Disneyland still closed in California, dragging Disney profits

Before the pandemic, Michael Afram’s transportation company made an average of 450 to 500 trips per day in the area between Los Angeles and San Diego. A significant percentage of Karmel Shuttle Service destinations were Disneyland, Universal Studios, and SeaWorld San Diego.

With theme parks in California closed and the demand for air travel at a fraction of what it was in 2019, Afram’s business was only 140 transports for the entire month of October.

About 50% of Afram’s business was in the Anaheim resort area, home to both Disney’s California parks and its Downtown Disney mall. Its shuttle company has visited local airports, hotels, theme parks, restaurants and other local tourist destinations in the area.

The remaining 50% included the greater Orange County area as well as Los Angeles, where Universal Studios is located, and day trips to San Diego.

Without the increase in Disney park tourism, Karmel Shuttle Service’s revenue is down more than 95%, Afram said.

As it is, theme parks in California will remain closed until 2021, as state guidelines ban reopening until coronavirus cases in counties drop below one in 100,000 – a target that will be elusive as cases skyrocket across the country. This extended shutdown will take a heavy toll on Disney’s profits for quarters to come and exacerbate the financial hardships local businesses face during the pandemic.

Currently, Orange County, where the two parks of Disneyland California and Knott’s Berry Farm are located, has 5.6 cases per 100,000 residents. Los Angeles County, where Universal Studios is located, has 11.5 cases per 100,000 residents.

“It’s completely unattainable at the moment,” Afram said. “I don’t know how and why Disney as a company is able to follow protocols, put in place procedures and guidelines and open up to Orlando, Paris and Shanghai and Tokyo, but Anaheim, for a some reason, they can’t do the same. “

California Governor Gavin Newsom has raised concerns about the number of people who typically visit theme parks, the length of time they spend there, and the possibility that transmission rates will increase if parks are reopened. .

Democrat MP Sharon Quirk-Silva, who represents California’s 65th Assembly District, which includes northern Orange County, wants a better balance.

“I believe that the guidelines set out by Governor Newsom were issued with the right frame and the right message of putting public health and safety first for theme park employees and guests. she says.

“However, as we have seen the economic impact of this pandemic on all sectors of activity, we can recognize that public health and the economy are not mutually exclusive”, he said. she declared. “I have expressed my concerns about state guidelines which are having a very negative impact on thousands of jobs, small businesses and ultimately billions in revenue for California. I urge the governor and his administration to review the numbers and encourage them to update the guidelines. for our theme parks. “

Disney’s parks, experiences and consumer products segment was its fastest growing profit engine last year. Since the start of the epidemic, Disney has been hemorrhaging cash. In the second quarter, the company reported a loss of $ 1 billion in operating profit due to the closure of its parks, hotels and cruise lines. In the third quarter, the company posted a larger loss of $ 3.5 billion.

On Thursday, the company said the Covid-19 outbreak cost its segment of fleets, experiences and products about $ 2.4 billion in lost operating income in its most recent period. The company expects its California parks to remain closed until the end of this year.

The coronavirus pandemic has caused many headaches for Disney. The company has faced movie theater closures, film and television production shutdowns, docked cruise ships and the suspension of most live sporting events. But the blow to theme parks has been huge.

While Disney was able to reopen in Florida, Shanghai, Japan and Hong Kong with limited capacity, its Parisian theme park was closed at the end of October due to the resurgence of Covid-19 cases and will not reopen until 2021. .

With California parks unable to open, Disney laid off 28,000 workers in its parks, experiences and consumer products division in September. Earlier this week, the company announced that additional workers at its California theme parks, including executives, wage earners and hourly workers, would face time off. Disney did not disclose the number of workers affected.

“In 2020, Disney was forced to go into damage control mode and its hangover from Covid is expected to linger with businesses such as their theme parks not expected to resume full swing for 12 months,” said Joe McCormack, senior analyst at Third Bridge Research firm up.

Bill Coan, president and CEO of ITEC Entertainment, said California’s reopening guidelines were “too aggressive.”

Coan, theme park developer and former Walt Disney Imagineer, said Disney’s reopening in Florida was a model for what could happen in California. So far, there is no indication that Orlando’s parks are responsible for a coronavirus outbreak, he said.

Even with limited attendance, demand is increasing, Coan said. While there are fewer international and out-of-state guests, the people who can drive to the parks are doing so in droves.

“They can’t stay for seven days, but they come in and go to the park and demonstrate that it can work,” he said.

Republican State Senator Patricia Bates, who represents the counties of southern Orange and northern San Diego, visited Disneyland a few weeks ago and told CNBC that she was “very, very impressed” by the security measures that the company has put in place in the parks. She also toured downtown Disney and saw guests adhere to Disney’s social distancing guidelines when shopping and dining.

Bates worked at Disneyland during his time at Occidental College in Los Angeles and believes the parks should be able to open earlier than current state guidelines allow.

“Their openness is vital for local communities,” she said, explaining how small businesses in surrounding counties depend on tourism generated by Disneyland and other parks in the region.

Not to mention that the majority of workers laid off two months ago live in these local counties.

“A lot of our hard-working residents will struggle and that’s something Californians can’t afford,” Quirk-Silva said.

Andrea Zinder, president of TUAC 324, the union that represents all retail workers at both Disney parks and Downtown Disney, said its members were eager to get back to work. Many were called back to work in Downtown Disney and Buena Vista Street stores, a restaurant and retail area in one of the Disney parks. But others are still waiting.

“We would like to see the state allow Disney to reopen with reduced capacity once Orange County is in the ‘orange’ level,” Zinder said. “Disney has implemented numerous safety protocols in addition to those required by the state and also offers regular testing to all employees.”

The orange level in California is where there are between one and 3.9 cases per 100,000 population. This is the category the theme parks hoped the state would use to allow them to reopen.

The concern is that while big companies like Disney will be able to weather the pandemic – relying on revenue from other areas of its business like streaming, consumer products and advertising – small businesses won’t. won’t be there when the storm comes down.

“[Big theme parks] have deep pockets, which makes them very durable, but my pockets are just the pockets I have in my pants, ”Afram said.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.