Disney Will Not Return To 2019 Levels Until At Least Fiscal Year 2022, But Here’s What Could Help

The Walt Disney Company has faced financial challenges due to the ongoing coronavirus pandemic, and its theme park and film divisions “continue to be severely affected” according to S&P Global Ratings.

“We forecast that Disney’s operating performance at its two hardest-hit segments (theme parks and movie studios) will not begin to normalize (return to 2019 levels) until fiscal [year] 2022, ending Sept. 30,” S&P analysts Naveen Sarma and Jawad Hussain wrote in their Wednesday report. “We no longer believe Disney can reduce leverage [as much as expected] by the end of fiscal 2022. Our original operating assumptions … assumed an economic recovery from the pandemic in the latter half of 2020, with a return to more normalized operating activity at Disney’s theme parks by the end of 2020.”

Due to the pandemic Disney parks and movie studios had to close for much of the spring and summer months before being allowed to reopen in late summer and early fall. None of the Disney theme parks have fully reopened, and the Disneyland Resort in Anaheim, California has not allowed guests into the parks since closing in March. Due to many people not traveling and restrictions on theme parks the analyst are projecting that attendance at the Walt Disney World Resort and the Disneyland Resort in 2021 will amount to 50 percent of 2019 levels, before improving to more than 90 percent of the 2019 levels in 2022.

According to the analyst, they no longer believe Disney can reduce leverage by the end of fiscal 2022. As part of the original operating assumptions, analyst assumed there would be economic recovery from the pandemic in the latter half of 2020, and a return to more normalized operations at the Disney theme parks by the end of 2020. Because of this, analyst have a negative outlook on Disney’s debt, meaning they could downgrade their rating further in the future.

“We anticipate that it could take all of fiscal 2022 for revenues at the theme parks and studio entertainment to return to pre-COVID levels. We do believe that earnings before interest, taxes, depreciation and amortization may improve somewhat faster because of the significant permanent cost reductions achieved throughout the entire Disney organization. These reductions will more than cover any additional costs associated with COVID-19 health and safety procedures,” continued the S&P pair.

So what is Disney doing about their lack of theme park guests and big movie premiers?

Bringing Park Hopper options back to Walt Disney World

Disney has announced they would be reinstating their Park Hopper option to annual pass holders and valid theme park tickets. This could be one of the pillars that Disney will rely on to bring more guests back to the park. Many loyal Disney fans were disappointed that this option was discontinued when Walt Disney World reopened in July. Now more guests will be able to bounce from park to park during their stay. This would likely mean visitors will spend more money on upgrading their tickets and buying food and merchandise since they are getting out earlier and staying out later.

Focusing on new cornerstone attractions and experiences

While some projects have been put on hold at the Disney parks around the world, others have pushed forward. Disney is focusing on new cornerstone attractions at the parks, including the trackless ride, Remy’s Ratatouille Adventure and the new “storytelling” coaster, called an Omnicoaster, Guardians of the Galaxy: Cosmic Rewind at Epcot. At Disney California Adventure a new land, Avengers Campus, continues to make progress with new eateries and attractions. Outside of attractions, Disney has continued to make process on the upcoming Star Wars: Galactic Starcruiser hotel. The hotel is more of an experience than a place to sleep. Guests will board a starship for a two-day, two-night Star Wars experience.

Relying on Disney+ for movie premiers

Disney has relied on Disney+ for movie premiers throughout the spring and summer, when Hamilton, Mulan, and Onward premiered on the streaming service. To continue bringing more paying subscribers and increase operations performance, Disney could still reply on the streaming service for big movie premiers throughout the next year. Disney has already moved Pixar’s Soul to debut on Disney+ on December 25.

The next big movie on Disney’s docket is Marvel’s Black Widow, set to debut May 7, 2021. Black Widow is a movie that many people have been anxiously waiting to see since it was first announced in 2019 at San Diego Comic-Con. The question to be answered is will the film move to Disney+ instead of a traditional theatrical debut? It’s likely that Black Widow could move to Disney+, especially after another big title, Wonder Woman 1984, is set to debut on HBO Max December 25. Moving Black Widow to Disney+ would not only bring in new subscribers, but people would likely be willing to pay for “Premier Access” to see the film, unlike when Mulan debuted on “Premier Access.”

No matter what Disney’s plans are to recoup money lost and return to 2019 levels, it will take time and rely on Disney’s loyal fans to take part and spend money.

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