Hong Kong Disneyland is temporarily closing down on Friday. The global surge of COVID-19 cases has started to hit home, and the theme park resort announced on Wednesday that it would be locking the entrances to its gated attraction through Jan. 20. The two-week closure can naturally be extended if the local situation doesn't improve in the coming days.
Theme park fans in general and Walt Disney (DIS -0.93%) investors in particular will naturally wonder if Disney World in Florida and Disneyland in California will follow suit. The pandemic has taken a bigger bite out of the U.S. market than in China, and the crisis has certainly been intensifying stateside in recent weeks. It's a grim backdrop, but a closure of either U.S. resort seems highly unlikely for now. Knock on Pinocchio.
Image source: Disney.
It's a great big beautiful tomorrow
The news of Hong Kong Disneyland closing down for a couple of weeks didn't really weigh on Disney stock on Wednesday. The media giant's shares were actually one of the few stocks exchanging hands in positive territory for most of the otherwise brutal trading day. It would buckle in the final minutes before the closing bell, clocking in with a modest 0.35% decline.
California's Disneyland hasn't closed down since resuming operations in April of last year. Disney World has remained open since welcoming guests back to its parks two summers ago. Things can always change, of course, but closures at Disney-branded international parks haven't stopped the turnstiles from clicking at the entertainment bellwether's domestic attractions. Disneyland Paris was closed for months after its initial restart. Hong Kong Disneyland has had a few shorter closures since resuming operations, and this will technically be the fifth time that it temporarily shutters its park.
Every country is different, and as we learned here -- with Disney World getting back to business more than nine months before Disneyland -- even every state marches to the beat of a different governor.
A second closing for either park could prove devastating to both Disney shareholders and the local economies. Theme parks have always played a starring role in Disney's business, but the attractions have been an even bigger contributor to its turnaround. Disney's parks, experiences and products segment saw its revenue nearly double in its latest quarter. Even with the travel market still in a state of flux, Disney's U.S. theme parks generated an operating profit of $244 million on $3.473 billion in revenue for the quarter. Closing down the parks wouldn't just turn that profit to a loss. Disney would have to start from scratch to regain its momentum. If it's struggling with staffing issues and tourist planning concerns now, just imagine what happens if either resort has to go all Walley World again and tell visitors that the park is closed.
It's not just wishful thinking that the parks will remain open. The data is also on its side. Case counts have never been higher, but fatalities and hospitalization rates remain well below their earlier peaks. A growing number of fully vaccinated and boosted folks, along with the initial tendencies of the omicron variant to be highly contagious but serve up kinder short-term outcomes, appears to be helping.
Everything can change for the worse, of course. However, after nearly two years of dealing with the COVID-19 crisis, the parks have been able to fine-tune their operations to incorporate safety and social distancing measures in delivering escapism to theme park fans. As the top dog of entertainment stocks, Disney has adapted to the new normal, and is no doubt studying ways to embrace the next new normal.
