Attendance figures could take years to rebound if a recession follows the COVID-19 pandemic.
Recent quarterly reports and analyst forecasts offer a glimpse at the attendance losses theme parks face if visitors are slow to return in the post-COVID-19 era.
The global pandemic has inflicted financial pain on Disney, Universal, Six Flags, SeaWorld, Cedar Fair and Legoland. The latest quarterly reports show that promising attendance figures at the start of the year quickly turned to big losses. This is due to the coronavirus outbreak, which forced theme parks around the world to close indefinitely. More economic trouble is expected as the theme park giants begin missing out on attendance from the busy summer season.
The unprecedented global crisis has brought with it uncertainty about what lays ahead for theme parks.
“We cannot predict the timing of when the parks will reopen or the level of attendance when they do reopen,” according to the latest quarterly report from Comcast, Universal’s parent company.
SeaWorld Entertainment remains cautiously optimistic yet soberly realistic about the prospects for an attendance rebound.
“We believe, but cannot guarantee, that our business will ultimately rebound and benefit from pent-up social demand for out-of-home entertainment as government restrictions are lifted and home sheltering subsides,” according to the SeaWorld Entertainment quarterly report.
“However, the ultimate significance of the pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration and the effect on the overall economy and of responsive governmental regulations, including shelter-in-place orders of the pandemic and mandated business closures.”
Travel restrictions could hamper any hopes for a quick attendance rebound when theme parks reopen.
“Demand for our parks is highly dependent on the general environment for travel and tourism,” according to the SeaWorld quarterly report.
The prolonged stay-at-home orders and lingering fears could make some theme park fans reluctant to return straight away.
“Even after we are able to reopen our parks, some guests may choose for a period of time not to travel or visit our properties as a result of continuing concerns related to COVID-19. This could lead to lower attendance and further disruptions in our business,” says the Six Flags earnings report.
Cedar Fair CEO Richard Zimmerman remains confident. He says there is plenty of pent-up demand for the type of thrills and excitement theme parks deliver.
“Anticipated pent-up demand for outdoor entertainment gives us confidence our parks are well-positioned to provide our guests with an outstanding choice for family outdoor entertainment,” Zimmerman said in a statement.
“When our parks do finally reopen, we should be excited about the chance to regain some of our lost momentum by tapping into pent-up demand for an experience that few can offer and that no one does better than we do. Unlike most businesses, our parks offer what our friends and families have been missing most while being stuck at home. The opportunity to finally bring some excitement into their lives again.”
Any attendance rebound could come to an abrupt halt if a second wave of coronavirus outbreaks occurs. This could force governments to institute another round of stay-at-home orders.
If COVID-19 continues to spread in the United States, we may elect on a voluntary basis to again temporarily close
“If COVID-19 continues to spread in the United States, we may elect on a voluntary basis to again temporarily close (after their reopening) certain of our properties or portions thereof. Or governmental officials may order additional closures, impose further restrictions on travel or public gatherings,” according to the Six Flags earnings report.
Wall Street analysts forecast a long-lived impact on reduced theme park attendance. Reduced attendance could stretch for months and even years after the COVID-19 pandemic recedes.
J.P.Morgan lowered its attendance expectations for Disney theme parks through the end of the company’s 2020 fiscal year. This is a result of the global pandemic.
The hit to Disney theme park attendance from COVID-19 is likely to be “very specific” to the fiscal year 2020. There is likely to be “only some lingering impact” in 2021, according to the J.P.Morgan report issued in April.
“We assume it will take a long time to normalize,” the J.P.Morgan report said of attendance.
A Wells Fargo Securities forecast predicts that Disney’s global theme park attendance will decline by a combined 148 million visitors in fiscal years 2020 and 2021. The two-year loss nearly equals Disney’s 155.2 million global attendance in the fiscal year 2019.
Attendance drop and rebound
MoffetNathanson issued a report in May. This assumes Disney theme park attendance will drop by 50% through the end of the company’s 2020 fiscal year. The report expects attendance to increase to 75% of previous levels in 2021. It may reach 90% in 2022, according to the MoffetNathanson report.
An extended economic downturn following the COVID-19 pandemic would mean a “slower ramp back to a new normal” for Disney theme parks after they reopen. This is according to the MoffetNathanson report.
“We believe that investors are underestimating the lagging recovery nature of Disney’s theme parks,” according to the MoffetNathanson report.
A prolonged post-coronavirus recession could complicate any theme park recovery plans. This is according to MoffettNathanson founding partner Michael Nathanson.
“What we’ve modelled is a multi-year slowdown. Because you see throughout history that the parks do lag in economic recovery,” Nathanson said on a recent conference call. “One of our core beliefs that we’ve observed in all the previous recessions and crises is that the park recovery takes time.
“People don’t instantly, when the economy goes back to growing, go to the parks. They basically look at their family balance sheets. They look at what damage has been incurred and hold on to their cash.”
According to the MoffetNathanson report, attendance at Disney’s U.S. theme park declined 9% during the post-9/11 recession. Attendance didn’t rebound to peak levels until 2005. After the 2008-09 economic downturn, it took three years for Disney’s U.S. hotel revenue to return to pre-recession levels.
It is clear that the current pandemic impact on the travel and hospitality industries is much more severe than both prior downturns
“It is now clear that the current pandemic impact on the travel and hospitality industries is much more severe than both prior downturns,” according to the MoffetNathanson report.
“When will the parks reopen? How will Disney approach staffing them? Will they only open up one park like the Magic Kingdom to optimize operations? Given limited air travel, how many of their Orlando hotels will be up and running?”
A Wells Fargo Securities forecast also anticipates social distancing measures will remain in place as theme parks reopen.
“Walt Disney World will either need to operate with social distancing in place – significantly limiting capacity – or a vaccine will need to be widely enough available that the population will again feel safe in such a gathering,” according to the Wells Fargo forecast. “Testing may also improve, allowing customers with immunity/antibodies to behave a bit more freely.”
Testing & vaccines
Disney attendance may not rebound for two years until COVID-19 tests become more ubiquitous and a vaccine is available. This is according to a Wells Fargo Securities analyst report.
“It will be some time before park attendance approaches pre-corona levels,” according to the Wells Fargo report. “Until the time at which there is significantly improved testing and/or a widely available vaccine, it’s tough for us to imagine long lines for Rise of the Resistance. No matter how much folks might want to go.”
Attendance rebound forecast
Disney theme park attendance may also see a “significant rebound” in 2022 to past peak levels. Assuming the pandemic threat recedes and a COVID-19 vaccine becomes widely available. This is according to the MoffetNathanson analysts.
Wells Fargo analysts are less optimistic: Disney theme parks are unlikely to return to pre-COVID-19 operating levels until 2025.
“We think the experiential economy writ large is in for a sustained period of pressure. Disney’s will be no exception,” according to the Wells Fargo report.