Please ensure Javascript is enabled for purposes of website accessibility

Disney World Has a Problem No One Is Talking About

By Rick Munarriz - Mar 9, 2020 at 10:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The leading theme park operator could be facing a setback it can't control.

The latest Disney (DIS 3.51%) theme park earworm -- sung by none other than Mickey Mouse and his main squeeze Minnie -- began enchanting riders of the new attraction that opened at Disney's Hollywood Studios in Florida last week. "Nothing Can Stop Us Now" is the catchy throwback song featured on Mickey & Minnie's Runaway Railway trackless dark ride, but the unspeakable truth is that something can stop Disney World in Florida and Disneyland in California right now.

Coronavirus fears are escalating, and even if Disney never gets to the point of shuttering its theme parks on both coasts in an attempt to control the spread of COVID-19, the tourism pinch is starting to show early signs of weighing on attendance levels. I was at several Disney World parks over the weekend, and while the crowds were reasonable for this time of year, there was some general uneasiness in the air. Guests were sometimes hesitant to approach the biometrics fingerprint scanning stations at the entrance turnstiles, and crowds were common around the hand sanitizers that Disney is adding across its parks.

Nothing can stop us now -- until it does. 

Mickey Mouse in a regal costume in front of Cinderella's Castle

Image source: Disney.

Raining on a perfect picnic

Disney itself is already taking hits as a result of the coronavirus outbreak, and this goes beyond the stock's 17% plunge over the past two weeks. Pixar's Onward just experienced the studio's weakest opening weekend tally since 2015. The film has received generally positive reviews, but with multiplex attendance in general taking a hit, it's clear that moviegoers don't want to be in a crowded theater as long as the coronavirus threat is around. 

Things are about to get even worse for Disney's expanding cruise line as the U.S. State Department and the Centers for Disease Control issued advisories over the weekend, urging Americans not to board ships given the increased health risks associated with COVID-19. If folks are steering clear of the local multiplex and cruise ships, isn't it just a matter of time before they begin avoiding theme parks, too?

We've already seen prolific festivals including SXSW in Austin and Ultra in Miami get cancelled over the past week. If it seems like it's business as usual at Disney World -- and probably Disneyland in California -- right now, it's because these are getaways that folks plan for weeks and typically months ahead of time. Until we start seeing a sharp reversal in COVID-19 cases, it's a matter of when, not if, Disney will experience a drop in tourist levels. The one thing that no one wants to talk about is the possibility that Disney may actually have to close its two domestic theme park resorts for a stretch of time.    

Momentum derailed

Mickey & Minnie's Runaway Railway is a fun and family-friendly addition to a park that has had a massive metamorphosis over the past two years. Disney's Hollywood Studios is a full-day park again, and given the high demand for some of its newer attractions, a single day may not be enough to experience it all. 

There's never a good time for a temporary closure of a year-round theme park, especially for a Florida resort that attracts more than 58 million guests a year. There have been a couple of weather interruptions and even a 9/11 related closure, but none of those setbacks lasted more than a day or two. A virus containment closure would eat up a bigger chunk of the calendar. Disney's two Chinese resorts have been closed since late January, and its licensed Japanese resort is going on its second week of being shut down.  

No one knows how long it will take Disney World and Disneyland to get back on track if they have to close down for weeks, if not months, but the financial drain won't end when the turnstiles are unlocked again. The same reason the parks are seemingly holding up well right now -- the advance planning for Disney vacations -- will likely also cause a slow ramp up of business once the coast is determined to be clear. 

Disney remains the class act of the theme park and media entertainment industries. However, even blue chip stocks can't chase away the gray storm clouds on the horizon.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
$109.32 (3.51%) $3.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.