Hong Kong Disneyland Closure Seen by Analysts as Temporary Setback

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Hong Kong Disneyland when it reopened June 18 2020.

The conglomerate has faced criticism for reopening parks, especially in America.

The Walt Disney Co. on Monday announced it would again close Hong Kong Disneyland as the result of a rise in novel coronavirus cases in China. The second of the company's theme parks to welcome guests back amid the global pandemic on June 18, Disney said the park would "temporarily close" Wednesday, with no mention of when it may reopen. 

Disney has faced criticism for reopening parks, especially in America, while the virus remains rampant. Still, Florida's Walt Disney World partially reopened Saturday and will be fully reopened Wednesday. 

But as for Hong Kong, as far as some analysts are concerned, Disney closing a park again amid the virus crisis is not necessarily a huge hit to the conglomerate. One veteran Wall Street analyst noted the move was not a "big surprise" as theme parks face a rocky road to full recovery. 

"We anticipated that flare-ups could cause temporary setbacks such as temporary closures and then reopenings again," Moodys senior vp Neil Begley tells The Hollywood Reporter. "I don't expect any long-term implications or prolonged closures. But re-closures and potential multiple re-closures could continue until the virus is mostly buttoned-down." 

The Hong Kong park is the second setback Disney has faced as it attempts to operate its theme parks and stores in a drastically changed environment. In late June, Disneyland in Anaheim had to scrap plans to reopen the theme park and resort hotels fully by late July due to the surge in novel coronavirus cases in California. What's more on Monday afternoon, Gov. Gavin Newsom announced a statewide order requiring indoor operations to close effective immediately. That order includes restaurants, movie theaters, family entertainment centers, wineries and tasting rooms, zoos and museums, card rooms and bars.

"We're seeing an increase in the spread of the virus, so that’s why it's incumbent upon all of us to recognize soberly that COVID-19 is not going away any time soon until there is a vaccine or an effective therapy," Newsom said Monday. The Downtown Disney shopping and dining district, which reopened last month, will still be able to operate. 

CFRA Research analyst Tuna Amobi says the closure of Hong Kong Disneyland "underscores the fluidity of the COVID-19 outbreak and its projected financial impact across Disney's worldwide theme park businesses, also raising the specter of similar concerns following the earlier reopening at Shanghai Disneyland." The Shanghai park remains open. 

Begley argues, in his opinion, that Disney has a bigger concern than temporary closures, which is the limitation on raising capacity at each park over the next six months, which "will impact profitability and the ability to bring back furloughed workers." For the moment, no park is operating at greater than 30 percent capacity. 

At the same time Disney World was reopening, Florida reported a record-breaking 15,299 new confirmed coronavirus cases Sunday. That marked the highest daily total any U.S. state has recorded thus far. And yet, Begley gives the company some praise. 

"In Florida, Disney may in fact be leading by example with social distancing and mask-wearing if in fact the science behind those protocols proves effective and spread is not traced to park attendance," he says. "The state of Florida is very dependent upon Disney World, so I would not necessarily expect a push for broad closure unless the spread and hospitalizations in Orlando approaches critical levels." 

While the surge in cases my raise more questions about the domestic parks reopening, Amobi says, "Longer term, we believe Disney's portfolio diversification and relative financial strength continue to provide distinct competitive advantages as the media and entertainment industry navigates the highly disruptive impact of the pandemic."