One of Disney's (DIS -1.01%) fastest-growing theme parks is going on a hiatus at the worst possible time. The media giant announced that it will be temporarily closing Shanghai Disneyland on Saturday in an effort to help control the coronavirus that has escalated rapidly to more than 830 confirmed cases across the country, with thousands of others under observation. We're up to 26 fatalities, a figure that will unfortunately increase dramatically if the spread of the deadly disease isn't contained.
There is never a good time to close a theme park, but this is happening during the peak Lunar New Year travel season. Disney really didn't have much of a choice. Many of the country's temple fairs and festivals are already being nixed, and keeping Shanghai Disneyland and the rest of the resort open would have negative ramifications if the virus continues to spread. It's a financial hit now, but staying open would have deeper negative ramifications down the line if the coronavirus outbreak continues to spiral out of control.
Image source: Shanghai Disney.
Grinding halt
Shanghai Disneyland has been a hit since opening in June of 2016, at the time the first new Disney theme park in more than a decade. Disney itself doesn't provide attendance figures, but industry tracker Themed Entertainment Association pegs its attendance at 11.8 million guests in 2018. Shanghai Disneyland is the eighth-most-visited theme park in the world, and the most visited park outside of the U.S. and Japan.
Disney is not immune to temporary closures and virus outbreaks. It's had to briefly close its Florida parks as a result of hurricanes, and as a cruise line operator it suffers from the occasional norovirus outbreak, as on the Disney Wonder in the spring of 2016. However, when windstorms or terrorist events shutter Disney parks, it's typically for no more than a day or two. There is no timeline for when the Shanghai Disney resort will reopen.
Momentum matters, but since all of China is going through the coronavirus outbreak, this obviously isn't just a Disney problem. When the world's most populous nation is convinced that the deadly respiratory virus is finally in check, folks will come back. The longer the Shanghai Disney resort is closed the harder it may be to get back on track, but there's also something to be said about the pent-up demand for entertainment and escapism once the coast is clear.
For now it seems as if Disney can't catch a break. It is coming off of back-to-back quarters of declining attendance at its original Disneyland theme park, and China's slowing economy could be eating into the turnstile clicks at Disney resorts in Hong Kong and Shanghai. Disney will bounce back from this, as that is just what the planet's leading theme park operator does. However, until we get a clearer grasp of the coronavirus impact and how long Shanghai Disney will remain closed, it will be difficult to see Disney shares take out November's all-time highs.
