Disney parks division reports massive increase in revenue and profit

Sorry... I spaced and thought I posted this last week but clearly only read it.

So is this just pent up demand or is demand really inelastic with respect to upcharges and diminished offerings?

Demand is elastic by default, which is why Disney is trying to game all of it to their advantage. They have a lot of levers they can use to tune attendance and spending. But the part about exceeding 2019 attendance on some days implies that even with reservations it's really packed.

Well, the part where the price increases and the attendance increases suggests that it's not as elastic as the nay-sayers would lead you to believe. Which is probably not a surprise to anyone who isn't in an echo chamber of entitlement.

Wait, I thought there was a park attendance cap? Did they stop that?

There is a limit on daily reservations, but I would think that cap is much higher than it was after the parks reopened in 2020.

The company has previously said that the reservations allow for more predictability around staffing and stocking, which doesn't mean that they're necessarily letting fewer people in. We've only encountered two days where we couldn't score reservations the day before, both in July. I know you have the AP complainers bitching about spontaneity, but anecdotally I don't think they're actually limiting people. Diana and Simon went to MK last week and they said it was intolerably busy.

I was at Epcot on Saturday and was stunned by how uncrowded it really was. I wouldn't be surprised if they keep the Reservation system in perpetuity. If I were a manager I'd love to know what my crowd levels were going to be everyday. I think it would particularly help at someplace like Epcot for the festivals since they can dial up or down the extra staff working as cooks and cashiers. In France, for instance, there was one cashier at the exterior frozen slushie stand (I'm a sucker every time) and I've been there before when there were 3 working. The line was not bad at all so they really didn't need 3 working.

As for the significantly higher revenues, like it or not, I would say that the premium pricing for Genie+ and Lightning Lane are making a big difference.

ApolloAndy:

So is this just pent up demand or is demand really inelastic with respect to upcharges and diminished offerings?

I've been thinking about this a lot--and not just in relation to Disney. How is it possible that nearly every "big" leisure time activity (major ski resorts, top tier pro/college sports, "name" act concerts, etc.) seems to be able to increase prices faster than inflation?

I think the answer might be: those "big" things do not target everyone. They target folks in the upper X% of disposable income. And, that group has had their disposable income also increase faster than inflation.

For example: if you own your home, your housing costs are almost fixed in constant-dollar terms. (Yes, it goes up a little bit through increased taxes and insurance, but the monthly interest/principal payment does not change.) So, as your income increases over time, housing becomes a lower share of that.

Now, add in the fact that folks in, say, the upper quintile have seen their market rate compensation increase much faster than for most others. The linked article suggests at a rate of about 3.5-4x. 2019 WDW attendance was about 58.6M (using the AECOM/TEA bogus figures, but gotta use something). If average visits-per-guest was 2.5 (wild-a** guess) then that means that about 23.5M different people entered the gates. That's about 7% of the US population. That ignores the fact that there are plenty of international guests in that 23.5M number, so figure maybe 5% of the US population crossed a Walt Disney World turnstile in 2019. That's not right, but it's probably not off by more than a factor of 2.

How many of those domestic guests are drawn from the upper 20% of household income? I'd bet the vast majority.

I also missed this last week... where our friend Rick points out that Disney considers its attendance mix at Disneyland as "unfavorable," which is code for too many passholders. I wonder though if their assumptions are correct. If they further limit passholders, do they make up for it in day tickets? At that park, I'm not convinced that would be true.

WDW is a different beast, in part because I think the parks together are big enough to bring in pass folk. The Guardians preview was pretty loaded, so I assume there are lots of them. I also think, anecdotally and mostly by watching Epcot, that many passholders are big spenders. After forking over $700 for the pass, the festivals are like money sponges. I'm largely basing that on my own experience though. Since we've been reloading a gift card periodically, and I can count the big single transactions, I know we're spending an unholy amount on food and wine. I can't imagine that we're that unique.

You are not. I'm not a passholder now but I do spend an unholy amount on food and wine.

It’s not like the company can’t tell how park spending changes as the attendance mix does. I have to believe they know what they are talking about unless they are completely incompetent.

Until recently, it seemed like Disneyland’s park pass calendar for day tickets was booked out most days in both parks, so I suspect there was some unmet demand there. Things have quieted down recently though.

I'm sure they can tell how the mix changes spending. I do wonder, however, what their modeling looks like to determine total addressable market as you adjust prices. If they understood that before the pandemic, why didn't they change the mix/pricing then?

I got the sense that the pandemic got them asking questions they hadn't been asking before. (As it did for many of us.)

I agree with that. I think the pandemic also accelerated some decisions. We had been discussing making certain changes for years but never pulled the trigger. Pandemic hit and we finally made them. In certain respects, there was a justification/blame provided by the pandemic. Shouldn't be that way (good business decisions should be made) but that isn't always the case.

I imagine that some of it is still that idea that a Disney visit (to either coast) is an aspirational right of passage. And for the locals, it's your pride and joy. The changes in the last two years mess with that ethos quite a bit.

GoBucks89:

Shouldn't be that way (good business decisions should be made) but that isn't always the case.

I think in a vacuum I agree with you, but PR is a real thing. Instating a park reservation system and charging for FastPass in the middle of 2019 would have looked like a huge cash grab for no reason. Maybe that's fine and maybe that's what it look like now, anyway, but public opinion is a real resource and it's limited (can be recovered, but not always easily).

That's an interesting point. Three years ago, you're right, no one would ask if anything was broken because the trajectory was positive. What I worry about a little is the same thing as CF or even SF. Cool, you scored better per caps, but does that have an effect on repeat business? Between the three companies, I bet there's a yes, maybe, and no. Disney is probably the no (or negligible).

@Andy--One, I was talking more broadly than just Disney. Two, I agree that PR is real. its part of the business decision. And can make what is otherwise the right one, not right. But there are decisions (again not specifically talking about Disney) that are made (or not made) from a cultural, past practices, etc point of view (not involving PR issues).