How Brexit could impact Disneyland Paris

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On Thursday 23 June 2016 Britain went to the polls and voted in the EU Referendum, the result of which the next morning sent shock waves around the world knocking $2 trillion   off the worlds financial  markets, the crash of the Pound and  the resignation of the Prime Minister.

The British people have voted   to leave the European Union by  51.9% to 48.1% in the largest turn out of the electorate since 1992  –   17,410,742 people voted to leave and 16,141,241 voted to remain.

As the Pound plummets to a 31  year low against the US Dollar,  and one of the big three credit rating agencies S&P Global Ratings down grades the United Kingdoms AAA credit rating to AA with ‘a negative outcome’,  we speculate on how Brexit could impact Disneyland Paris.

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Before the referendum on the 20 June,  shares in Euro Disney S.C.A.  in which The Walt Disney Company  is the majority shareholder were trading on the Euronext  at €1.21. Today (27 June) seven days later after a fall to €1.17 on Friday the share price has recovered to a pre-referendum price of €1.21.

For a UK investor to purchase the 1,000 shares required to join the Euro Disney Shareholders Club on the 20 June would have cost £930. Now 1,000 shares will cost  £1008.

Shareholders that own 100 Euro Disney Shares will now find that their shareholding is worth £100.85.  Still a lot less that they paid for them before the recapitalisation last year when the share price was devalued from €3.50  to €1.25.

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Over the last 12 months the Euro Disney share price has been volatile  and dropped considerably following the November 2015 terrorist attacks in Paris when many Guests cancelled their bookings.

The share price made a recovery earlier this year to around the  €1.25. mark – its post recapitalisation price and the share has floated around that price  for the last few months.

Euro Disney S.C.A. will announce their third quarter results on Tuesday 9 August 2016  and since Friday,  France has now overtaken the United Kingdom to become the worlds fifth largest economy which is news that was welcomed by Paris’ financial sector.  This boost to the French economy could see a further rise in the share price if this quarters results show an improvement in visitor numbers, increased hotel occupancy and Guest spending.

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Before the vote on Thursday £1 bought $1.48 and €1.28. By Monday, £1 bought $1.32 and €1.19. For holidaymakers, going abroad is now more expensive.

Aviation fuel is priced in US Dollars and with the drop of the Pound against the Dollar, this will be impacting the profits of the airlines, who will of course pass on these additional costs to their passengers, so flying to France in the future is going to be more expensive. Shares in EasyJet have fallen 28% since Thursday as investors fear a recession will hit the United Kingdom, cutting the number of holidays and trips abroad made by the British.

With the drop of the Pound  against the Euro  visitors from the United Kingdom will find their holidays to Disneyland Paris more expensive in the short-term.  In the long term it is difficult to predict what will happen to the Pound.  During the next few months Guests from the UK will be monitoring their spending and sticking to a budget, which could impact  Guest spending in the months to come.

In November  Disneyland Paris will be publishing their next holiday brochure and the company will be setting their pricing based on the exchange rate for Holiday Packages from October 2017 on-wards in the next few months.

If the Pound stays at the level it is now  against the Euro, UK visitors could see an increase of around £100 in the prices of Holiday Packages and Meal Plans in 2017.

How much Disneyland Paris raises its prices is yet to be seen, but if the resort  fears a drop in visitor numbers from the United Kingdom   I expect we will see large discounts and offers being used  to entice the  British to keep visiting the resort.

During the last financial year (1 October 2014 – 30 September 2015) 14.8 million Guests visited Disneyland Paris, with 2.19 million of those from the United Kingdom.

2015attendance2.19 million visitors is not an insignificant number,  the British make up 14% of  Disneyland Paris’  Guests, and the United Kingdom is the resorts second largest market place after France.

Any decrease in visitors from the UK to Disneyland Paris will be significant, especially during the resorts 25th Anniversary year when the company and it’s investors are expecting  the resort to increase visitor numbers, raise hotel occupancy rates, and improve Guest spending in a year that promises  updated refurbished attractions and new entertainment to tempt visitors.

What about those Guests who all ready have booked to visit next year, how could the drop in the Pound impact their bookings?  In the Booking Terms and Conditions Disneyland Paris reserves the right to alter the total amount of a booking due to exchange rate fluctuations.

Whether or not Disneyland Paris imposes any price rises to those Guests already booked and risking further cancellations, is yet to be seen.  But if they do it would be a very brave move.

I.5 Prices – Alteration of prices

Prices of our Holiday Packages and Separate Services have been determined on the basis of the existing economic conditions on the date of establishment of the prices in Euro on June 23rd, 2014 on an exchange rate of £1.00 = €1.20926 for the period from April 1st, 2015 to March 23rd, 2016 and on June 23rd, 2015 on an exchange rate of £1.00 = €1.32064 for the period from March 24th 2016 to March 28th 2017.

We reserve the right to amend our prices at any time before you book your Holiday Package or Separate Services, subject to your being advised of the total cost prior to booking.

Prices are subject to changes, in compliance with the applicable laws, even after you have booked, to account for a modification to or the imposition of any dues, taxes and fees on your booking, for exchange rate fluctuations and/or, as the case may be, for transport cost increases (including by reason of increase of the cost of fuel).

We reserve the right to alter the total amount of your booking by applying the relevant fluctuation rate to the concerned element of your booking. Any increase will be notified to you in writing and you will have the right to cancel your booking at no charge. Where you have booked Holiday Packages, we will however absorb all increases of less than 2% of the total cost of your booking and notify you of any increase of 2% or above.

In anycase, no such increases will be made within thirty (30) days of your arrival date at Disneyland® Paris (“Arrival Date”), or of your departure date, meaning the date of commencement of transport* (“Departure Date”) if transport* is included.

One major benefit United Kingdom residents would  lose  is  the ability to book their holidays under a promotional offer being run in another European Union Country.  Once Britain exits the European Union Disneyland Paris would  no longer be under any  EU price matching obligations to sell these offers to Guests living in the United Kingdom.

Another issue facing British holiday makers will be the loss of the abandonment of European mobile telephone roaming charges in 2017.  Making mobile calls or using data  more expensive once the UK leaves the EU.

The cost of medical and travel insurance will possibly rise too adding further costs to Britons traveling to Disneyland Paris as European Health Insurance Cards (EHIC) would no longer be valid.

One thing is for certain many Britons will be tightening  the purse strings and  curtailing their  spending on luxury items like holidays  during the next two years while the United Kingdom negotiates its exit from the European Union.

With  50% of new house purchases cancelled in the UK since Friday this appears to be already happening.

Disneyland Paris employs 15,000 Cast Members, many of those are from the United Kingdom.  They  could possibly  lose their existing right to work in France.  British Cast Members could find themselves caught up in French bureaucracy and increased work visa fees.  But I do not think the company would cease employing people from the United Kingdom.

The European Parliament is due to meet and debate the implications of the United Kingdom leaving the European Union this week.

Sources:

ABTA
BBC News
Euro Disney S.C.A.
Google Finance
Reuters
XE
Yahoo Finance

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Salon Mickey The Disneyland Paris Shareholders Blog
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