Tokyo Disneyland operator to cut winter bonus by 70% due to pandemic

Tokyo Disney Resort operator Oriental Land Co. is cutting its semiannual bonus payments by 70 percent this winter due to revenue falls amid the novel coronavirus pandemic, but investors are already betting that its business will return to normal next year.

The pay cut for about 4,000 of its employees, announced Monday, will be the first time the company has cut bonus payments, which workers in Japan typically see as part of their salaries, from the initial budget.

As for people working at its theme park attractions such as dancers who have had their work hours sharply cut due to reduced operating capacity and live show suspensions, the company will offer them options such as transfers within the company and early retirement, Oriental Land said.

The company is also considering an additional pay cut for its executives following a decision in June to reduce their remuneration by 10 to 30 percent for 10 months through March.

Oriental Land closed the Disneyland and DisneySea parks in late February and resumed their operations on July 1 with shortened hours and at less than 50 percent of their visitor capacity.

The company posted a net loss of ¥24.87 billion ($234 million) in the April-June quarter, as sales plunged 94.9 percent to ¥6.16 billion in the three-month period due to the four-month closure.

Despite the plunge in revenues, market data suggests that investors are already betting that Tokyo Disney Resort will return to normal after getting battered by the pandemic.

Shares in Oriental Land are back to levels seen in February, before the virus outbreak took hold in Japan. And in the debt market, the company’s sale of ¥100 billion ($943 million) of bonds last week met with strong investor demand, according to underwriters.

All these numbers indicate that despite the country being largely closed to travelers from overseas for now, investors figure that its business is set to come back.

Japan Credit Rating Agency Ltd. has kept its AA grade for Oriental Land, the third-highest score, saying that the firm’s strong capacity to attract visitors and its solid financial base will help its business recovery.

GPS data suggests that visitor numbers are around 40-50 percent of last year’s level, according to Hirofumi Oda, a senior analyst at SMBC Nikko Securities Inc. He projects that visitors to the parks will rise to 28.5 million in the next fiscal year starting April 2021 compared with 12 million in the current 12-month period. There were about 29 million visitors last fiscal year, Oriental Land data shows.

SMBC Nikko also forecasts a ¥100 billion operating profit for the company next fiscal year after a ¥19 billion loss this year, according to a report.

The Disneyland operator’s sale of five-year, seven-year and 10-year bonds last week was its biggest yen deal in over two decades. Orders exceeded the amount of notes sold for all the tranches, with demand for the five-year debt coming to 1.8 times the securities offered, according to the underwriters.