Attendance and revenue were up at Disney's theme parks in the first quarter of the company's new fiscal year, Disney reported this afternoon. However, the temporary closure of Disney's parks in China looms over the company's near future, with the company assuming a two-month closure for those parks.
Disney had reported declining attendance at the Disneyland Resort and flat attendance at Walt Disney World last year, following the opening of Star Wars: Galaxy's Edge at Disneyland and fans delaying visits awaiting the land's opening in Florida.
"Attendance at our domestic parks was up two percent in the first quarter and per capita guest spending was up 10 percent on higher admission merchandise and food and beverage spending," Senior Executive Vice President and Chief Financial Officer Christine McCarthy said.
"Spending at our domestic hotels was up four percent and occupancy was 92 percent. So far this quarter, domestic resort reservations are pacing up four percent compared to this time last year, and booked rates at our domestic hotels are currently pacing up, 10 percent," she said.
From Disney's earnings report:
Parks, Experiences and Products revenues for the quarter increased 8% to $7.4 billion, and segment operating income increased 9% to $2.3 billion. Operating income growth for the quarter was due to increases at merchandise licensing and domestic parks and resorts, partially offset by lower results at our international parks and resorts.
Higher merchandise licensing results were due to an increase in revenue from sales of merchandise based on Frozen, Star Wars and Toy Story, partially offset by lower sales of merchandise based on Mickey and Minnie.
Growth at our domestic parks and resorts was due to higher guest spending and, to a lesser extent, increased attendance, partially offset by higher costs. Guest spending growth was primarily due to higher average ticket prices and an increase in food, beverage and merchandise spending. Higher costs were due to new guest offerings, driven by Star Wars: Galaxy’s Edge, and the impact of wage increases for union employees.
The decrease in operating income at our international parks and resorts was due to lower results at Hong Kong Disneyland Resort, partially offset by growth at Shanghai Disney Resort. Lower results at Hong Kong Disneyland Resort were due to decreases in attendance and occupied room nights reflecting the impact of recent events. At Shanghai Disney Resort, higher operating income was driven by an increase in attendance.
Disney CEO Bob Iger started the company's conference call with investor analysts by noting the coronavirus crisis.
"Our thoughts are with those affected by this devastating outbreak, including the thousands of people who worked for us in the region," he said. "In line with numerous prevention efforts taking place across China, we've temporarily closed our parks in Shanghai and Hong Kong. And we will continue to closely monitor this public health crisis."
"The recent closure of our parks in both Shanghai and Hong Kong, due to the ongoing coronavirus situation, will negatively impact second quarter and full year results," McCarthy said.
"The current closure is taking place during the quarter in which we typically see strong attendance at occupancy levels, due to the timing of the Chinese New Year holiday. The precise magnitude of the financial impact is highly dependent on the duration of the closure, and how quickly we can resume normal operations at Shanghai Disney Resort. We currently estimate the closure of the park could have an adverse impact the second quarter operating income of approximately $135 million. assuming the park is closed for two months during Q2," she said.
"At Hong Kong Disneyland, we currently estimate the closure of the park could have an additional adverse impact operating income of about $40 million for the second quarter. And as I discussed last quarter, we were already seeing a significant decrease in visitation to Hong Kong Disneyland from China and other parts of Asia. So in aggregate, we estimate these two factors could result in a decline in Hong Kong Disneyland's operating income of about $145 million for the second quarter. Again, this assumes the resort is closed for two months."
Elsewhere in the company, the big news for Disney this quarter was the launch of the Disney+ streaming service, for which Disney reported more than 26 million paid subscribers. CEO Bob Iger also noted that Star Wars: Rise of Skywalker and Frozen 2 also posted more than $1 billion each in box office.Tweet
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