LDN - Business

Disney's recovery ride hinges on Delta as theme parks swing to profit

[August 14, 2021] By Eva Mathews and Subrat Patnaik

(Reuters) - Walt Disney Co's path to a sustained recovery in its theme parks business will rest on one question: Can the entertainment giant keep its parks open for the rest of the year?

Disney's chief financial officer, Christine McCarthy, said on Thursday the company's theme parks were expected to be fully staffed by the end of this year to cater to the rising demand.

Those plans could be upended by the spread of the more infectious Delta variant of the coronavirus, which has been ravaging Florida, home to Disney's biggest park, as well as other U.S. states with lower vaccination rates.

"Disney's ability to keep its parks and resorts open is clearly of the utmost importance to their bottom line," said Joe McCormack, analyst at Third Bridge.

"Whether (parks remain open) will largely be driven by Delta variant."

While the success of the company's video-streaming operations cheered others on Wall Street, some analysts and investors worried about the prospects for the parks.

"It is clear that parks will not return to full capacity for some time," PP Foresight analyst Paolo Pescatore said.

For now, Disney executives struck a confident tone and said demand for its parks has not wavered.

"The primary noise we're seeing right now are really around group or convention cancellations," Chief Executive Officer Bob Chapek said. "But on the whole, we see really strong demand for our parks."

[to top of second column]

The character of Black Panther is pictured next to a vehicle ahead of the opening of the Avengers Campus area at Disney California Adventure Park in Anaheim, California, U.S., June 1, 2021. Picture taken June 1, 2021. REUTERS/Mario Anzuoni/File Photo

Disney shares rose 4.7% to $187.69 in premarket trading on Friday, after upbeat third-quarter results prompted at least six brokerage groups to raise their price targets on the stock.

The virus has also had varying impact on the domestic and international businesses of theme park operators.

One big factor weighing against a full recovery is the deterioration of international air travel, experts said.

"That could hold back attendance at parks – particularly international parks like Paris and Hong Kong that rely on cross-border travel," said Nicholas Hyett, analyst at Hargreaves Lansdown.

Disney, Comcast and Six Flags have been upbeat about their domestic businesses but offered a cautious view on their international operations, which depend heavily on tourist inflows.

Airbnb Inc and Southwest Airlines both warned this week that the spreading of the delta variant could hit their operations.

(Reporting by Eva Mathews and Subrat Patnaik in Bengaluru, Additional reporting by Lisa Richwine in Los Angeles and Tiyashi Datta in Bengaluru; Editing by Saumyadeb Chakrabarty)

Back to top