Disney announced today that it's offering buy-outs to 600 managers at its U.S. theme parks. If not enough take the offer to leave (and the company didn't say how many that would be), then Disney might start laying off employees.
Disney also said that advance bookings at Disney's hotels were down six percent for the first six months of 2009, compared with the same period one year ago. That's a better showing the 10 percent drop the company forecast earlier, when it announced its current round of discounts.
*Update: (From the comments) Universal Orlando lays off 70 employees.
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Im not too afraid about losing my job, since Im seasonal, but this is a big blow to my hopes of going from seasonal to full time anytime soon. Id be lucky if I get enough hours to keep my seasonal status...
The question is, how ready are they for this year? They have had robust attendance for a long time, but they are a vacation destination, and an expensive one at that. People are cutting costs this year, and that will likely include vacations as well. The Disney parks live by their attention to detail...it's what separates them from most others, and cost cutting has a tendency of putting detail on the back burner. Are they prepared to sacrifice some of that Disney "magic"?
I'm sure that attendance will be ok at the Disney parks, but mark my words. This is the year of the regional amusement park.
As for service issues, I think buying out a bunch of highly compensated suits is probably not going to have much of an impact. If things continue to go south (what the hell happened to that big, beautiful tomorrow Obama promised us?), then you could see the visitor experience impacted with shortened hours, fewer showtimes, days without parades/night time spectaculars, and even park closures (you know a certain park closed each day to cut costs). I don't think Disneyland is in nearly as much danger as WDW just because the local population is more capable of propping that park up, but WDW could see some even more severe downturns. When you are the #1 vacation destination in the world, and the economy is such that vacations are less likely, then you are going to be hurt more than others.
And I believe Everest was $200 million, Derek, which adds even more fuel to your fire. We sure like it when Disney throws wads of cash at their parks and builds new attractions, but when the going rate for a top notch narrative experiences like Toy Story Mania runs $80 million, you can see why WDW is standing pat this year and opting to spend $$$ on improving/fixing/maintaining what they have and not bundling all their assets up into one big new $100+ mil attraction.
For all of our sakes, I hope things start turning around quickly, but most "experts" who aren't screaming about the end of the world, are figuring on 18 months before we see some sustained positive changes in the economy. Not good news for Disney, but good news for bargain hunters like me. At least until I lose my job, anyway.
I think this is very worrisome for everyone working for Disney (as I at the Disney Store with little to no hours), but its not the first time its happened (I think when Eisner took over they had this problem) and it shouldn't be too suprising since many other businesses are cutting back too!
All this to say, I'm very curious to see what the attendance will be like when we arrive, (anyone know?). I think that if people are budgeting and planning early enough, they will still go and the parks will be packed. I always worry when people start losing their jobs, however, 600 managers does sound quite top heavy.
I Respond: How bold.
Mr. Rao claims Expedition Everest cost $200 million to build.
I Respond: As a person with experience in attraction construction I assure readers the number is closer to $125 million -- regardless of what outsiders have estimated -- and I would also note that these costs (based upon a typical construction schedule of values) are extended (inccluding concept and design) over the last eight or nine years.
The real story regarding Disney and the economy is its aggressive marketing. The company has really pushed forward -- with the free birthday admissions, the discounts for military personnel, the "Are you 23" campaign and the "buy four nights get seven" hotel deals.
My spouse is a cast member and we have regularly joked that the amount we have spent inside the parks (on her main gate pass -- including the time we spent in California last summer) is far greater (more than double) what she is paid in salary.
And while it is always chic for media types to examine Disney during times of economic turbulence, perhaps we need to acknowledge its standing as an industry barometer.
In other words, if Disney is having problems, imagine how the second tier parks are doing.
That big black and white fish has to eat every day.
(P.S. I know its a mammal).
The point is that when Disney cuts back on work force, they suffer more than other, more traditional, midway-style, amusement parks, because the Disney Experience requires lots and lots of bodies! If Disney can't make magic, then why should someone travel 3000 miles to make it a destination?
And while Disney may be a barometer for the parks in Florida, a downturn at Disney may actually be helpful to places like Worlds of Fun in Kansas City, MO. In fact WOF may have a banner year thanks to people like me staying at home and getting their amusment park fix nearby.
(Granted it is a cheap fix, but even cheap fixes can bring short term satisfaction!).
The real potential issue here is that Disney is a destination vacation, and an expensive one at that. Families watching their money will for the time being, be inclined to forgo expensive vacations this in favor of closer attractions and activities. The $3000 Orlando trip will more often give way to the $500 weekend at the local amusement park or some other inexpensive alternative.
The two words that I never hear at Disney are "cut costs", and offering buyouts to six figure suits is just the beginning. You talk about feeding a big black and white fish, well how about the monster that is Disney. The attractions and hotels were expensive to build in the first place, but imagine the operating costs they incur every day. The bottom line is that the "magic" of Disney requires it's own wad of cash and a lot of customers to operate. It will get worse before it gets better, and I'll be interested to see how they handle this whole thing.
Disneys standing as an industry barometer goes about as far as Florida's border. The increases in attendance and revenue at Six Flags and Cedar Fair, as well as other parks around the country tell that. If anything, a well run regional park stands to gain some market share in this economy.
This note is from Al Lutz over at Miceage.com:
The Imagineers assigned to...multiple DCA project [teams] can't believe the luck they had in getting all of [their projects] approved and fully funded when they did in ‘07, as the economic crisis of ‘08 has literally put a stop to nearly everything [else]..."
Sure, anything can change, but right now DCA Imagineers are just thanking their lucky stars that they got all their projects approved before the big economic downturn.
On another tack, Disney's aggressive discounting is what's driving the crowds right now. But that means they're only getting 60% of lodging revenue (giving away 3 nights out of 7) and I'm sure those using that lodging are being more creative (read "economical") in their dining and miscellaneous purchases. Here's hoping the market, banking, housing and job situations turn around soon...
but don't hold yer breath.
Having said this, the same site reported that constrcution activity has picked up at the Pop Century resort -- where the company plans to build family suites.
My team is continuing to work on the pirate renovation at the Caribbean Beach Resort.
In my opinion Disney has positioned itself to ride the storm out -- enjoying the benefits of years of financial success and the foresight to know when the rough economy was going to arrive.
I respond: You have GOT to be kidding. Disney is constantantly looking for ways to reduce costs. Where to begin? From the food services for cast members (employee cafeterias, etc.) being contracted out to an outside company, to the reductions in entertainment at all the Florida parks, to the closing of the clubs at Pleasure Island, to the intermittent opening of the Life and Health pavilion, there are a myriad of places Disney has reduced its operating expenses.
Jim Hill Media (and this was Published LAST JULY): "Finding new ways to cut costs as well as increase profits ... That's Mickey's new mantra. Particularly since Mouse House managers are anticipating that -- what with the higher costs of jet fuel & heating oil -- far fewer Guests will be flying on down to Disney this winter.
This is why -- in anticipation of these coming tough times -- Disney's being proactive. They're instituting all sorts of cost savings measures around property these days. Doing everything from limiting the amount of overtime that’s available to WDW cast members to removing some of the less popular / more expensive items from the menus of the resort's buffet restaurants."
Having said of of that, Mr. Hill recently reported some good news!
Jim Hill Media (January 13, 2009) :For most of 2008, WDW officials knew that 2009 was going to be a real challenge for the Resort. Which is why -- as far back as July -- they began putting cost containment measures in place. Doing whatever they could to lower Disney World's operating costs (i.e. cutting Fantasmic! back to just two performances a week, eliminating character dining at the Liberty Tree Tavern, etc.).
But then in October of last year, Disney Parks & Resorts execs got some scary, scary news. Due to what was happening on Wall Street and the continuing credit crisis, WDW's advance bookings had fallen off precipitously. And unless something was done and fast, the Magic Kingdom (which can hold 65,000 - 67,000 Guests on its busiest days) might see weekdays in January of 2009 where its attendance level would fall into the teens.
This was why Disney Parks & Resorts rolled out that Buy-4-Get-3-Free promotion back in early November. Which seems to have done just what the Company had hoped it would. Given that -- during the first 10 days of January -- the Magic Kingdom saw weekday attendance levels in the 30,000s.
Now anecdotally speaking my (gorgeous) wife who works in entertainment just got done playing what we refer to as the Sunday Disney Scratch-Off Game. That's where she gets her cup of coffee, sits down at the computer and checks her schedule. As a part time cast member she has managed to get three days of shifts scheduled every week this year. No cut backs.
Meanwhile, my pal Chris, will arrive on January 29th from Chicago, to stay at the Poly -- where he is taking advantage of the buy four get three deal.
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