DISNEY WORLD'S PRECARIOUS POSITION IN FLORIDA
- Disney has had a rollercoaster few years as costs at its Orlando theme park have soared while revenues have been hit.
- The company has also been in the middle of a culture war with Governor Ron DeSantis following his "Don't Say Gay" bill.
- The turmoil has led some observers to question Walt Disney World's viability in the Sunshine State.
- Could this be the end of the Florida fairytale for the entertainment giant?
The past couple of years for the Disney company have been as wild as some of the rides at its theme park in Orlando.
A revolving door at the CEO's office, a dip in revenues, raising inflation pressures, layoffs, big wage demands from workers, and an ongoing political battle with Florida's governor—who has placed the theme park at the center of his ideological war against "wokeness"—have all taken their toll.
The recent storms clouding Walt Disney World in Florida have consumers and economic experts keeping a close eye on what its future holds, with some questioning how exactly park bosses will transfer increasing costs onto consumers.
"The costs of running the theme park will continue to escalate, creating pressures for executives to quickly adjust and evolve their formula for growth. The real challenge? How do you disperse the hourly wage increase for park employees onto paying customers who themselves are dealing with the looming threat of a recession," Christina Curtis, founder of Curtis Leadership Consulting, told Newsweek.
Loyal Disney World attendees were left dismayed when CEO Bob Chapek introduced a series radical prices hikes during his short-lived tenure in the top job.
After replacing long-serving boss Bob Iger in February 2020, Chapek oversaw an increase in the cost to stay at Disney hotels and ditched free Fast Passes, which allowed people to bypass longer lines at their favorite rides. The cost of food and beverage also went up dramatically at Disney parks. Chapek did away with free resort parking as well, and raised the price of the shuttle to and from Orlando airport.
For Vanessa Gordon, a Disney World devotee who has been vacationing at the park multiple times a year since 1993 and even got engaged there, the rising prices which she says are "through the roof" have put her off attending as often. Gordon says she sees more value in heading to the Caribbean or Europe with her young family.
"It would definitely affect our decision as a family... Disney would really need to step up their game as far as any significant park updates, ride updates or provide more in terms of the overall experience, especially for those that stay on property as we always have," the 34-year-old publisher and CEO of East End Taste magazine told Newsweek.
Layoffs and Cost-Cutting
Iger was reportedly "alarmed" at the price hikes at Disney's parks and overturned some of the decisions when he came back as Walt Disney Co. CEO in November 2022.
His return was not all good news as it came with the announcement that there would be mass layoffs and a freeze in hiring following a fall in revenue.
Disney said last month it planned to cut $5.5 billion in costs, including $3 billion on content spend, and this week Iger informed Disney staff the company would cull 7,000 jobs in the coming months.
"This week, we begin notifying employees whose positions are impacted by the company's workforce reductions... A second, larger round of notifications will happen in April with several thousand more staff reductions, and we expect to commence the final round of notifications before the beginning of summer to reach our 7,000-job target," Iger wrote in an email to staff on March 23.
At a time when Iger is looking to make sweeping cuts across the company, from streaming site Disney+, to parks, cruises and other networks it owns, around 45,000 staff at Disney World successfully negotiated a raise.
The Services Trades Council Union, the umbrella union for six unions representing service workers from performers to bus drivers, hospitality staff to lifeguards and hotel housekeepers, negotiated with Disney to see the minimum wage jump from $15 to $18 by year's end.
The services workers make up more than half of the 70,000-plus workforce at Disney World, which is one of the biggest employers in the state. Their new contract with Disney will see the immediate pay rise with a further potential rise of between $5.50 and $8.60 an hour within the next five years.
Given the increase in wages at Disney World and the rising cost of living, some are worried the cost of attending the park or staying in one of its resorts will skyrocket over the coming years.
But one economist said visitors "should not be too concerned" about potentially dramatic price hikes because there will likely be a "one-time adjustment" that has nothing to do with rising labor costs, according to William J. Luther, associate professor of economics at Florida Atlantic University.
"It is tempting to think the recent pay increases will drive up Walt Disney World's costs and ultimately cause the company to raise ticket and concessions prices. But that's not quite right," Luther told Newsweek.
"Rather, Walt Disney World's prices and labor costs will have been driven up—at least in dollar terms—because the value of the dollar has fallen."
Luther added that "unusually large price hikes" will not "become the norm."
"Money growth slowed and became negative in the back half of 2022. Declines in inflation should follow. At that point, park goers can expect more normal changes in prices over time," Luther said.
Culture War With DeSantis
If rising costs and the battle to keep regulars interested in attending Disney World weren't big enough issues for the company, it has also locked horns with a potential presidential candidate in Florida Governor, Ron DeSantis.
Tensions between Disney and DeSantis rose after the governor decided to go after the park by revoking its special status and appointing a five-person board—made up of people whose moral views are aligned closely with his— to oversee its operations.
In February, DeSantis signed into law a bill that gives the state control of the Reedy Creek Improvement District, a local government entity that essentially allowed Disney to operate as a self-governing authority in Florida for more than 50 years.
With its special status, Disney has essentially been able to tax itself in order to pay its operating costs and oversees all municipal needs, from planning, development, utilities and emergency services.
Having full control of the land on which the park sits and freedom to make decisions without government influence was something Disney pushed for to expedite its growth in Florida, especially as its main competitor, Universal Studios, was developing nearby, said Richard Foglesong, author of Married to the Mouse: Walt Disney World in Orlando.
"[Disney] wanted these government powers because of their experience at Disneyland in Anaheim [California]. The one thing they were dissatisfied about was that they had to depend upon a government that they did not control to provide public services," Foglesong told Newsweek.
DeSantis' move to give state control to the board came after Disney rebelled against his controversial "Don't Say Gay" bill. After initially botching its response to the 2022 bill, which bans the discussion of sexual orientation and gender identity in schools, Disney was spurred into action by its sizeable LGBTQ+ staff.
Disney cut political donations, spoke out publicly against the new law, and pledged $5 million to organizations supporting LGBTQ+ people.
The park continued to host its popular "Gay Days" where more than 100,000 people attend the park's celebration of the community and in September hosted the Out & Equal Workplace Summit, touted as the biggest LGBTQ+ conference in the world.
It's in Disney's interests to protect its relationship with the LGBTQ+ community, whose "pink dollar" spending brings in millions to the park annually. In 2018, US LGBTQ+ residents spent $63.1 billion on travel, representing almost two percent of the market share, according to Out Now Consulting,
Upon appointing the board, known as the Central Florida Tourism Oversight District, DeSantis implied it could have control beyond the park's operations. He suggested its influence would be able to dictate the kind of content Disney could make and wanted to stop it "trying to inject woke ideology" into society.
"These people appointed were appointed as 'cultural warriors' and were people who had taken positions on the same anti-woke issues that Governor DeSantis did and that the danger was... they would use that power to leverage Disney to change the nature of the movies in the cartoons and rides and whatnot that the Disney company produced," Foglesong said.
"Disney company, you might say, is the largest manufacturer of culture in the United States and some of... what they produce is not to the liking of Republicans."
Newsweek reached out by email to Walt Disney World and DeSantis' office for comment.
So why would DeSantis take on Disney, which is not only a powerful multinational with significant political clout itself but one of the biggest generators of employment and tax revenue in Florida? According to a 2019 Oxford Economics study, the park has an annual economic impact of $75.2 billion and generates $5.8 billion in additional state tax revenue.
Former President Donald Trump thinks it's all a political stunt designed to bolster DeSantis' chances if he runs for president in 2024.
"Ron DeSanctimonious totally caved in his public relations inspired battle with Disney," Trump wrote on his Truth Social platform on March 12.
Not Yet Out of the Woods
But Foglesong thinks the matter is deeper than that and ties into what he describes as the "new Republicans" who are driven by their firm set of values and desire to see them applied across the country.
Foglesong was surprised when DeSantis first introduced the bill that Disney did not "push back" to stop it from happening.
That was until this week when the company flexed its power by revealing the previous board signed an agreement on February 8 that strips the new board of most of its powers.
The deal would hand back control of the district's special privileges to Disney—just weeks before DeSantis signed his bill setting up their oversight organization.
The Central Florida Tourism Oversight District reacted in anger to the news and said the the agreement could last decades because it contains a rare royal lives clause, which means it remains valid until "21 years after the death of the last survivor of the descendants" of King Charles III.
The agreement will be "embarrassing" for DeSantis who was outplayed by Disney, according to David B. Cohen, a professor of political science at Ohio's University of Akron.
"While he was publicly boasting about taking on and besting 'woke' Disney, DeSantis and his team were cleverly outmaneuvered at the last minute by Disney, who was busy working quietly behind the scenes to ensure that it would maintain its autonomy," Cohen told Newsweek.
Although it has been a turbulent time for Florida's Walt Disney World, Foglesong was apprehensive to say whether the park's future was precarious; however, it was clear that Disney is not yet out of the woods when it comes to the "culture war" with DeSantis.
"I think precarious is a little strong, especially seeing how Disney has pushed back here, but I don't think just fine is right either," Foglesong said.
"I think it's something in between and I think there are two big challenges."
Foglesong said the first challenge was Disney remaining true to its core by being a "fun" and "entertaining" entity in whatever medium one is consuming its products. He also anticipated the technological changes that might challenge exactly how Disney delivers its product.
"I'm referring to the new digital world, such as streaming or the internet and gaming. Communication has replaced transportation in the new digital world. You don't have to physically go places anymore [to be entertained]," Foglesong said.
"And I see that as a big challenge for Disney because it's expensive to take your family across country to a theme park and put them up in a hotel in real life as compared with going places by streaming."
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