Disney Execs fear price hikes hurting reputation

Investment Analysis Clubs Macro Economic Trends and Risks
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{{ The trip left Kindell, a bank compliance officer from Bear, Del., with sticker shock—especially after recent price increases. Two days of park tickets ran to $1,123. Passes that let them skip the line on popular rides: $208. A meal with costumed characters, including Donald and Daisy Duck: $219. Two Mickey Mouse bubble wands: $60.68.

“It was really stressful for me thinking all the time about how much we were spending,” Kindell said—even though she and her husband, a driver at a warehouse, weren’t paying for it all themselves. Her parents covered the cost of lodging and airplane tickets for her children, aged 10 and 4. Her total came to $3,000. }}

https://www.wsj.com/business/disney-parks-price-hikes-consumers-0bf4dbd6?mod=hp_lead_pos7

The last time I went to Disneyland in California in the late 1980’s, the price of admission was about $20. Can’t imagine hitting up the grandparents or taking on student loan sized debt for a visit to the park today.

intercst

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I used to hold DIS. Like many other USian companies, like the automakers, management has hit on the idea of simply raising prices, and squeezing ever more money out of their customers, over and over. Reportedly, their strategy is to measure wait times at rides, then raise prices. If wait times, as a measure of price resistance, do not decrease more than a certain amount, they raise prices again. Then measure wait times. If no large decrease in wait time, they raise prices again. Wash, rise, repeat.

Thing is, their primary customers, little kids, don’t understand money. The people with the money don’t have the heart to tell the little kids “NO”, when the kids want some mouse. So prices spiral higher and higher.

Not my idea of a “family friendly” company. But this is the same outfit that replaced USian IT workers with H-1B visa holders, because they were cheaper, so that “traditional family values” image is pretty tarnished anyway.

Steve

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The issue is the massive crowds and the long lines. Disney has to have some way to control that. During COVID they simply required reservations per park, and they limited it to 25% capacity, and later to 50% capacity. Now they require reservations, but at 100%, or seemingly sometimes at 110%, of capacity. The bean counters will tell them that if they have 120% demand, they need to raise prices until demand drops to 110% or 105%, and they’ve been doing that repeatedly. But prices are “sticky” and then along comes a recession (we haven’t had a real business cycle recession in about 15 years) and suddenly those sticky prices become a big problem. Then discounting begins, and discounting is ALSO sticky, because people get used to it and then “wait for the discount” before buying. I estimate that Disney, at least the parks part of it, will have some issues come next recession.

Now, there are those who believe that the fed and congress have “cured” recessions forever by the use of massive spending and massive money creation. But I suspect that isn’t true. We shall see.

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As I suggested, on the old DIS board, build more capacity. But no. That costs money. Make more profit off their exiting customers by constraining the supply of mouse, and raising prices to a “market clearing price”.

Steve

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Hold on there Tonto. Disney has spent tens of billions expanding their attractions all over the world. There is a StarWars land now, Cars land (after the movie “Cars”) and an Avengers campus, both carved out with some difficulty in California. They’ve announced over $100 billion in buildout in both California and in Florida to encompass both new attractions and to refresh the old ones.

They also have a half dozen cruise ships in various stages of construction, to add the the half dozen already in operation. And they are one of the few who has invested enough in streaming to build a successful platform.

Like others, I think they have gone too far squeezing the theme park goers for revenue, but “lack of investment” is surely an inapt criticism.

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The “investments” you cite are like putting new tailfins on. What I was proposing was one or two new parks, in the US. Expand the footprint, so more people can be accommodated.

Steve

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That is exactly what Disney has been doing, and what they are planning to do more of.

Keep in mind that when you add a new ride or attraction or “land” you are adding capacity.

Cars Land in CA expanded the park into a parking lot. Star Wars in both CA and FL expanded the footprints of the parks. In CA, that involved relocating admin and support areas to expand the park. Avengers campus replaced an underutilized area, and is currently breaking ground (quite literally! It’s big news among park fans like me) on an expansion into another old parking area.

In CA, they’ve reached an agreement with the city of Anaheim to convert two parking lots into more park space. That will take a couple of years before it starts, but they’re working on other spots first.

In FL, Disney announced two new lands that will be built simultaneously. Those will involve a small footprint expansion, but will replace two physically large attractions that can’t handle many visitors with 3 or 4 attractions that can handle many more visitors, plus shops and restaurants that also add to capacity.

That’s just in the US. I don’t follow the parks in Europe or Asia as closely, but they all had some expansions announced last fall.

—Peter

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Adding on: Granted, none of those are new parks, but they all add to the capacity of existing parks.

However, there is a possibility for a whole new park in CA. About a half mile south east of the existing parks is another large parking lot that Disney owns. It is large enough for a new park. Development of that into something else is part of the agreement with the city. Disney teased that with some concept art that makes it look like a luxury low density resort hotel. But no one is fooled by that. It makes no sense to build that. There are plenty of hotels in the area that could be purchased.

I’m sure they’d rather build another park. That would be far more profitable.

—Peter

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So…why are they complaining about the crowds, and raising prices to ration space by ability to pay ever higher prices?

Steve

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Because that’s what a for profit business does. Charge the highest price they can for the limited number of customers they can accommodate.

Like an airline, Disney can only serve so many customers in their parks per day. Also like airlines, at least in CA, they charge more for days that are in higher demand and less on low demand days to attract more customers.

They also offer discounts. If you live in So Cal, you can buy a 3 day ticket at about $65 per day instead of the usual $125 or more. Or you can buy an annual pass that allows you to go more frequently. Which is what I do. For about the price of a gym membership, I can walk around a safe and enjoyable environment, watch a bit of live music, or ride a ride any time I want (except for about two weeks around Christmas and New Year’s Day).

Or compare it to seeing a pro football or basketball game. It my entertainment budget.

—Peter

PS. Posted from here:

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That’s pretty shrewd. Just like few New Yorkers want to visit the top of the Empire State Building, I bet most Southern Californians have had their fill of Disney.

I wonder if Disney execs could restore their reputation by offering “Disney park visit scholarships” for economically disadvantaged kids? Kind of like the Make A Wish Foundation.

intercst

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Yes, Disney offers discounted tickets and other programs for students, service members, and people with disabilities.
  • Disney Imagination Campus

Offers discounted tickets and educational opportunities for student and youth groups. This program is for guests ages 3 to 22.

  • Shades of Green Resort

Offers discounted stays for service members, retirees, veterans, and some of their families.

  • Disability Access Service (DAS)

Offers accommodations for guests with developmental disabilities who have difficulty waiting in long lines.

Other ways to save at Disney

  • Nonprofits can get free tickets by contacting Disney corporate.
  • Cast members who have foster children in their care may be eligible for discounts.
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So, then why are the DIS “JCs” squirming about their growing reputation as greedy, rapacious, sumb!tches?

Steve

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Are they squirming?

—Peter

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What is the title of the thread? People are trying to support conflicting ideas: management is entitled to beat every nickel out of it’s customers, vs DIS is a “family friendly” company.

Steve