FYI: More Cuts Coming

[JimmyV]

This. Is not how it works.

Focus on the word "labor" in the passage below:

Disneyland Resort saw a 20% cut in labor costs from non-profit locations starting at the beginning of the month, this includes positions such as attractions, guest relations, custodial, entertainment, and more. Walt Disney World will see similar cuts starting this week

A new fireworks show brings with it new labor costs. If new labor costs are incurred, then, an equal amount of labor costs in other areas have to be cut just to remain at current levels. So if you want to cut 20%, you have to cut the labor costs that equal the added labor costs plus 20% more. Now, it is certainly possible for Disney to reallocate labor from one area to another such that a person does not lose their job or have their hours cut. But if a person who is moved from helping to organize the Anna & Elsa meet and greet over to DHS for SW fireworks crowd control, then the A & E crowd control efficiency suffers. And moving a person from the MK to DHS doesn't achieve any labor costs savings. So the 20% reduction still has to come from somewhere. So the net effect is a decline in efficiency at A&E, plus 20% labor cost reductions elsewhere.

 

[soniam]

The way I see it, the big iron bell is already tolling when you start outsourcing core competencies to save money on headcount. If something's vital to your business, outsourcing it makes you vulnerable because the company you hire to do it doesn't have a stake in your success or failure...

Yes, a lot of people understand this, but big companies and those that run them don't. I have seen outsourcing in my industry for 15+ years. The quality and quantity of work from the outsourced sights has not improved much, if at all. We usually tow the line for them They are also starting to get more expensive such that it's not quite the cost savings it once was. It's all about doing whatever makes the company look "good" for the next earnings announcement

 

[starjazz]

Focus on the word "labor" in the passage below:


A new fireworks show brings with it new labor costs. If new labor costs are incurred, then, an equal amount of labor costs in other areas have to be cut just to remain at current levels. So if you want to cut 20%, you have to cut the labor costs that equal the added labor costs plus 20% more. Now, it is certainly possible for Disney to reallocate labor from one area to another such that a person does not lose their job or have their hours cut. But if a person who is moved from helping to organize the Anna & Elsa meet and greet over to DHS for SW fireworks crowd control, then the A & E crowd control efficiency suffers. And moving a person from the MK to DHS doesn't achieve any labor costs savings. So the 20% reduction still has to come from somewhere. So the net effect is a decline in efficiency at A&E, plus 20% labor cost reductions elsewhere.

If I'm going solely based on the article that was linked in the original post, then your explanation doesn't seem to work. Mainly because the article said that Disneyland had (past tense) seen cuts of 20%, and WDW would see "similar" cuts. I didn't read that there were any hard and fast numbers that the parks were required to meet. All I read is that additional costs in Shanghai were going to result in labor cuts in the U.S. parks. And I suppose until Disney comments officially, there's a handful of speculation involved as well.

Meanwhile, the parks press on - new shows are added, renovations continue, and the magic is still made for tens of thousands every day.

 

[hopeful4fl]

Meanwhile, the parks press on - new shows are added, renovations continue, and the magic is still made for tens of thousands every day.

Sorry. I will have to disagree with the last part. I think more and more people are seeing behind the curtain of the "magic" and it is loosing it's charm. Yes the parks are still crowded and people are still going, but if the level of service that people expect from Disney suffer (and with labor cuts it is very feasible), the magic will be destroyed.
I think Disney is doing what it can to control cost from their other decisions backfiring. If they see their golden goose starting to suffer as a result, i am sure they will do what they need to adjust. I am concerned about the loss of the vision of the one man, and what is means to us.

 

[JimmyV]

I didn't read that there were any hard and fast numbers that the parks were required to meet.

OK. You can make up any percentage that you want to account for "similar". 22%. 20%. 18%. For purposes of this discussion, does that matter?

 

[starjazz]

Sorry. I will have to disagree with the last part. I think more and more people are seeing behind the curtain of the "magic" and it is loosing it's charm. Yes the parks are still crowded and people are still going, but if the level of service that people expect from Disney suffer (and with labor cuts it is very feasible), the magic will be destroyed.
I think Disney is doing what it can to control cost from their other decisions backfiring. If they see their golden goose starting to suffer as a result, i am sure they will do what they need to adjust. I am concerned about the loss of the vision of the one man, and what is means to us.

You may not be included in the tens of thousands. Perhaps the magic has died for you. Perhaps for others as well. None the less, tens of thousands of visitors leave well satisfied every day. The magic exists for them (and for me!).

 

[starjazz]

OK. You can make up any percentage that you want to account for "similar". 22%. 20%. 18%. For purposes of this discussion, does that matter?

The exact number? No it doesn't matter. But the point remains: cuts are made in one place, and shows and fireworks are added elsewhere, and the parks press on.

 

[mom2rtk]

The fact remains that they have said cuts are needed in the domestic parks to offset losses in Shanghai and Hong Kong. If they are adding back something of the same significance as what they are cutting, then where is the savings for the overseas parks?

To be honest, they needed to add something to DHS anyway to make up for everything that has closed. I'm sure they are saving quite a bit just in reduced staffing from all the closures.

 

[JimmyV]

But the point remains: cuts are made in one place, and shows and fireworks are added elsewhere, and the parks press on.

I don't think anyone in this thread has ever questioned that point. Dumbo still flies. He just does so with chipped paint.

 

[mom2rtk]

I don't think anyone in this thread has ever questioned that point. Dumbo still flies. He just does so with chipped paint.

And some are ok with that. Others are not.

 

[starjazz]

I don't think anyone in this thread has ever questioned that point. Dumbo still flies. He just does so with chipped paint.

I'll take Dumbo with a bit of chipped paint, if I also get some X-Wing Fighters!!

 

[JimmyV]

I'll take Dumbo with a bit of chipped paint, if I also get some X-Wing Fighters!!

There was a day when the corporate mission statement was to give you both an unchipped Dumbo and an X-Wing Fighter.

 

[amg35]

I don't think anyone in this thread has ever questioned that point. Dumbo still flies. He just does so with chipped paint.

I get the point you are making. I just honestly have never noticed things like that on my trips. You have to admit, some of this stuff people are purposely looking for to prove a point (referencing the post with the photos from earlier), so I take this all with a grain of salt and my own experiences mixed in.

 

[JimmyV]

I just honestly have never noticed things like that on my trips.

And the point of this thread is that with upcoming cuts, you are going to start to see these things more and more. Increased park attendance has to impact park erosion, and a cut in "custodial" (quoting from the article) staff has to have some side effect. It can't be otherwise. What remains to be seen (pun intended) is whether you will see the impact and effects without having to go looking for it. And honestly, how could anyone riding in the Dumbo pictured in the previous post not notice that?

 

[amg35]

And the point of this thread is that with upcoming cuts, you are going to start to see these things more and more. Increased park attendance has to impact park erosion, and a cut in "custodial" (quoting from the article) staff has to have some side effect. It can't be otherwise. What remains to be seen (pun intended) is whether you will see the impact and effects without having to go looking for it. And honestly, how could anyone riding in the Dumbo pictured in the previous post not notice that?

If I did see something like that, obviously it hasn't stayed with me.

 

[Budshark]

Focus on the word "labor" in the passage below:


A new fireworks show brings with it new labor costs. If new labor costs are incurred, then, an equal amount of labor costs in other areas have to be cut just to remain at current levels. So if you want to cut 20%, you have to cut the labor costs that equal the added labor costs plus 20% more. Now, it is certainly possible for Disney to reallocate labor from one area to another such that a person does not lose their job or have their hours cut. But if a person who is moved from helping to organize the Anna & Elsa meet and greet over to DHS for SW fireworks crowd control, then the A & E crowd control efficiency suffers. And moving a person from the MK to DHS doesn't achieve any labor costs savings. So the 20% reduction still has to come from somewhere. So the net effect is a decline in efficiency at A&E, plus 20% labor cost reductions elsewhere.

Still not how it works.

Somebody didn't wake up Monday and say "cut 20%", and on Tuesday someone said "Add fireworks", and on Wednesday someone said "Now cut 20% + add fireworks and cut 20%"

More than likely, the 20% cuts are being used to pay for/offset the addition of these new things. So, they expected Shanghai to be open by now, they hoped AvatarLand would be ahead, they had overruns on multiple projects. The dollar got stronger making cash movement more difficult. All these things happen that put downward pressure on costs.

Then, you have the individual park heads looking at this and saying "We can't wait... we are ready to move with this next generation fireworks show"... "We have a stage show ready to go"... "We have the costumes for Phasma and a battalion of Stormtroopers and everyone loves the Stormtroopers walking around Launch Bay". So, they have decisions to make. You can't just spend more. You can either wait for the inflow of cash to improve, cost overruns to be controlled, delay capital projects, or cut costs. So they cut costs in order to pay for the new things. Then, they will re-balance.

So, the announcement about the fireworks and shows actually is an indicator to me things are better than suspected. The way these things work, and knowing what we know, this is beginning to smell very much like capital overruns and delays caused pressure to cut costs in order to introduce new features.

But to say this is going to make things even worse... that its the 20% cut plus add the new show which makes it feel like a 24% cut (or whatever) is fundamentally flawed.

The new DHS shows were budgeted for $X. Management was told to either wait (due to Shanghai delays, pending capital projects, and existing overruns) or cut enough to offset the $X. They chose to cut in order to offset $X. (No secret mouse told me any of this, but I know from past experience how theme park expenditures and capital works, and I know how Fortune 500 expenditures and capital works. Disney is not unique in that respect).

 

[ellie05]

@monorailrabbit and @shanethesaint88 I think someone already talked about cuts in Disneyland too, I just haven't had time to check the boards.

On another note I feel terrible for the CM forget how this affects me. Those CM have to figure out how to pay their bills and I find it unacceptable for them to screw their employees like that.

 

[ChloesDaddy]

The typical executive bonus justification during "difficult" financial times is: Bob Iger has done a fantastic job of overcoming issues to still maintain top shelf profitability. He has also turned Disney into the most powerful brand in the world. He is a special talent that needs to be retained to navigate Disney through the impending rough water. The market value for this type of executive is "x" and if we don't pay out the bonus, we risk Iger leaving Disney for Comcast. Therefore while Disney may not be in an ideal position to spend the money on his bonus, they feel they have no choice but to live up to the previously agreed upon contract, even during tough times, to ensure they don't lose this special talent and secure Disney's future success.

To a certain extent they are correct in finding people with successful experience leading a brand as large as Disney is extremely rare. He is a unique resource that therefore commands a very high salary due to the law of supply and demand. While capitalism is a great system, at times it can leave a bitter taste.

I can't really argue with any of this. It's an accurate assessment of how executive compensation is considered. It does bring a couple of questions to mind:

1-Do officers and directors so carefully consider the prospect of losing the customers that will sustain the business long after their gone, or are their incentives too heavily weighted to short-term gains (and/or their compensation decision making too incestuous) to make such consideration worthwhile?

2-Is CEO (and to a lesser extent other officers) compensation the only expenditure for which there is never a good time for a cut? Good times = great job! Bad times = could be worse, can't afford to lose him/her.

 

[JimmyV]

The new DHS shows were budgeted for $X. Management was told to either wait (due to Shanghai delays, pending capital projects, and existing overruns) or cut enough to offset the $X.

Support? I haven't seen anything that confirms that. Are you making up this timeline or can you cite to something that substantiates it. One can alway make someone else's argument "fundamentally flawed" by making up facts. You seem to want to ignore two important facts:

1. Reports that cuts are coming; and
2. First hand accounts of hours being cut or eliminated.

Bottom line. Fewer people are working fewer hours to maintain order and maintenance. Your choice then becomes to either believe that none of this will matter, or that it will. There is nothing fundamentally flawed in that.

 

[rteetz]

You can't afford to give your guests a full counter service menu until closing time as it's too expensive?

They can afford it they just don't want to.