Brexit, Zika, Brazil, and the upcoming Rio Summer Olympics—but not so much gators—slam prospects of tourism to Disney World and send Disney stocks plummeting downward

Meet the U.K.'s face for the 'leave' vote in Brexit, Nigel Farage leader of the United Kingdom Independence Party
There was no shortage of big losers in the global financial markets yesterday after the United Kingdom's surprising vote to cut ties with the European Union (EU), a major trade and political alliance comprising of 28 member countries in the European continent.

Note the sharp drop on Friday on Disney stock after news of the Brexit vote 
Upon learning of the unexpected news of the Brexit vote (short-hand for "British exit"), British Prime Minister David Cameron, who had championed the campaign for the U.K. to stay in the EU, announced his equally unexpected resignation, which further set into everyone's minds just how shocking the news was really was.

The news of the U.K.'s divorce from the EU was so devastating that it had toppled the reigning U.K. government overnight only hours after the announcement of the vote results.

The Dow Jones industrial average in the U.S. also reacted in a panic by plummeting more than 610 points, or 3.4%, on Friday as global stock, currency exchange, and other markets reacted swiftly and very unkindly to the immediate uncertainty of Britain's economic future of deciding to say FU to the EU in the crucial Brexit vote.


Many political experts now believe that the dissolution of the EU may also be inevitable as the U.K.'s sudden departure from the EU may have a domino effect from other disgruntled EU members who may follow the U.K.'s example to leave the confines of the political and financial alliance to pursue greater political and economic autonomy, sovereignty, and independence on their own.

The biggest take-home message from the Brexit fallout is that tourism 
from the U.K. to the U.S. is expected to fall precipitously after the 
pound suddenly plunged relative to the dollar and the euro on Black Friday
The immediate financial repercussions of the decision saw the value of the U.K.'s pound plunge worldwide against other foreign currencies.

In particular, the pound dropped 8% relative to the U.S. dollar and 4.6% against the euro, making it now that much more expensive for tourists from the U.K. to visit Disney theme parks and resorts in Florida, California, France, and elsewhere around the globe.

The sudden devaluation of the British pound now puts it at its lowest level in 30 years after many U.K. pollsters and political pundits inexplicably misread and bungled how the actual Brexit vote would turn out, possibly leaving many "stay votes" on the sidelines with complacency.

24 hours before the actual vote, polls actually overwhelmingly showed a 90% chance that the U.K. would remain in the EU; however, it appears this was all just wishful thinking as the actual vote showed the polls were not at all that objective or scientific in their methodologies, thus losing credibility when the actual voting time came.


With an estimated 1.7 million U.K. tourists at stake who come to visit Florida each year, this is going to be a devastating blow to the sunshine state's tourism industry, particularly to its many theme parks, resorts, and other tourism businesses such as Disney, Universal, Sea World, beaches, and cruise line industries.

The Brexit vote two days ago puts up a lot of uncertainties about the U.K.'s future
with investors in the global financial markets, which is why the markets reacted
in a panic yesterday with a massive sell-off
Because the value of the pound plunged nearly 8% relative to the dollar, it's going to cost U.K. tourists coming to America at least 8% more to finance their vacations packages to Walt Disney World Florida and Disneyland California across the pond, and it's going to be comparably just as expensive to even go to Disneyland Paris across the English Channel under the umbrella of the EU. According to Disneyland Paris's own numbers, U.K. visitors made up 16% of EuroDisney's visitors in 2014.

Add on the political and financial uncertainty, unknowns, and fears from the Brexit chaos and suddenly many Brits are thinking twice about traveling to America or elsewhere on holiday this year.

It also doesn't help Disney's cause that their theme park tickets now cost 18% more this summer than from a year ago, which is even far outpacing the difference in the currency exchange flux and from inflation, combined.


Thus, it's no surprise that Disney stocks fell on par with Dow Jones losses today, going down 3.3% to $95.72 per share, but as investors realize how hard the lowered prospects in U.K. tourism is going to hit Disney, the international tourism conglomerate's stock prices are poised to get hammered even more next week.



As of today, Disney shares are trading 15.87% below what they were a year ago.

The same seeds of nationalism and anti-immigration sentiment in Brexit may have already been planted for the U.S. Presidential election this year

When it rains, it pours


The bad news couldn't have come at a worse time for Disney as domestic and international park attendance at Disney's theme parks were already hit hard from the same period last year due to numerous other contributing economic factors, compounding all at once to slam the number of tourists that were flocking to Disney theme parks and Disney Cruise Line across the globe compared to the same time last year.

The fears of an imminent outbreak of Zika virus in Florida has already severely 
impacted tourism to the region and Florida's cruise line industry to tropical 
destinations. Should Disney begin posting mosquito warnings on all its 
water-front properties in addition to the new alligator warnings?
Those other problems including threats of terrorist attacks from Islamic extremists, increased ticket prices, anticipation of having to compete with the Rio Summer Olympics later this summer, a sharp decrease in the number of Brazilian (and other South American) tourists coming to Florida, and the imminent scare of a widespread Zika viral outbreak in Florida.

The potentially devastating impact from the news of an imminent Zika outbreak in Florida from mosquito transmissions is much more concerning than from the bad PR from alligator attacks.

Only last month, a renowned British international public health expert, Jimmy Whitworth of the London School of Hygiene and Tropical Medicine, issued a health advisory to all U.K. citizens, thinking about going to Walt Disney World in Florida on holiday, to "think twice" about traveling to Florida anytime soon due to dangers of the Zika virus spreading through mosquito bites in Florida.





Florida has at least 220 residents known to be infected with the Zika virus who have brought back the virus after traveling abroad (mostly from the Caribbean and Latin America regions), with four times that number who are infected within the population who don't know even they are infected, and a large population of local Aedes mosquitos that are able to spread that disease from person to person, much like how Malaria transmits in tropical regions around the globe.


So many U.S. infectious disease experts and Florida political leaders think the Zika virus may become endemic and an serious epidemic to the U.S. through mosquito bites, which could occur any day now as the heat of summer comes and more rain comes to the southern Gulf Coast states.

Zika infection is not just a health concern for women who are pregnant or thinking
about conceiving. Sexually active men can sexually transmit the virus to their
partners, and as they say, 'It takes two to conceive a baby.'
Once Florida's Aedes mosquito acquire the virus from infected human hosts, the dams of holding back a local outbreak of the Zika virus in the U.S. will have burst, and there will be no holding back the deluge of the pandemic spread of the virus in the U.S.

This worry not only affects international tourism to Florida, but probably has a much bigger impact on domestic tourism to Florida from travelers around the country, who far out-number the number of foreign tourists coming to Florida.

Many in the press have given the public a false impression that only women, who are pregnant or thinking about conceiving, have to worry about the public health consequences of acquiring the Zika virus; however, the virus is unusual in that it can also be transmitted via sexual contact or from the exchange of bodily fluids from men. Thus, it can be considered a sexually transmitted disease (STD) as well.


To basically explain the birds and the bees, it takes two—a man and a woman—to make a baby. So if either the male or the female is infected with the Zika virus during the time of conception or thereafter during any of the early stages of pregnancy, the resulting offspring may also be infected with Zika virus, and we don't need to explain what the consequences of having a fetus infected with the virus are.


Thus, both men and women who are sexually active have to worry about getting infected with Zika because any pregnancy that is infected with the virus may result in severe birth defects.


There are already cases in the U.S. where men, who were infected with the virus, after acquiring the virus while traveling abroad, have passed on the virus to their sexual partners inside the U.S. Thus, the virus is technically spreading person-to-person in the U.S. already; however, the mode of transmission that really worries public health officials, which will cause a massive outbreak and gain a foothold in the U.S., is from infected mosquitos transmitting the virus.

Florida Governor Rick Scott has called a state of emergency over the threat of
Zika spreading inside of the state this summer
The problem is so serious that the Governor of Florida, Rick Scott, has called a state of emergency over the Zika threat in Florida and has been personally lobbying Washington for more than a billion dollars in aid to help fight Zika from gaining any kind of foothold in his state.

No doubt, the prospects of the Zika virus (and the Brexit vote) are bad for the tourism industry in the southern Gulf coast states, such as Florida, Louisiana, and Texas, where there are large populations of indigenous Aedes mosquitoes, but tourism in Florida has been impacted by other coincidental factors that have compounded declining numbers of tourists coming to the sunshine state.

A few years ago, Florida used to see more tourists from Brazil than any other foreign country in the world, including from the U.K.; however, since last year, those numbers have precipitously fallen behind the U.K. with 1.5 million Brazilian tourists per year, compared to the U.K.'s 1.7 million per year, due to political and economic unrest and upheavals in numerous South America trouble spots.


Usually, that translates into what is termed "poor currency exchange rates," the same thing observed in the U.K. the last few days, and results in a drop in tourism from those countries because costs to take a vacation to the U.S. become that much more expensive.


Visit Florida tourism data shows that foreign tourism numbers from Brazil, Argentina, and Venezuela have plunged by 10%, 15%, and 34%, respectively in 2015, and those numbers are likely going to get worse this year in anticipation of the Rio Summer Olympia, taking place to compete with summer destination tourism dollars in the U.S.

The Rio Summer Olympics will take business away from Disney theme
parks during the summer peak season
We expect, on Disney's next earning call, for their park attendance numbers in all their theme parks and resorts to be down significantly compared to the same time last year.

The problem with Disneyland in California is that half of the rides inside the Disneyland Park are closed to accommodate the massive Star Wars land construction project, which will not be completed until years down the line. A completion date has not been announced yet.

Hong Kong Disney is already tanking due to intense competition from Shanghai Disney and other mainland Chinese theme parks and due to poor currency exchange rates, since Hong Kong's currency is pegged on the U.S. dollar. Hong Kong Disney saw a precipitous drop in mainland Chinese tourists of 23% from 2014 to 2015. Mainland Chinese visitors used to account for 60% of Hong Kong Disney's attendance numbers in 2014 before they stopped coming to Hong Kong in droves last year.


Shanghai Disney is not expected to turn a profit for years due to its extravagant costs and Disney's lack of media penetration inside mainland China to promote its business interests, so it is still a work in progress and may, like Disney's other foreign theme parks, not turn a profit for decades.


And Disneyland Paris is also struggling, as usual, due to concerns about ongoing terrorist threats in Europe and poor currency exchange rates in the EU, thus completing Disney's foreign theme park curse.

Poor currency exchange rates pegged on the strengthening U.S. dollar will
impact attendance at Disney's theme parks in the U.S. and Hong Kong
Disney World in Florida is already experiencing a significant dip in attendance this year, but we don't think the alligator incident from a few weeks ago has much to do with impacting this downward trend, but here again repercussions from threats of terrorism may have a small effect on attendance. Increased security measures have made lines and wait times at both U.S. Disney theme parks much longer.

Don't get us wrong, the killing of a child is bad publicity, but we don't think it's going to affect attendance numbers at Disney World since the resort has reacted very quickly to rectify safety concerns to children inside the resort. At most, Disney will probably have to settle with the family of the deceased boy in an 8-figure monetary settlement; however, many legal experts believe the Empire of Mouse will face a wrongful death lawsuit with damages beginning at $100 million.

The parallels between what's happening politically in the U.S. and the U.K. should not be lost on observers
Given all the factors compounding Disney theme parks' attendance problems this year, which we have chronicled in depth, is it any wonder why Disney stock prices are dropping so precipitously?


We'll see for sure in the coming weeks and months as the factors we discussed in this article are evaluated by Wall Street financial securities analysts.


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