When both Disneyland and Walt Disney World reopen in July, they need to operate at 25% capacity to break even, according to one analyst.
Todd Juenger, a Bernstein analyst, looked at Disney’s US theme park’s profitability when they do reopen with a reduced capacity, The Hollywood Reporter revealed.
25% capacity of pre-coronavirus attendance
He estimates that “Disney can generate enough profit contribution to cover the incremental fixed and variable costs of operating its parks when operating at about 25 percent of normal run-rate attendance”. By ‘normal run-rate attendance’, he means pre-coronavirus attendance.
Juenger also explained that pre-coronavirus, it was rare that US Disney parks operated at full capacity. He estimates that they actually operated at about “51 percent of maximum theoretical capacity”.
This means that if Disney were to limit attendance to 50% of their pre-coronavirus attendance, it would actually be operating at around 25% of their theoretical maximum capacity.
When operating at 60% of pre-coronavirus attendance, Disney can “break even on earnings before interest and tax” according to Juenger.
$1bn loss in operating income
Disney’s CEO Bob Chapek has said that the goal of reopening the parks is not necessarily about reaching a breakeven point for profitability. The company “would not reopen any park unless we can make at least a positive contribution to that overhead” of running costs.
The financial impact of months of closure on the Disney company has been severe. Its Q2 results estimated that it lost around $1bn in operating income in the Parks, Experiences and Products segment.