Tokyo Disney Resort Operator Oriental Land Company Posts $92 Million Q2 2021 Losses Due to Strict Capacity Restrictions

The Oriental Land Company, owner and operator of the Tokyo Disney Resort, announced the results for the second quarter of the 2021 fiscal year this week, with losses amounting to nearly $100 million in Q2 due to the strict capacity cuts required by the Japanese government amid several States of Emergency.

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Through this year, we’ve extensively covered Tokyo Disney Resort’s erratic hour changes before the back-to-back State of Emergencies from mid-May to the end of September forced it to operate 9 hours per day. The Oriental Land Company laid out the different ticket options, park hour choices, and reasons behind them at the beginning of the report.

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They also chose to highlight some of the new measures to boost “experience value” and net sales even amid attendance limits, such as the test run of alcoholic beverage sales, the return of Dreaming Up!, Club Mouse Beat, and the various scaled-back seasonal events including the Tokyo DisneySea 20th Anniversary “Time to Shine!” celebration.

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Results for the first half of FY2021 (aka FY3/22) were positive compared to last year, mostly due to the two theme parks being closed for the entirety of Q1 in 2020. Net sales were up 65% year over year, at ¥97.5 billion, or $855.2 million. Net sales grew over 120% at the four Disney Hotels, 57% at the theme parks, and 39% in other segments like Ikspiari and the Disney Resort Line.

However, the Oriental Land Company still lost ¥19.3 billion ($169.3 million) in the first half of FY2021, a 4.7% decrease in losses compared to the first half of 2020. The vast majority of these losses came from the two theme parks, with the hotels almost breaking even comparatively.

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Because these numbers are against the first half of both years, net sales per guest and attendance were up from last year as well. Attendance in the first half of the year was at 3.9 million guests across both parks, versus 2.69 million last year. Net sales per guest also increased 13% to ¥14,877 ($130.48) due to ticket cost increase, strong demand for Duffy and 20th Anniversary merchandise, and strong demand for both new menu items and souvenir food items.

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When put up against last year’s Q2, the results look less positive. The Oriental Land Company lost ¥2.7 billion ($23.7 million) more in Q2 2021 than in Q2 2020. This is entirely attributed to lower net sales due to low capacity at both parks, in spite of personnel and miscellaneous expenses decreasing.

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Things were much more positive for the hotel and other segments, which each posted better first half results than last year.

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The Oriental Land Company also took this opportunity to forecast their results for the second half of Q2 2021, which is based on the latest COVID-19 regulations agreed to between many theme and amusement parks across Japan.

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The plan as it stands is to continue increasing attendance in phases while maintaining some restrictions and countermeasures to ensure guest and Cast Member health and safety. We can expect to see more variable pricing and further earnings generation from guest experience improvements as well.

Additionally, some developments planned for FY2021 such as the Toy Story Hotel and the nighttime spectacular Believe! Sea of Dreams at Tokyo DisneySea have been delayed to FY2022.

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The latest increases and introduction of tiered ticket prices this year have been formulated based on internal assessments of the value of a visit to Tokyo Disney Resort as well as results of price sensitivity surveys among guests, as well as attempting to forecast guest demand trends. Ticket purchases have been highly competitive during the capacity restrictions, and it seems the Oriental Land Company expects this heavy competitiveness to continue as capacity increases. Additionally, they believe that these tiers will serve to even out attendance, which is a problem in non-COVID times, with weekends and holidays being notoriously overcrowded at the two parks.

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The Oriental Land Company expects to have a better second half to FY2021 than in 2020 (keep in mind, almost all of Q4 2020 was during the first cut to 5000 guests per day). They estimate net sales will grow another 27% to ¥141.4 billion ($1.24 billion), largely generated by the two theme parks. Hotels are expected to be the only profitable division come April, with the theme parks still projected to incur a loss of ¥7 billion ($61.4 million) in the second half. Relaxing of capacity restrictions is expected to have a major effect on net sales as well, although spending per guest is expected to shrink slightly.

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Costs are of course expected to rise as attendance increases, especially for paying part-time Cast Members, paying bonuses to full-time employees, development and supply costs for merchandise, food and beverage, and events, which fluctuate based on whether events are actually held or not, as well as marketing costs. Other major costs that are expected regardless of operating conditions are of course basic salaries for full-time employees and maintenance costs.

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A rise in room sales and passengers on the Disney Resort Line are expected to decrease operating loss in the Other Business segment, and bring the Hotel Business segment into profitability.

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By the end of the year, the Oriental Land Company expects attendance to be at 10.5 million Guests between the two parks across FY2021, a nearly 40% increase over 2020.

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Dividends to shareholders have shrunk to levels not seen since FY2011 due to the COVID-19 pandemic.

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The future outlook for the company is positive, however, as new offerings are underway or on their way to enhance guest value while increasing corporate value. Several methods were laid out, such as the return of tour guides, collaborations with popular premium bakeries, and merchandise based on guest voting for favorite characters.

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Attendance is still not expected to hit nearly the same levels as in FY2019 before the COVID-19 pandemic began, where attendance hit approximately 29 million guests across both parks. Attendance at 10.5 million guests would put the resort at attendance levels not seen since 1984, in the infancy of Tokyo Disneyland.

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Due to international travel restrictions and fears over domestic travel, guests from overseas represented less than 0.1% of visitors last year, and the vast majority of all guests came from the immediate Tokyo area at 85%.

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The Oriental Land Company also laid out the different capacity, park hours, and ticket sales measures taken during the parks’ initial reopening stages from July 2020 through March 2021.

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They also revealed that ticket sales were always kept within the then-current attendance limits from the prefectural and national governments. But some days were higher than the capacity of the time due to tickets being sold a month early, and the resort was not required to cancel any oversold tickets.

All in all, although the continued losses for the company are disappointing, the future still seems bright for the Oriental Land Company and Tokyo Disney Resort, and it shouldn’t be too far down the road where they return to profitability once more. What are your thoughts on the latest financial results? Let us know in the comments below.

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