Theme parks were among the few financial bright spots in Disney’s latest quarter with domestic attendance returning to pre-pandemic levels, as the media giant announced $5.5 billion in planned cost cuts including 7,000 layoffs.
Executives told analysts during a quarterly earnings call that organizational restructuring and reductions playing out in coming weeks will include a 3% paring of Burbank, California-based Disney’s global workforce. Cuts will be made primarily in media-related entertainment, marketing and technology divisions as the company looks to bring its streaming services to profitability by the end of 2024.
Theme parks are crucial generators of retail, hotel and other real estate demand near venues including Walt Disney World in Orlando, Florida, and Disneyland Resort in Anaheim, California, the nation’s two most visited theme parks for the past several decades.
Disney leaders told analysts the domestic parks have essentially returned to pre-pandemic attendance and consumer spending, though the company continues to limit capacity during certain periods to optimize customer service including crowd control.
“I’m very bullish about our parks, and not just because of the COVID recovery,” said CEO Robert Iger, making his first earnings call appearance since his return to the top executive post in November.
Chief Financial Officer Christine McCarthy noted that after several quarters of lagging behind the U.S. parks because of on-and-off pandemic restrictions, Disney’s parks in Paris, Tokyo and Shanghai are now contributing significantly to overall attendance and revenue gains.
The division that includes theme parks saw total revenue rise 21% from a year earlier to $8.7 billion in Disney’s first fiscal quarter ended Dec. 31. Theme parks proved to be an outsized contributor to the company’s total revenue rising 8% from a year earlier to $23.5 billion for the quarter. Net income increased 16% to $1.3 billion.
McCarthy noted theme park hotel bookings for Disney’s current second quarter are running ahead of year-ago levels, suggesting more theme park attendance and revenue gains are in store. But the parks division will not be unscathed in Disney’s future spending plans. McCarthy said the company now expects to spend about $6 billion on capital projects in the current fiscal year, down from a previous guidance around $6.7 billion.
According to consulting firm International Theme Park Services in Cincinnati, several U.S. theme park operators including Disney finished 2022 with strong attendance and revenue, though the industry may not fully return to pre-pandemic conditions until 2024. Among other challenges, the industry faces a lingering shortage of staff needed to handle line control, concessions and other service demands of growing crowds.
Disney and its media competitors are now facing challenges including a drop in traditional advertising and struggles to retain and attract subscribers to numerous rival streaming services. Disney joins several streaming providers in cutting program-related spending after a significant pre-pandemic ramp-up in content production that helped to boost demand for studio space in Los Angeles and other media hubs.