Losses at Hong Kong Disneyland mar an otherwise strong Q4 for Disney parks

Pro-democracy protests in Hong Kong have had an impact at the turnstiles at Hong Kong Disneyland, Disney CFO Christina McCarthy said during the company’s earnings call on Nov. 7. The park recorded a $55 million loss of income for the fiscal fourth quarter, a price tag that could increase to $275 million over the course of the next 12 months if the unrest continues.

“Circumstances in Hong Kong have led to a significant decrease in tourism from China and other parts of Asia and based on the trends we saw in Q4 and what we are seeing so far in Q1, we expect operating income at Hong Kong Disneyland to decline by about $80 million for Q1,” CFO Christine McCarthy said during Disney’s fiscal fourth quarter earnings call on Nov. 7.

Domestically, Disney said it is pleased with the performance of its U.S. theme parks. Its strategy to change ticket prices to control crowds “continues to pay off,” McCarthy said.

Parks, Experiences and Products revenue increased 8% in the fourth quarter, to $6.7 billion. McCarthy said operating income was up 13%, driven by growth at Disneyland on higher guest spending and an income increase at Disney Vacation Club.

Walt Disney World’s results were comparable to the prior year, she said. Guest spending, occupied room nights and attendance increases were offset by higher costs that came with the opening of Star Wars: Galaxy’s Edge at Disney’s Hollywood Studios park.

Attendance across the company’s domestic parks also was comparable to the fourth quarter last year, McCarthy said.

“We believe some guests are deferring visits to Disneyland and Walt Disney World Resort until the complete opening of Galaxy’s Edge at those respective locations,” McCarthy said. “I’ll note that awareness and intent to visit remain strong. Booked rates at our domestic hotels are currently pacing up 5% versus this time last year.”

Per-capita spending was up 5%, bolstered by higher admission prices, merchandise and food and beverage spending. Per-room spend was up 2%, and occupancy of 85% was comparable to the fourth quarter last year.

Attendance growth at Walt Disney World was down for the quarter, but only by about 1%, due to Hurricane Dorian, which hit Florida in early September.

In the current fiscal first quarter, McCarthy said the company expects revenue growth at the parks to benefit from a full quarter of an open Galaxy’s Edge at Walt Disney World as well as the opening of Rise of the Resistance, the land’s second attraction to open in Disney World on Dec. 5 (the ride opens in Disneyland on Jan. 17).

That growth is expected to be partially offset by “meaningful cost growth,” McCarthy said, from operational expenses associated with Galaxy’s Edge and higher labor expenses following new collective bargaining agreements.

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