The new normal for theme parks such as Disney, Universal, Six Flags, SeaWorld and Cedar Fair will mean reopening with reduced capacity. Fewer visitors will pass through the gates as attractions reopen after extended coronavirus closures with strict government-mandated health and safety restrictions.
Local and state governments will impose reduced capacity limits when theme parks reopen in the post-COVID-19 era. These are expected to heavily impact the financial bottom lines of the theme park giants.
Theme park leaders discussed the potential capacity restrictions during conference calls with analysts following the release of each company’s latest quarterly report.
There is a lot of pent-up demand. So, Disney will probably not have trouble filling any of its parks at a reduced capacity of 10%, 25% or 50% of typical crowd levels once they reopen. This is according to new Disney CEO Bob Chapek.
“We will staff accordingly to that type of level,” Chapek said on a call with analysts. “Whatever that level will be. Obviously labour is a huge component of our cost base and so that will slide with the attendance.”
The recently reopened Shanghai Disneyland in China requires advance reservations. Tickets sold out in minutes when they were first posted online. Attendance is currently limited to a Chinese government-mandated 24,000 visitors — about 30% of Shanghai Disneyland’s 80,000 capacity.
“We’re going to actually open up far below that,” Chapek said on the call. “Just to have our training wheels on with our new procedures and processes. We want to make sure we don’t have any lines backing up either as guests enter into the park. Or as they wade through the park. We’re going to approach that very, very slowly.”
Reduced capacity in parks after COVID-19
Disney plans to increase the number of daily Shanghai Disneyland visitors. It will do this by 5,000 each week with the government’s permission, according to Chapek.
“After a few weeks, we will actually be up to what the government’s guideline is. At that point, there could be some lifting of even those restrictions of the 30%,” Chapek said on the call.
He also said the goal of reopening the parks is not necessarily about reaching a breakeven point for profitability:
“Frankly, we would not reopen any park unless we can make at least a positive contribution to that overhead. While every site is completely different, that’s the approach that we’re going to take.”
Disney will use a variable pricing strategy in order to maximize revenues and profits. “That gives us the ability to make our decisions on a variable basis. And to keep as much of that cost structure variable as possible,” said Chapek.
Travel restrictions could hamper hopes for a speedy attendance rebound when theme parks reopen. Florida’s Walt Disney World resort relies more heavily on air travel and overnight visitors than California’s Disneyland Resort.
“We have a fairly robust annual pass program at both parks and a big drive-in market as well,” added Chapek.
SeaWorld & Busch Gardens
SeaWorld and Busch Gardens parks rarely operate at full capacity, according to interim SeaWorld Entertainment CEO Marc Swanson.
“We often have a lot of excess capacity,” Swanson said on a call with analysts. “So, we’re used to operating in an environment where we do much less than a peak day. Obviously, we would not operate in those environments if it didn’t make sense for us to do that.”
SeaWorld and Busch Gardens are ready to take advantage of pent-up demand for out-of-home outdoor entertainment once the parks reopen, according to Swanson.
“Our parks typically have significant excess capacity and have landscaped and well-manicured open, outdoor space with room for people to safely socially distance while still enjoying the varied sites and experiences our parks offer,” Swanson said on the call.
SeaWorld Orlando operates on a peak day at approximately 30,000 visitors and a shoulder season day at around 5,000 visitors.
We’re confident we can operate on much less reduced capacity
“That gives you some order of magnitude of how low the attendance can go and we still feel good about operating,” Swanson said on the call. “We’re confident we can operate on much less reduced capacity. And we’re confident that we can still drive above breakeven performance there.”
The park closures have forced SeaWorld Entertainment to strip down costs to the most essential level. Swanson said: “We’re going to be very careful and methodical in what we add back over time. We’re going to emerge stronger and more efficient for having done that work.”
Daily park capacity in the “new normal” will be dependent on creating social distancing, increasing sanitisation and making visitors feel comfortable, according to Six Flags CEO Michael Spanos.
“If we’re fortunate enough to get the parks open, it’s going to be something that’s not obviously at full capacity,” Spanos said on a call with analysts.
Six Flags parks rarely reach maximum capacity — even on the busiest summer days: “We operate at about 50% normally. It’s what we would call 50% of a good experience.”
To achieve the “new normal,” capacity is expected to be capped at 25% of a maximum “good experience” level in some markets when Six Flags parks initially reopen.
“I’m sure it’s going to be something that starts at 25% and ramps up in this phase based on state and local guidelines,” Spanos said on the call. “We’re prepared to do that. But as you know, today we’re able to open up parks and operate them day-to-day with relatively low levels of attendance to drive breakevens.”
Reduced capacity at Six Flags parks
Six Flag theme parks expect to operate with reduced capacity limits established by guidelines from local health officials when its amusement parks reopen across the United States.
“What a lot of the initial feedback from the locals is that they would see that that 25% number is the first number they would feel comfortable with to create the right social distancing, the comfort,” Spanos said on the call. “But again, that’s going to vary. We’re going to have that dialogue with the local folks as we move through this new normal.”
Six Flags plans to require visitors to schedule visits in advance once the parks reopen following the coronavirus closures in order to limit daily capacity.
“That’s going to be something we work on in partnership with the local health authorities and city officials,” Spanos said. “There’s nothing we’re going to do that they’re not comfortable with. That ensures the safety of our guests and the safety of our employees. So it’s going to be very local. And we’re going to work through that knowing what’s comfortable for everybody and gives confidence in everybody’s safety.”
Cedar Fair parks typically operate at much less than full capacity, according to Cedar Fair CFO Brian Witherow.
“We can do numbers that are significantly less than theoretical capacity and still be at a very profitable level in terms of daily operations,” Witherow said on a call with analysts.
Capacity will depend on the structural limitations of each of Cedar Fair’s parks, according to Witherow. Cedar Fair plans to deploy an advance reservation system when the parks reopen following the coronavirus closures in order to limit daily capacity.
“Most of the parks don’t operate anywhere near theoretical capacity,” Witherow said. “Outside of a handful of days each year, most of our parks would operate on a normal day probably someplace at or below 50% of theoretical capacity.”
Ohio’s Cedar Point can draw 50,000 visitors on a busy day that’s “maybe not at theoretical capacity,” Witherow said on the call:
“Let’s put it in a 90% plus range. But on average, that’s not what it’s doing over the course of an entire operating season. The average attendance is probably closer to 50% of that.”
Universal Studios theme parks operate at typical seasonal levels well below full capacity for most of the year, according to Michael Cavanagh, CFO of Comcast, Universal’s parent company.
“We’re breaking even certainly when we get to 50% of typical, which will be well below capacity on average,” Cavanagh said on a call with analysts.
Universal parks will likely be on the lower end of attendance when they reopen. This is in order to maintain a safe environment, according to Cavanagh:
“There will be pretty low levels of return attendance as things ramp up. But we’ll be in better shape than were the parks to be closed.”