Shanghai Disneyland opening driving cost-cutting measures in the US and Paris parks

MIceAge had this article today, talking about how the significant cost overruns at the Shanghai park are leading to cutbacks at other parks. They wrap it up with a "why should Disneyland pay for Shanghai's problems" question, but aside from that it's an interesting article.

I call B.S. on these kinds of "articles." I don't buy it. My accounting expertise is not high, but capital expenditures and operating costs come from two very different buckets. For significant cap ex, they are typically borrowing money, and they don't ask for the specific budgeted amount, they ask for that plus additional credit for this kind of scenario. Cutting back on cashier hours doesn't make up $800 million.

It's nonsense.

I would ordinarily agree, but my Cast Member friends at WDW all say this is pretty accurate, and they all tell similar stories. Immediate suspension of overtime, hourly full timers going from 40 to 32 scheduled hours per week, "free" unpaid days off with no penalty if you ask, etc. "Extra" positions for attractions, etc dropped until further notice.

I'm not sure how much of it is Shanghai and how much is just local management asking folks to tighten belts. But these things are definitely going on behind the scenes in Orlando and Anaheim.

I don't think anyone is disputing that it's actually happening. Just that it has absolutely nothing to do with Shanghai.

oh but you're wrong. The problem is that the Fiscal budget was done and published to the world (i.e. Wall Street) with the idea that Shanghai would already be open and producing profits. The fact that it isn't and is racking up huge amounts of crisis bills as they race to get most of it ready for opening day isn't helping. The cost savings from the other parks are what is to offset the lack of any profits until Shanghai opens.

These cuts are most decidedly due to Shanghai.

Fair enough, but what you said and what the Mice Age article says are completely different. And even then, labor cuts aren't going to do anything to offset the type of money the park is losing by not being open. If it's not open, the park is saving all of the operating money they would be spending on their own labor.

I'll be honest, are some marginal cuts really going to completely ruin the parks when they appear to be grossly overstaffed in the first place? Completely anecdotal experience, but on my trip to WDW in October, I was staggered at how much they throw out there in the way of labor. I counted 25 staff members working Space Mountain alone (that's just what I could see) at one point. That was at 11:00pm during the Not So Scary party with a 10 minute wait with only one side of the ride operating. I'm no expert on Disney, but I've worked in a theme park and I've dealt with staffing and labor for years and I would find it hard to believe if they couldn't cut a 1/4 of that staff and really have a noticeable decline in quality.

Well, MiceAge often gets the core issue, but then expresses it in terms that make no sense.

I'm talking SHDL Net Profits, not operating costs. Shanghai profits are less than 50% attributable to DIS (since they own less than 50% of SHDL) while 100% of U.S. cost savings are. That's a 2x multiplier on the US side, and slightly less than50% on any euro cuts. There's no denying that massive labor hour cuts are happening just after recent price increases, and during normally busy times in the US parks. All of this while Shanghai is burning cash at an amazing rate, not all of which is going to be capitalized.

Regardless of the reason for the cut in staffing, the amount of staffing at the parks is one thing that makes the experience better. When you look at how many people they were employing to make things run smoother, it helps justify the (over)pricing. When they start cutting back on things like that, their sky-high prices are becoming even less justified.

The point is that the cost overruns have zero to do with any changes in staffing in the US. They're completely unrelated, and likely the typical and cyclical seasonal changes.

^I had the same initial thought but I do wonder if there is some truth to the story. Is it better to simply tell the Street "sorry folks, had some big overruns, we'll do better next time" or to say they are at least trying to make cuts elsewhere to show they are doing something to minimize the damage.

The cuts being made in the Parks and Resorts departments in both Orlando and Anaheim right now are much more significant and noticeable for employees than the typical "slow season" stuff that happens in January, May, and September. Folks are on edge and bracing for layoffs similar to early 2009. Spring Break staffing levels were nowhere near what they usually were - and if it didn't affect the guest experience much I am sure it will be the new normal.

Jeff said:

likely the typical and cyclical seasonal changes.

I doubt this is following "typical" cycles; this all happened a few weeks before the Easter wave. If it happened starting in April (after Easter Weeks were over) that would be a lot more plausible.

Let's say all of those cuts are dramatic. Does anyone notice? I haven't noticed any difference at WDW. (If anything, there are more people working at Epcot for Flower & Garden.) That's why these stupid fanboy sites "analysis" irritates me. All they want to do is paint the executives as puppy kicking satan worshipers who ruin everything and Walt is crying in the grave. The reality is never actually that.

The only thing I noticed was at Pop Century at breakfast, they are not using all of the food stations - at 8am on a Saturday they only had two open with the other menu boards nothing they would be only opened for dinner. And I'm not sure if it is the new norm, or a one day staff shortage. But it was noticeable. Other than that, I haven't noticed a thing.

It does suck for the full time employees that have had significant hour cuts and part time employees who aren't getting any hours right now. But with the summer season just around the corner, the hours for employees should be available if they want them.

This came up in my Facebook memories today, complaining about how much nonsense the Disney "fan" people are clueless. Two years later, surprise! Disney clearly hasn't gone down any wrong path. But I'll get to the end for the most hyperbole:

Led by Iger and now CFO Jay Rasulo, the company has sacrificed guest satisfaction in favor of getting the most money out of a guest on their current trip. This shortsightedness sacrifices future profits for current cash flow. In Disney’s eyes there will always be a new crop of guests to replace those they lose. Repeat visitors aren’t as profitable as the first timer. Every corporate decision is made with the next quarter’s balance sheet in mind while five, ten and twenty year plans are seemingly non-existent.

Translation: "I don't know what a business is or accountability to stockholders, but I bet it's bad!"

Or this gem:

Unless a change of philosophy takes place, Disney will continue to make cuts and only make safe additions to the parks. They will do so as long as the current management team remains in place and the current management team will remain in place as long as the stock price continues to rise. Strip mining Walt Disney World is not a long term plan, and it’s one that will eventually catch up with those doing the mining.

Translation: "Everything is changing and getting more expensive and I hate it!"

Disney really hasn't made a gigantic misstep since the initial launch of DCA. Sure, NGE was a massive overspend and IT organizational failure in terms of execution, but the public doesn't know it.

I bet the next big misstep will be Avatarland. LOL

I don't even care about the guest experience in a situation like this. I feel bad for those who work at the park. Sure, the cut in hours may be temporary, but the landlord still wants his rent this month. The CEOs still gets their multi-million dollar bonuses, while the low-wage earner has to go to the food bank to eat. Stay classy, Disney.

Yeah, and CEO's get paid a lot of money because they make really hard decisions. That's not an issue of fairness. I'm tired of hearing that argument because it's not logical. The supply of people who want to blow pixie dust up the asses of tourists is overflowing and doesn't require a lot of skills. That's why it pays $10 an hour and is potentially not consistent. If that arrangement is not satisfactory to a worker, it's in their best interest to find something else to do. Two miles from Magic Kingdom there are guys killing it building houses in the various trades, and there aren't enough to meet demand in the area.

I know my opinion about this is unpopular within the CoasterBuzz crowd. The bigger point is that businesses should treat their employees better. Cutting hours shows that they don't value their employees. Disney employees are disposable. "If you don't like us cutting your hours and creating even more hardship for you, you can just go find another job!"

These are people we are talking about. Giving them a sense of stability in their job will go far in loyalty. Saying that you don't care about loyalty or providing stable work for your employees is the newer way of doing business, and it sucks. Fifty years ago, a person could get hired and they would stay with that company for their entire life. Now, an employer does not care about that, because they can just hire someone else if their employees don't like how they are treated. Like I said, stay classy.

It does not show that they don't value their employees, it shows that there isn't necessary work for them to do. There's a difference. What is it about labor supply and demand that doesn't make sense?

You know what has changed in 50 years? (And seriously, do you want to go back to that social era?) Everything has changed. We don't live in a world of skilled trades anymore, we live in a service economy. That's what technology did. Low-skill jobs are replaceable. And even in those "golden days," employees weren't there to be coddled and given group hugs, they were there to work. You want loyalty from a company in exchange for group hugs? That's a pretty slanted value proposition.

The old school godless atheist gay homosexual flaming liberal in me says, hell yeah....

...but the pragmatic me in me says fifty years ago is fifty years ago. The world has changed. Employees are disposable. As Jeff notes, technology has changed the world we work in.