In this post we’re going to discuss some updates from Disney’s fourth quarter and Fiscal Year 2020 earnings results. We’ll do our best to keep it interesting and relevant to trip planning, but that also means we’ll do a bit of speculating along the way.
You can see the earnings report here and read a CNBC article about the results here.
Disney World Capacity Increased to 35%
The biggest news from a parks perspective on the earnings call was that Walt Disney World has increased the current operating capacity of its parks from 25% of maximum capacity to 35% of maximum capacity.
One of the big takeaways from the recent round of cuts was that Disney clearly felt it would be a while before they’d get back to normal operations capacity. If they thought demand from guests was there, cutting such a huge amount of entertainment would have been ill-advised.
But that doesn’t make this change surprising. We always expected Disney to slowly increase capacity under the assumption they were starting as low as they reasonably could in order to make sure all their new protocols worked as best as possible.
Recently, the parks have made operational changes, like increased use of plexiglass barriers and the elimination of eating/drinking in ride queues, that allow the parks increased capacity.
Also, increasing capacity won’t mean higher crowds most days. If only 10,000 people were going to come, it doesn’t matter whether you allow 25,000 or 35,000 (those numbers are just for example). We’ve seen the parks hit capacity a handful of days, and we’d expect Thanksgiving week and Christmas / New Year’s week to hit the new capacity.
To that end, Disney also revealed that parks pass is 77% booked for this holiday season. That means the average day is at 27% maximum capacity (77% times 35%), or more than the previous 25% operating capacity of the park. So, expect busy days.
I don’t expect any changes as a result of this increase, other than higher crowds. Chiefly, I still don’t expect FastPass+ to return. Were it returning in 2020, I suspect we’d already have heard about it.
Given the increase in capacity and the recent vaccine news (which could—could—mean another increase in the first half of 2021), I do think FastPass+ could return for spring 2021.
We’ve seen that on the busiest days, waits for rides hover between one and two hours. This sort of wait is okay for a few days a month, but if crowds are consistently at that level, FastPass+ could see a return.
Of course, all of this depends on whether Disney’s safety operations can tolerate a return of FastPass+. I don’t see any huge barriers to it, but there are lots of uninteresting factors at play, like how using FastPass+ impacts available queue space.
Parks and Experiences Revenue Down 61%
Revenue for Disney’s Parks and Experiences segment was down 61% compared to this quarter in 2019 (July, August, September). With Disney World parks operating at 25%-30% capacity, Disneyland still closed, Disneyland Paris closed again, and the other international parks operating below capacity, this isn’t a shock.
With $2.58 billion in revenue, Parks and Experiences was handily beaten by the Direct to Consumer and International segment (which includes Disney+), which earned $4.85 billion, up 41% from last year.
This shift was expected, and helps explain why Disney is shifting focus to the Direct to Consumer segment.
As a parks fan, and shift in focus away from parks is a bummer for me, but I also doubt it will mean much on the ground. I think projects are much more dictated by the state of the parks’ finances than by what Disney says their focus is.
I also think Direct-to-Consumer has a trickier road ahead of it than people recognize. Disney+ is a great service, but it’s not not even in my top three streaming services—Netflix, Hulu (also owned by Disney) and HBO Max.
Disney Parks, by contrast, are the undisputed leader in theme parks across the globe. The current economic and pandemic climate might favor Direct-to-Consumer over parks, but we’re far from knowing which of these segments will come out on top in the long run.
Disney Reducing Capital Expenditures in Parks
Disney expects to spend less in capital expenditures (think new rides / resorts or major improvements) in the coming fiscal year than in the last. Since 2020 spending was already reduced, this would mean bringing the parks back to 2014 spending levels, as BlogMickey notes.
It’s hard to know what this means. For starters, rumors have already suggested that both TRON (at Magic Kingdom) and Guardians of the Galaxy Cosmic Rewind (at Epcot) have been delayed into calendar year 2022, which would push much of their spending into fiscal 2022 (which starts around October 1, 2021).
Remy’s Ratatouille Adventure is now on track for a 2021 opening, but much of that ride was presumably completed prior to the parks closing in March, as it was originally rumored to be set for a May 2020 debut.
And there are a host of projects outside Walt Disney World—Zootopia at Shanghai, Runaway Railway and Avengers Campus in California, and the Walt Disney Studios Park expansions in Paris—that are probably going to be impacted to some degree.
Undoubtedly the biggest question—and we’ve already touched on it a bit above—is what Epcot will look like by the end of 2021. Even if Guardians doesn’t open, there are of comparatively smaller projects, like the Play Pavilion, the Moana water attraction, the Mary Poppins attraction, and, most important aesthetically, the rebuild of the hub, that are up in the air.