Disney Scraps Plan For Florida Campus, Closes Star Wars Hotel Amid DeSantis Feud

The company is halting plans for a new corporate campus in Florida that would have relocated more than 2,000 employees, mostly from its theme parks division, to the community of Lake Nona in Orlando.

Separately, Disney is also closing its Star Wars: Galactic Starcruiser experience at Walt Disney World by October, one of the company’s most expensive attractions, where visitors are immersed completely in a Star Wars-themed adventure for multiple days.

Josh D’Amaro, head of Disney’s Parks, Experiences and Products division since 2020, said the Lake Nona project is dead. In an email to staff Thursday, he announced that employees will no longer be asked to relocate from Southern California.

Hundreds of employees from the division have already moved to Florida, and will be given the option of returning, according to people familiar with the matter. The cancellation comes as local government and tourism officials in Orange County, Fla., have been touting the project as an important driver of investment and job growth.

The Lake Nona initiative, which contemplated a capital investment by Disney of up to $864 million, was spearheaded by former Chief Executive Bob Chapek, who was fired by the board in November and replaced by Robert Iger, who had previously served as CEO from 2005 to 2020.

“While some were excited about the new campus, I know that this decision and the circumstances surrounding it have been difficult for others," D’Amaro wrote. “Given the considerable changes that have occurred since the announcement of this project, including new leadership and changing business conditions, we have decided not to move forward."

The changing business conditions include both significant job and budget cuts at Disney and growing tensions with Florida, according to people familiar with the matter. Disney is in the midst of reducing head count by 7,000 and slashing $5.5 billion from content and administrative budgets.

The company also is embroiled in a war of words and a legal battle with DeSantis, who last year criticized Disney for publicly opposing a sex-education bill that he had championed.

In April, the Republican governor sought to take control of Reedy Creek, a special tax district that allows Disney to essentially self-govern the land that includes its theme parks and hotels near Orlando by replacing the district’s board with a handpicked slate of allies and seeking to cancel a 30-year development agreement that Disney had struck in February.

The moves prompted Disney to sue the state of Florida in federal court. At Disney’s annual meeting in early April, Iger announced that the company plans to invest $17 billion in Florida over the next decade and create 13,000 new jobs, and called DeSantis’ attacks on the company “antibusiness" and “anti-Florida."

Disney announced the possibility of a Lake Nona campus nearly two years ago, but “nothing ever came of the project, and the state was unsure whether it would come to fruition," said Jeremy Redfern, a DeSantis spokesman.

“Given the company’s financial straits, falling market cap and declining stock price, it is unsurprising that they would restructure their business operations and cancel unsuccessful ventures," Redfern added.

Disney shares closed Thursday to $93.76, up 1.1% on the day. The stock has risen 8% in 2023 but fallen 9% over the past 12 months, both worse than the broader S&P 500 index.

Galactic Starcruiser, dubbed by fans as the “Star Wars hotel," is an immersive two-night experience that was priced and designed more similarly to a cruise.

For a party of four, the experience’s starting price tag was around $6,000, though that figure varied based on the date. Throughout their stay aboard the Galactic Starcruiser, guests could interact with costumed Disney employees, completing missions and living out story lines based on the popular film franchise.

A Disney spokeswoman called the attraction one of the company’s most creative projects ever. “As we prepare for its final voyage, we will take what we’ve learned to create future experiences that can reach more of our guests and fans," she added.

The Galactic Starcruiser cost more than $350 million to build, said Jim Shull, who worked for more than 30 years as an Imagineer—the team of green-beret engineers and designers who conceive of and build Disney’s theme park rides and other attractions—and attended planning meetings with Chapek about the hotel. The Disney spokeswoman declined to comment on the project’s cost.

But the construction cost wasn’t the biggest issue—it was the massive staff of Disney “cast members" required to maintain the aura of the immersive Star Wars experience, as well as technical and hotel staff, that made the project so expensive to operate, Shull said.

“Galactic Starcruiser as a hotel is a pretty simple facility—it only has about 100 rooms, which is very small by Disney standards," he said. “The entertainment staff, the technical staff, that’s where the costs sort of added up."

A year after the hotel’s March 2022 opening, cracks in demand were starting to show. In late March, among other deals, Disney began offering 30% discounts to Walt Disney World annual passholders for dozens of dates in April, May and June. The company also began canceling future “voyages" on the Starcruiser.

Danielle Hollander, chief marketing officer at Visit Orlando, the city’s official tourism association, said in a Monday interview that the Lake Nona project was evidence of Disney’s commitment to Central Florida. She also pointed to other projects, such as the debut of a new roller coaster at Magic Kingdom theme park and new attractions being built at nearby Epcot park.

Orange County Mayor Jerry Demings told the Journal on Monday that he believed Disney is “too big to want to fail in Central Florida."

“They want to certainly see a state of Florida that is supportive of their investment," said Demings.

Disney had struck an agreement with Florida officials that could give the company $570 million in tax breaks over a period of 20 years following the construction of its new campus in Lake Nona.

Those incentives were contingent on Disney bringing high-paying jobs to the region. The Orlando Economic Partnership had estimated that the average salary of the positions Disney was relocating to Florida at $120,000 a year.

The jobs set to move from California included hundreds of Imagineers and thousands of support staff in technology, marketing, communication and finance roles, according to people familiar with the matter.

When the relocation plan was announced in 2021, it caused an uproar among the parks division’s employees in California. Members of the relocating group called on company leaders to speak out against the Florida education bill, which limited classroom discussion of gender and sexuality. After then-CEO Chapek criticized the bill, DeSantis called the company a “woke" corporation, escalating tensions between the two sides.

In a November town hall meeting with staffers a week after returning as CEO, Iger said he would revisit the relocation plan.

“This was not an easy decision to make, but I believe it is the right one," D’Amaro wrote in the email Thursday. “We are committed to handling this change with care and compassion. I remain optimistic about the direction of our Walt Disney World business. We have plans to invest $17 billion and create 13,000 jobs over the next 10 years. I hope we’re able to do so."

Write to Robbie Whelan at robbie.whelan@wsj.com and Jacob Passy at jacob.passy@wsj.com