Will Phased Reopening of Parks Boost Disney Stock?

Walt Disney Company (NYSE: DIS) took a small step toward reopening its U.S. theme parks Wednesday by inviting the public back to Disney Springs. The shopping and dining complex is part of Walt Disney World near Orlando, Florida.

Only 44 stores and restaurants operated by contractors were open. That is about a third of the total businesses. The Disney-owned shops and eateries, including World of Disney, Marketplace Co-op and D-Luxe Burger, are waiting until May 27 to reopen.

Visitors are required to wear masks, to have their temperature taken, and to maintain 6 feet of space between themselves and others but that did not seem to deter them. After Disney Springs opened at 10 a.m., “within minutes there were lines,” The Hollywood Reporter said.

Lines Longer Than Expected

The Polite Pig had to put more stickers on the ground to show people how far apart they needed to stand because the line to get into the barbecue restaurant kept growing, the Orlando Sentinel said.

Inside the restaurant, after each group of patrons left, workers used sanitizer to scrub the tables and everything on them, including the paper towel holders.

Throughout the retail complex, trash cans were adjusted so their lids were permanently open. That way people would not have to touch the containers when disposing of refuse.

Customers are urged to pay with cashless methods: debit cards, credit cards, mobile pay apps or gift cards.

Disney has stated that visitors to its facilities do so at their own risk when it comes to the possibility of becoming infected with the novel coronavirus. “An inherent risk of exposure to COVID-19 exists in any public place where people are present,” a disclaimer on the Disney World website says. “COVID-19 is an extremely contagious disease that can lead to severe illness and death.”

It adds, “By visiting Walt Disney World Resort, you voluntarily assume all risks related to exposure to COVID-19.”

Visible Signs of Pent-Up Demand

The question hovering over the Disney parks operations in the United States has been whether people would return to Disney World and Disneyland, in Anaheim, California, when they are reopened. Both were shut down in mid-March because of the COVID-19 pandemic. But the response to the reopening of Disney Springs and Shanghai Disneyland in China seem to indicate that theme park fans are ready to return.

While the lines and ticket sales are signs of pent-up demand, they may also show the desire for people to visit Disney properties when crowds are much smaller. The Shanghai park is temporarily limiting the number of visitors to 24,000 a day, which is about a third of the capacity before the COVID-19 shutdown. And some of the festivities that encourage people to gather in crowds, like parades and fireworks, have been suspended.

In Florida, it remains unclear when the Disney World theme parks — the Magic Kingdom, Epcot, Disney’s Hollywood Studios and Disney’s Animal Kingdom — will reopen. Gov. Ron DeSantis has laid out the requirements for Disney and other theme park operators, like Universal Studios and SeaWorld Entertainment Inc. (NYSE: SEAS), to reopen their facilities. Universal Studios is a division of NBCUniversal, which is owned by Comcast Corp. (NASDAQ: CMCSA).

DeSantis said last week that reopening plans must be submitted to both his office and local government offices, according to Theme Park Visitor. The plans must include the date the operators believe their parks can be reopened safely and detailed procedures for protecting visitors and employees.

Disney Looking at 20% to 30% Capacity

None of the theme park operators have submitted their plans so far. Disney is believed to be far along in the process of preparing its draft, using its experience in reopening Shanghai Disneyland as a guide.

In a roundtable discussion with Vice President Mike Pence on Wednesday, some theme park operators gave indications of their intentions about reopening. A senior Disney executive said the company was looking at reopening its theme parks at about 20% to 30% capacity.

The Shanghai park opened at 20% capacity and quickly sold out of tickets for the first day, said George Kalogridis, president of segment development and enrichment for Disney Parks, Experiences and Products. This indicates that there is strong demand even with restrictions, like the wearing of masks and social distancing.

Universal Studios is expected to present its reopening plan to the Orange County Economic Recovery Full Task Force today. Orlando lies within Orange County.

John Sprouls, executive vice president and chief administration officer of Universal Parks and Resorts, told Pence that the reopening of its retail district last week had gone smoothly with people complying with restrictions.

Marc Swanson, SeaWorld’s interim chief executive, said he expects to reopen the aquatic theme park in June. He noted that SeaWorld’s visitor areas are outdoors, making it easier to keep visitors separated.

Theme Parks a Vital Park of Disney’s Operations

Reopening the theme parks is vital for Disney. It reported earlier this month that it had lost $1 billion in profit from the shutdown of all of its 12 parks around the world. Before the pandemic, Disney’s parks were the company’s most profitable business. In the final quarter of calendar 2019, theme parks had revenue of $7.4 billion and reported operating income of $2.3 billion.

Meanwhile, Disney studio entertainment had its best year ever. Revenue from films was $3.8 billion and operating income was $948 million.

But a quick rebound for the parks’ revenue is unlikely because the properties will be opening at a level significantly below capacity. Also it remains to be seen whether there will be any reticence on the part of some people because of COVID-19. Many people may alter their usual behavior if there is no vaccine to prevent infection or no approved therapeutic drug to treat the disease.

Since the virus outbreak, the lone bright spot for the company has been Disney+. The new Disney streaming service has exceeded all projections for the number of subscribers. That has been in part because people who have been staying at home have been seeking out new entertainment options. Disney+ is priced significantly lower than most of its competitors.

Disney’s stock price was $119.92 when the markets closed on Wednesday, which was up significantly from its mid-March low of $79.07, but well below its 52-week high of $153.41.

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