The effects of Covid-19 on the travel and tourism industry has been devastating, there is no other way to say it. Nobody has been spared, not even Disney, with the extended closure of all resorts, and the continuing closure of Disneyland Resort and Hong Kong Disneyland, the Disney Parks, Experiences and Products division has posted a loss of $2Billion. The company as a whole has still managed to turn a profit in the quarter ($0.08 a share, vs an expected -$0.63) despite the Covid-19 pandemic
A progressive re-opening
During Q3, Parks, Experiences and Products switched from a $1.8bn profit in Q2 2020 to a $2bn loss in Q3 2020. The operating segment, which covers Disney Parks and Stores, still managed to generate $983m.
The Disney earnings reports state:
Parks, Experiences and Products revenues for the quarter decreased 85% to $1.0 billion, and segment operating results decreased $3.7 billion to a loss of $2.0 billion. Lower operating results for the quarter were due to decreases at both the domestic and international parks and experiences businesses and to a lesser extent, at our merchandise licensing and retail businesses.
As a result of COVID-19, our domestic parks and resorts, cruise line business and Disneyland Paris were closed for all of the current quarter. Our Asia parks and resorts were closed for a portion of the current quarter, as Shanghai Disney Resort re-opened in May and Hong Kong Disneyland Resort re- opened in late June (Hong Kong Disneyland Resort closed again in July).
The decrease at licensing and retail also reflected the impact of COVID-19, which resulted in decreases in licensing earned revenue and lower minimum guarantee shortfall recognition, the closure of our Disney Stores for most of the quarter and the write-down of store assets.
We estimate the total net adverse impact of COVID-19 on segment operating income in the quarter was approximately $3.5 billion.
It’s not all doom and gloom
Disney’s DTC branch (covering streaming services such as Disney+ and Hulu) has largely performed well. This is undoubtedly aided by the launch of exclusives such as the hit musical Hamilton, and will be further helped in Q4 with films such as Beyoncés Black is King.
“Despite the ongoing challenges of the pandemic, we’ve continued to build on the incredible success of Disney+ as we grow our global direct-to-consumer businesses,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “The global reach of our full portfolio of direct-to-consumer services now exceeds an astounding 100 million paid subscriptions — a significant milestone and a reaffirmation of our DTC strategy, which we view as key to the future growth of our company”
What will Q4 2020 bring?
Anybody expecting a return to normal during 2020 will be sadly mistaken, whilst resorts are reopening, capacity has been limited in order to maintain social distancing. This means that guests cannot return in their former numbers for a significant period of time.
What is good, however, is that the reopening of the Disney parks has been largely successful with guests worldwide commenting on the safety of the resorts and how Disney have paid attention to detail and left no stone unturned. Losses may well be minimised (or even turned into profit) by increase attendance capacities as the new Health & Safety regimes bed in.
It can be expected that Q4 will also post poor numbers, but perhaps what Disney investors and fans should be looking out for is how much Disney is able to limit that loss.
The full earnings report for Q3 2020 can be read on The Walt Disney Company website.