Disney Parks have huge quarter, attendance up 10%, per-capita spending up 7%

Posted Wednesday, February 10, 2016 8:31 AM | Contributed by Jeff

For the first fiscal quarter, Disney reported a 10% increase in attendance at the company's domestic parks and a 7% rise in per-capita spending. Per-room spending at theme park hotels rose 9% for the period, while occupancy rose by 3%, to 92%.

Read more from The LA Times.

Wednesday, February 10, 2016 8:34 AM
Jeff's avatar

With this sort of growth, I refuse to believe that Disney is pricing huge portions of the population out of the market.


Jeff - Webmaster/Editor - CoasterBuzz.com - My Blog - Twitter - Video

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Wednesday, February 10, 2016 8:55 AM

There is some group of people who are priced out of the Disney market. As we discussed at length in the other thread, the determination of that group is difficult at least to a degree because its subjective. Though I don't see why it matters if its a lot, a huge portion or some other label denoting magnitude. What matters, at least for Disney, is its not enough to prevent them from growing. And the more "gotta have" status your product/service holds, the larger the group of folks who are priced out can be without impacting growth (and that is particularly true for services rather than goods of which you can more easily bump up production).

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Wednesday, February 10, 2016 10:16 AM

Of course Disney is pricing huge portions of the population out of the market. Their growth is coming from segments with discretionary income.

Disney offers a premium experience for a premium price and the strategy is working. It can be easy to forget a huge segment of America can't afford to drink Starbucks everyday when they appear to have locations everywhere. But this too is false. Starbucks is only saturated in places where people have money. Often times we just aren't as exposed to the other parts.

While I disagree with the populist criticism that Disney is pricing itself out of business -- their continued success proves they fully understand the new American economy -- it is incorrect to conclude that a strong quarter proves that large portions of the population are NOT priced out of the market. The two are not linked.

Last edited by Jetsetter, Wednesday, February 10, 2016 10:22 AM
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Wednesday, February 10, 2016 11:27 AM
slithernoggin's avatar

It has occurred to me that Starbucks took a common, cheap product and created an "affordable luxury" brand around it -- that is, people are willing to pass by Joe's Diner to pay more for coffee at Starbucks because the brand experience makes it justifiable to them.

Disney has taken a luxury experience -- immersively themed parks and resorts -- and can market them as an affordable luxury to segments of the market that aren't staying at Grand Floridian every year during Christmas for two weeks with dinner at Victoria & Albert's every third night (to exaggerate a bit).

Regarding Jetsetter's comment about location, it matters. I used to work in bookstore, back when I lived in Grand Rapids, Michigan, which was part of a chain. The big box bookstores, Borders and Barnes & Noble were about to enter the GR market, so the company board decided to open an upscale bookstore, with a new brand for the company, in order to compete with them.

But they ended up opening the store in a strip mall, which also featured a Little Caesar's and a Salvation Army store, that was in the parking lot of a Kmart and around the corner from a Walmart AND within a couple of blocks of Schuler Books, the largest independent bookstore in the state*. AND was within half a mile of the two largest malls in the city, which between them had three bookstores.

We constantly surveyed the customers that did come in the store, and they loved it. But we could never overcome the problem with the location and it closed after a few years.

*Which, for the record, while the GR Borders and Barnes & Noble are long gone, Schuler Books is still in business.


Time flies like an arrow. Fruit flies like a banana.
-- Groucho Marx

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Wednesday, February 10, 2016 12:07 PM
Jeff's avatar

Jetsetter said:

Of course Disney is pricing huge portions of the population out of the market. Their growth is coming from segments with discretionary income.

This theory is entirely predicated on the assumption that the "discretionary income" crowd wasn't already going, and ignores the popular economist view that the discretionary income crowd is getting smaller.

The rage also ignores the fact that in real terms, the price of tickets, assuming a 5-day trip, are only slightly more expensive on a per-day basis than they were 25 years ago. In 1990, a single-day ticket was $31. That's $56 in 2015 dollars. Today, a 5-day ticket works out to be $63 per day. Is $7 more a day really pricing anyone out? I have a hard time accepting that argument any more than $4 gas keeps people home compared to $2 gas.


Jeff - Webmaster/Editor - CoasterBuzz.com - My Blog - Twitter - Video

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Wednesday, February 10, 2016 12:21 PM

I'll be interested to see the transcript of the earnings call. This year, the first quarter included New Years week, whereas last year it did not. So, some of that 10% attendance growth is due to fortunate timing. It will be interesting to see if they address that specifically in the call, and if so what the directly-comparable number is.

https://thewaltdisneycompany.com/the-walt-disney-company-reports-re...scal-2016/


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Wednesday, February 10, 2016 12:22 PM
Thabto's avatar

If you drive a gas-guzzling SUV on a trip, and it takes 30 gallons to fill up and you need to fill up 3 times each way, that's $720 in gas alone if gas were $4 a gallon, compared to $360 if it were $2. That could be the cost of multiple nights in a hotel, meals, souvenirs, etc. And to some that $360 could be a deal breaker. It's not an easy amount to come up with.


Brian

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Wednesday, February 10, 2016 12:28 PM

Jeff said:...only slightly more expensive on a per-day basis than they were 25 years ago. In 1990, a single-day ticket was $31. That's $56 in 2015 dollars. Today, a 5-day ticket works out to be $63 per day. Is $7 more a day really pricing anyone out?

Frankly, portraying it as "only $X/person/day" is very misleading. That's a 12.5% increase, which is significant.


Brandon | Facebook

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Wednesday, February 10, 2016 12:29 PM

If $360 is someone's make or break amount on taking a vacation, they probably can't afford the trip in the first place.

I can't see how Disney is pricing out anyone now that they weren't before. I'm in the process of planning our vacation for this summer and, with the summer special they're running right now, I'm having a hard time finding anything that's all that much cheaper than 5 days and 4 nights at one of the All Star resorts with hopper passes and the dining plan.


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Wednesday, February 10, 2016 12:40 PM
Jeff's avatar

$7 a day is $7 a day, whether you express it as a percentage or not. It won't buy a burrito and a soda. There are a thousand ways to mitigate spending $7. Is Chipotle out of reach for the middle class too? If not, then skipping Chipotle a few times makes up the difference.

I absolutely reject this idea that prioritization and managing your money can't enable the ability even for a family of four making a combined $50k a year to do this. My former wife and I managed to fly to Orlando and do four-day vacations twice a year, when I made $30k and she was in grad school getting a TA stipend of $3k. I agree with bigboy... the price increases in the last few years haven't changed anything.


Jeff - Webmaster/Editor - CoasterBuzz.com - My Blog - Twitter - Video

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Wednesday, February 10, 2016 1:25 PM

Jeff said:

I absolutely reject this idea that prioritization and managing your money can't enable the ability even for a family of four making a combined $50k a year to do this.

You're assuming that people don't already make sacrifices to afford a Disney vacation. At a certain point, every family runs out of discretionary spending to eliminate. It's literally inevitable that for every tiny, incremental tick of the price dial, a certain number of folks won't be able to afford it anymore.

Sure, maybe a family can stay at a crappy motel down the road and pack sandwiches to offset that incremental increase. Or maybe they can drive rather than fly. But what about the family that was already making those concessions in order to afford a trip?


Brandon | Facebook

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Wednesday, February 10, 2016 1:35 PM
Thabto's avatar

^ Right. And that $360 amount that I gave in my example above can fall into that incremental amount. I just think from a penny pinchers perspective. And I'm sure many of those who take a Disney Vacation will be paying it off with interest for some time after making the trip.


Brian

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Wednesday, February 10, 2016 1:46 PM
matt.'s avatar

An incremental cost increase of one penny, in completely theoretical terms, will price out any consumer who was already on the margin of being priced out, and is price-sensitive to whatever extent needed to not go because of the one penny increase.

So yes, price increases undoubtedly convince some part of the potential consumer pool to not go to Disney, relative to the amount of the price increase itself.

That's completely missing the point though. The point is, for every story about Disney attendance and spending going up, up, and up - there's 10 more stories with teeth gnashing and hand wringing about how Mickey Mouse himself is personally murdering the American dream because huge swaths of middle and lower class families can no longer afford to go.

And the numbers just don't bear that out. The numbers show that Disney is offering a premium product that people are willing to pay for, even if the price does (marginally) go up. Hell, people might be MORE willing to pay as the prices go up because in a typically consumer's mind, a trip to WDW is a luxury good so a luxury price tag is what's expected.

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Wednesday, February 10, 2016 1:49 PM

Exactly.

And don't get me wrong - I'm not making a moral judgment on any of this. Disney can double ticket prices for all I care.


Brandon | Facebook

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Wednesday, February 10, 2016 2:08 PM

All of these people who are arguing about Disney prices, then there's me who still won't go to Disney because of moral views with them. Specifically their direct impact on the increase on the length of copyright length before something goes to the public domain.

Last edited by Go Intamin, Wednesday, February 10, 2016 7:20 PM

Hey, let's ride (random Intamin coaster). What? It's broken down? I totally didn't expect that.

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Wednesday, February 10, 2016 2:09 PM
Jeff's avatar

And perhaps the perceptions about a premium brand do factor into the rise in sales. I mean, objectively, I think an iPhone is way over-priced and not worth buying, and yet they still maintain a very large marketshare and 30%+ margins. This goes back to previous conversations about the American tendency to want to buy expensive cars and giant houses as well. It's why every time I would see a story about some "poor" middle-class family struggling to pay their giant ARM loan for their McMansion I just cringed.

Perhaps the reason I can't fall in line with the "it's too expensive" line of reasoning is because, subjectively, I see a broader cultural problem where people just suck at prioritization and managing their money like grown ups.


Jeff - Webmaster/Editor - CoasterBuzz.com - My Blog - Twitter - Video

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Wednesday, February 10, 2016 2:30 PM
Thabto's avatar

Here is a good article about Mickey Mouse and copyright laws:

http://copyright.nova.edu/mickey-public-domain/


Brian

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Wednesday, February 10, 2016 2:45 PM

Jeff said:

Jetsetter said:

Of course Disney is pricing huge portions of the population out of the market. Their growth is coming from segments with discretionary income.

This theory is entirely predicated on the assumption that the "discretionary income" crowd wasn't already going, and ignores the popular economist view that the discretionary income crowd is getting smaller.

To clarify, my theory assumes people with discretionary income were already going. Now it assumes that more of them are going, spending more and/or staying longer. If you don't have discretionary income, you're not going to a Disney park. It doesn't matter if the "discretionary income crowd" is getting smaller, as long as you get more of them than you did before and/or get more of their money, you win.

Disney's success isn't just a reflection of economics, it's also a reflection of quality and our current culture. People value quality and are willing to pay for it. If Disney offered the same quality levels as cheaper experiences they would have a problem but that isn't the perception. Secondly, our culture places increasing premiums on experiences and products with an emotion, purpose and story. Disney has this figured out and we are watching it succeed. Others in the discretionary income game will be less successful and those funds will flow to Disney. Thus, good quarter.

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Wednesday, February 10, 2016 2:56 PM
Lord Gonchar's avatar

Jeff said:

I see a broader cultural problem where people just suck at prioritization and managing their money like grown ups.

Ironically, I feel that if you have to prioritize and make 'decisions' to gather the funds for a Disney vacation, then that's the problem you describe being played out before your very eyes.

I'd include a trip to Disney as one of those luxury items that people likely can't afford, but find a way to do (not unlike big houses and expensive cars). If you make a median income (give or take) you probably shouldn't be spending the money it costs to go to Disney to go to Disney.

Disney is increasingly pricing out more and more of their customers. The problem is, they're still going.


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