Disney tests reopening strategy at Shanghai Disneyland

Walt Disney Co. will kick off its strategy next week to begin restoring its lucrative parks business that has suffered $1 billion in lost profits from the coronavirus-led shutdown.

Disney said on Tuesday it will reopen its Shanghai Disneyland park on May 11 but severely limit the number of guests and enforce strict social distancing measures on rides and in restaurants.

The plans provide a glimpse at how the company - which in previous quarters generated a third of its revenue from parks, experiences and consumer products - will recover from the pandemic.

"We will take a phased approach with limits on attendance using an advanced reservation and entry system, controlled guest density using social distancing and strict government required health and prevention procedures," Disney Chief Executive Officer Robert Chapek said on a conference call with analysts after reporting second-quarter earnings.

"These include the use of masks, temperature screenings and other contact tracing and early detection systems."

Executives said they have “limited visibility” over the timing on when other parks, stores and the company’s cruise line would reopen.

The stakes are high: more than half of the $1 billion in second-quarter operating profit declines came from just two weeks of closure of Disney's U.S. parks, Chief Financial Officer Christine McCarthy told analysts on Tuesday, with the rest coming from the closure of parks in Asia and its smaller, but popular cruise business.

To quickly reduce overhead, Disney furloughed more than 120,000 employees in April.

Chapek said the company would only reopen locations that would not lose money.

"We would not reopen any park unless we can make at least a positive contribution to that overhead and operating profit level," he said.

In China, Disney executives explained, the company will take it slow to test new ideas. Guests at Shanghai Disneyland will be required to purchase admission tickets valid on a selected date only, and annual pass holders will need to make a reservation prior to arrival.

Ride vehicles, lines and restaurants will be set up to follow social distancing guidelines. Guests and employees will be required to wear masks, which guests can remove when dining.

Guests' temperatures will be screened and the park will use the government-issued Shanghai Health QR code, a contact tracing and early detection system used in China. Sanitization and disinfection will occur more frequently, the company said.

Disney Chief Medical Officer Dr. Pam Hymel said the company is exploring ways to use technology such as its Play Disney Parks App to help with those efforts, according to a Disney blog post on Tuesday. Reuters previously reported that guests could be notified via app or another technology when they can go on a ride or in a restaurant to eliminate lines.

Chapek said Shanghai Disney Resort, which includes Shanghai Disneyland theme park and other properties that have previously been reopened, tends to attract 80,000 guests a day.

The Chinese government is limiting that capacity to 24,000 daily guests but Disney is planning to open the park “far below” that capacity to try out new procedures, Chapek said. After a few weeks park attendance will be up to the government's guidelines, he added.