Hurricane Irma came, saw, and conquered. An old Disney Circle-Vision movie once commented that “nothing on earth stands in the way of a glacier,” but hurricanes are a mighty powerful second place when it comes to forces of nature. As you’ve likely seen multiple times by now, the storm did a real number on Central Florida, causing flooding and widespread power outages that, in some cases, persisted for more than a week. Given the crushing heat and suffocating humidity of the area, this is no trivial matter for the residents affected. Yet for all the heartache it caused, Irma did not wreak any major havoc or cause substantial structural damage to Walt Disney World. There were lots of downed trees and branches, to be sure, but for the most part it looks like WDW dodged a bullet. But did it? Especially when you look at the long-term scenario, the picture is far from rosy.

Irma, as it passed over the WDW area.

Hurricanes are expensive to the bottom line for WDW. You’ve got the obvious reasons: people cancel vacations and/or don’t make spur of the moment trips, for instance. You’ve got the less-obvious reasons: it’s costly for Disney to staff their resorts with the “ride out” crews, who dedicate much and endure sometimes irrationally irate Guests at such moments. But you’ve also got the hidden reasons: in addition to losing money from gate ticket purchases, merchandise sales, and experience upcharges, Disney can’t even make its money back on food. During the hurricane, electricity-resistant meals were prepared (the kind you can eat even if power goes out), and Disney can’t charge its usual markup, because that looks to the public like price gouging. We know this from prior ride-out hurricanes. So this time around, rather than risk the wrath of Twitter, Disney elected to sell those pre-made meals at an actual loss to their costs.

Snapped bamboo at the entrance to DAK

Irma closed the parks for two full days (one was the very tail end of the storm; they other was for cleanup), and of course closing the parks is costly to the company. Sure, they don’t have to pay the front-line hourly CMs (who as a result view the closure as a negative, since they aren’t earning money), but most of the rest of the costs remain, like air conditioning, lighting, etc. The biggest impact, as you can imagine, is the loss of revenue from ticket sales, food sales, and merch sales. I heard a rumor (or just a rank guess?) that it was about $1 million in profit per day, forfeited. Typhoon Lagoon stayed closed many extra days–no surprise with all its leafy foliage likely blown down.

The bigger problem is the public perception. People cancelled entire vacations during the storm–that’s to be expected–but booking after a storm like this will always be soft. People don’t necessarily rush back to book a replacement vacation, especially when it’s still hurricane season (and the weather channels continue to show new storms forming that could strike Florida a second time). This has led to softer crowds. The first day back after the hurricane, with many locals lacking power and many out of town visitors not able to fly in (if they weren’t already here) had amazingly short lines–I saw one post that Avatar Flight of Passage was a literal walk-on. Crowds have picked up since then, of course, but it’s a solid bet that they are lower than they would have been in a pre-Irma universe.

The relevant backdrop to consider all this, of course, is the larger context of corporate results and, even more importantly, Wall Street expectations. We should never lose sight of the fact that many “on the ground” decisions are driven by larger forces, and for a publicly-traded company like Disney, no force looms larger than stock price performance.

Thinned foliage at the Oasis at DAK from the storm

On this front, things look especially dicey just now. CEO Bob Iger has announced solid performance by Shanghai Disneyland, but he also, right during the hurricane, gave guidance that overall company results are likely to be flat compared to last year–never a good sign when short-term mentality on the Street expects constant growth, consequences to quality be damned. Part of this is surely due to ESPN’s subscriber losses. But if the poor performance of some lines of business are balanced by good performance of Parks & Resorts, that doesn’t mean P&R will be spared any blood-letting or cost-cutting. Ironically, and perhaps against good judgment, the better performers are sometimes squeezed at moments like this to see if there are any further gains to be had.

This kind of thinking fuels rumors of layoffs in the theme parks division–likely lower-level salaried jobs, not front-line hourly jobs. Indeed, there’s the odd rumor or two about this floating around out there, and they may even be right.

The most disastrous scenario would be if people stop moving to Florida for fears of storms like Irma. The state’s economy depends on rapidly-expanded and ever-increasing valuations in housing, so if the housing market here starts to suffer, so too will the State. And when the State flounders, big players like Disney definitely feel the pinch. So the storm’s impact on the national psyche is important. If ever the day comes that Florida isn’t seen as one of the premier places to retire, watch out. Any further storms that come, either this year or future ones, only really bring more bad news for Disney, even if the short-term damage wasn’t too bad.

One bright side: I’m guessing Disney is thanking its lucky stars that it didn’t still operate StormStruck, a hurricane-themed mini-simulator in Innoventions. That would be seen as particularly tasteless, and they would have had to shut it down immediately, likely to some bad press (just as they did with StormStruck’s neighbor, the first version of Habit Heroes). Hm, maybe keeping Innoventions shuttered is an intentional strategy?!

 


 

Our thoughts are with all those who suffered through the recent storms and our deepest sympathies to the families of all those injured and lost.

If you’d like to help those in need, we encourage you to join us in donating to the Red Cross HERE or to any group aiding hurricane relief.