For the most part, Disney Parks & Resorts have been doing exceptionally well recently. The opening of Star Wars: Galaxy's Edge at both Walt Disney World and Disneyland have brought people to the parks in massive numbers, and the company has also seen strong international success in places like France and Shanghai. Unfortunately, sometimes there are factors that can impact a business that it has little or no control over, and that's what is happening at Disney's Asian parks, as coronavirus has forced the closure of both the Hong Kong and Shanghai Disneyland Resorts, which the company believes could impact the bottom line to the tune of $175 million minimum.
Yesterday The Walt Disney Company held it's quarterly earnings call for investors where it was revealed by Disney CFO Christine McCarthy that if the two Disney parks are closed for two months, it will mean $135 million loss in operating income for Shanghai Disneyland and about a $40 million loss in Hong Kong. The Parks, Experiences, and Consumer Products division posted an 8% increase in revenue and a 9% increasing in operating income over the quarter that just ended.
At this point, the Shanghai and Hong Kong resorts have been closed for a little less than two weeks, and there's no indication when the locations might reopen, so a closure of two months isn't an unreasonable prediction. The closure is hitting at an exceptionally bad time, as it started just as the region's Lunar New Year celebrations would have been getting underway. This is usually a strong period at the parks so the closure is hitting extra hard.
Of course, because of the Lunar New Year drawing people to Disneyland in Asia, it meant the park was a place where the coronavirus could be more easily spread between guests, who likely wouldn't even have known at the time they were carrying it. Any place where large numbers of people gather is a potential hot spot, and Disney certainly didn't want its parks to be associated with the spread of a serious virus. Chinese movies theaters have also remained closed for the duration.
Hong Kong Disneyland was already a park dealing with a financial hit as the ongoing protests in the region had led to significant declines in attendance already, which have now been compounded by the coronavirus.
While the virus outbreak is bad news for the Asian theme parks, Disney doesn't believe that coronavirus will have a major impact on the domestic parks. While international tourism is certainly a significant segment of tourism to the North American parks, in response to a question during the financial call's Q&A period, Christine McCarthy said that visitation to Disneyland and Walt Disney World is not significant from the affected region, so there is little fear that the virus will cause a problem stateside.
Still, if this outbreak is an ongoing problem, it can still have an impact on other parks. Any lost revenue to the theme parks as a whole is going to reduce the amount of money that can be spent at any park. If the hit is bad enough, we could see improvement and expansion plans at other parks put on hold due to the lack of funds resulting from the closure.
