It was the pay hike heard ’round the Disney World. Comcast‘s (NASDAQ:CMCSA) Universal Orlando announced on Thursday that it will pay all employees a minimum of $15 an hour come June 27. The new starting salary for all full-time and part-time hourly workers as well as entry-level salaried hires is a pretty big deal in Central Florida.
Rival Disney (NYSE:DIS) is getting there. Three summers ago Disney World reached a deal with a half-dozen unions representing the lion’s share of the resort’s employees. Disney was starting new employees at just $10 an hour at the time, but the agreement has the House of Mouse scaling higher until the new hourly minimum rate for non-tipped “cast members” goes from $14 to $15 in October. With staffing becoming a problem across many consumer-facing businesses, victory in the “fight for $15” was inevitable.
This was supposed to be the summer that national theme parks and regional amusement parks have been anticipating for two years. Can theme park operators thrive in the new normal? Should investors start separating the winners from the losers as wage inflation crashes the turnstiles? Let’s take a closer look at Comcast’s significant move.
Going for a ride
What if the country threw a post-pandemic reawakening party and too many people called in sick? A lot of industries are suffering through a staffing crisis right now. It’s evident in the restaurant industry. Even the leading ridesharing companies are struggling as demand for transportation and takeout deliveries is outstripping the driver supply.
We’re already seeing ripples in the amusement park industry, and this is before the start of the peak summer travel season. Cedar Fair‘s (NYSE:FUN) iconic Cedar Point recently turned heads for updating its June availability. The park will be closed on Tuesday and Wednesday through the next four weeks, citing insufficient employees to operate every day. Last week it took the dramatic step of doubling its pay to $20 an hour and offering a $500 signing bonus for new or returning hires. Bumping up labor costs will weigh on the bottom line, but it’s better than not being open at all.
Universal Orlando and eventually Disney paying $15 an hour will be easier to stomach at gated attractions where single-day tickets run in the triple digits, but one has to wonder about the competition. Central Florida’s third-largest theme park operator by attendance — SeaWorld Entertainment (NYSE:SEAS) — raised its hourly rate to $11 an hour in late 2018. It won’t be able to stay there when its two largest rivals are paying 36% more. SeaWorld Orlando employees may be passionate about the marine life cause, but will that still hold up if they are literally being discounted?
Paying more is easier said than done, especially now when a theme park’s profit potential is capped by limits on guest capacity and travel restrictions are gnawing away at Central Florida’s most lucrative customers. SeaWorld stock may be hitting new highs, but keep an eye on its operating calendar and the ongoing delays in new rides that were supposed to debut in 2020. Investors are bidding up leisure stocks ahead of what is supposed to be a blowout summer season, but don’t forget to belabor the labor point.
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