Opinion: Disney price hikes about more than profit

Posted Tuesday, October 6, 2015 10:27 AM | Contributed by Jeff

From the piece:

While profits are undeniably at the heart of these changes, they’re also about simple crowd control. If you glance at many of the negative reviews of Walt Disney World or Disneyland at sites like Yelp and TripAdvisor, you’ll see that people complain nearly as often about the parks being overcrowded as they do about them being overpriced. Maddening crowds and long lines can make theme park visitors miserable, and the “solution” Disney seems to be settling on is a win-win for the company: Raise prices so high that the parks will be full (but not overfull) of just the right (high-paying) customers.

Read more from Time.

Tuesday, October 6, 2015 12:56 PM

Crowd control is about profit too.

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Tuesday, October 6, 2015 1:22 PM

While I'm not in the board room with these guys, I just can't see a bunch of Disney brass sitting around a conference table brainstorming how to make the parks less crowded by trying to control the demand side by jacking up pricing.

I think that a huge part of the game that every publically traded company plays is having to answer to Wall Street and quarterly earnings reports. Wall street typically rewards stock prices when there is growth. Wall Street LOVES growth. So it really is just Disney constantly tweaking the Disney Parks segment of the company to achieve continual growth, which keeps Wall Street/investors/shareholders happy with hopefully appreciation in stock price.

My park during certain times of the summer hits "capacity" and is crowded beyond a healthy guest experience. We've never had a discussion over jacking up pricing to the point where less people visit so it is less crowded. Maybe we have it wrong...

But other than that, yea, I think it is really mostly, or all about profit...

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Tuesday, October 6, 2015 1:34 PM

Hanging n' Banging said:

My park during certain times of the summer hits "capacity" and is crowded beyond a healthy guest experience. We've never had a discussion over jacking up pricing to the point where less people visit so it is less crowded. Maybe we have it wrong...

But have you had discussion about the crowds? How to handle them better? How to perhaps spread them out better across operating days?

If so, you're having the same conversations as Disney.

If not, you suck at amusement parking.

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Tuesday, October 6, 2015 2:20 PM

My meme on the other thread was highly predictive...

Disney is just too crowded at the cheap prices they were charging...

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Tuesday, October 6, 2015 2:41 PM

If it was truly about crowd control, prices would vary significantly to balance attendance across a day/week/month/year to reduce peaks and valleys. It's much easier to operate a business if you can expect similar staffing every day.

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Tuesday, October 6, 2015 3:37 PM

CP Maverick said:

If it was truly about crowd control, prices would vary significantly to balance attendance across a day/week/month/year to reduce peaks and valleys.

1. We'll have to see what they go with if they move to dynamic pricing.

2. I wonder how much movement is really needed to change people's habits?

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Tuesday, October 6, 2015 3:46 PM

Lord Gonchar said:
2. I wonder how much movement is really needed to change people's habits?

IMHO, I'd say a lot. Many people do not have flexibility as to when they are able to travel. And those that do probably already come at slower times. I used to be a big proponent of dynamic pricing. But, now I'm not so sure. From the consumer side of it, I was in favor of it as I used to have more flexibility. From an investor side of it I wonder if people's habits will really change or will you just be giving up money at the slower times.

And if the travel patterns do change, will the increase in customer satisfaction (and in turn, likely more in park spending) be enough to justify the lesser cost of admission?

Last edited by Jason Hammond, Tuesday, October 6, 2015 3:48 PM
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Tuesday, October 6, 2015 3:59 PM

I think for Disney that's true. But I also think they've always done this to some degree with resort deals and free dining plans and such.

I mean, if you really think about it, that's dynamic pricing. We drop our rates (or throw in freebies, or run 'specials' or whatever) to encourage behavior.

Dynamic pricing in the sense we're talking now for Disney seems to mean ticket prices. I wonder how effective that really could be? Locals likely use passes (hence the price hikes) and travelers find other deals to influence behavior. I find myself wondering exactly who they expect to manipulate with some ticket price variation.

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Tuesday, October 6, 2015 4:08 PM

We've seen Cedar Fair do this with online tickets and bring-a-friend discounts. You may not see a change in gate price, but they can certainly manipulate prices to shift attendance. Will this make September 3rd as busy as July 3rd? Not a chance. But it could help bring more people in when crowds are lower.

Was Monday ever a prime day to go to the movies? It certainly has become one with $5 tickets available. And believe it or not, the attendance gained on Monday has more than recovered any (minimal) lost on the weekends.

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Tuesday, October 6, 2015 4:17 PM

Disney prices make no sense to me.

If Little Jonny sells 20 cans of Coke on the street corner for $1 each. After he sells out, he turns away 20 more customers. The next day he has to make a decision. Should he bring 40 cans of Coke to sell for $1 or should he bring 20 and raise the price to $2?

I would think that Disney would want to serve as many customers as they can, because more first-time customers means more repeat business. More customers through the gate means more customers buying food and souvenirs, and staying in hotels. That means there are more wallets to extract money from.

Therefore, they should build more rides and attractions and increase overall park capacity. They seem to be doing this, but I don't think they are doing enough, or fast enough.

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Tuesday, October 6, 2015 4:22 PM

I'd be curious to know how much of Disney's business is repeat business. Most of the people that I know (outside enthusiast circles) have visited a couple times in their life. Many, none at all. The one person I know who makes a habit of going there regularly with his family still only visits once about ever 3 to 5 years.

On the enthusiast side of things I know people who go every year and some multiple times a year. But as we all know. We are the exception, not the rule.

Last edited by Jason Hammond, Tuesday, October 6, 2015 4:23 PM
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Tuesday, October 6, 2015 4:53 PM

As Gonch alluded to, the resort and meal plan deals is where the flex pricing model comes to play. If you visit after Labor Day in September you will almost always get free dining and lower rates at the hotel. Same thing in February before President's Day weekend. That is when we visit normally. To be honest, with what we pay for the resort, the hopper passes are just a small chunk of what we pay overall. We probably wouldn't even notice the price difference. Especially when the hopper becomes a better deal the more days you stay. We normally gut it out for ten days when we go and those last few days on the hopper are usually a few bucks extra.

I am not sure what the percentage is of guests at the parks that stay in the resorts vs guests that stay off-site vs locals. Any movement in prices would be targeted to the later two groups, IMHO.

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Tuesday, October 6, 2015 5:21 PM

Yeah, I guess that makes sense. I was overlooking the obvious there - not everyone stays on property and includes meal plans and such. For the budget visitor staying off property where the only real Disney expense in tickets, then ticket prices could influence behavior, I suppose. But is still seems like in terms of the cost of traveling to Disney World, that the ticket itself is a fraction of the overall cost. Without seriously steep discounts, you're simple taking a small part of the cost equation and cutting is a small bit.

LostKause said:

Should he bring 40 cans of Coke to sell for $1 or should he bring 20 and raise the price to $2?

He's paying 25 cents a can. So if he goes with 40 cans his profit is $30. If he goes with 20 cans his profit is $35. By reducing inventory costs and raising price to meet demand, Johnny increased his profits by 17%.

And that assumes he would sell 40 cans. He may very well find himself with leftover cans. With 20 cans he can adjust pricing to the demand.

I would think that Disney would want to serve as many customers as they can, because more first-time customers means more repeat business.

I think they are already serving as many customers as they can. You eventually reach a point of diminishing returns. That is to say at some point, more business isn't going to generate more business. There is not endless growth potential.

More customers through the gate means more customers buying food and souvenirs, and staying in hotels. That means there are more wallets to extract money from.

Less customers paying more means you can extract more from each guest. You attract a different kind of spender, lower costs and offer an overall better experience with smaller crowds - further justifying those increase prices.

Therefore, they should build more rides and attractions and increase overall park capacity. They seem to be doing this, but I don't think they are doing enough, or fast enough.

That sort still assumes endless growth to some degree and now increases the risk should business drop in the future. It's easier to adjust pricing to accomodate market trends than it is to adjust your product - especially in Disney's case. Ask Six Flags Ohio how being overbuilt for the market worked out.

Last edited by Lord Gonchar, Tuesday, October 6, 2015 5:34 PM
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Tuesday, October 6, 2015 5:26 PM

Rumor is that free dining during the shoulder months is not long for the world. We missed out on it last week because our (not so on-the-ball) travel consultant waited until after noon the day it went live to try to book it for us and she was told that the number of available slots was significantly less this time around. And from the looks of the crowds last week, they don't need it.

Anyone that thinks that WDW in its current state has a capacity problem when it comes to attractions is way out of the loop. Magic Kingdom looked to be wall-to-wall people on Saturday afternoon and evening and less than a quarter of the rides had a wait of more than 20 minutes, the longest being Seven Dwarves Mine Train at 90 minutes. The crowds were there and they were moving through the lines. We were only there for a few hours with no fast passes and managed to get on 4 or 5 rides and watch the electric parade and Wishes.

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Tuesday, October 6, 2015 6:15 PM

LostKause said:

... they should build more rides and attractions and increase overall park capacity. They seem to be doing this, but I don't think they are doing enough, or fast enough.

They have been and are doing quite a bit: off the top of my head, the Fantasyland expansion, the changes to the hub at Magic Kingdom, Rivers of Light and Sunset Kilimanjaro Safaris at Animal Kingdom, the Soarin' and Midway Mania capacity enhancements.

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Tuesday, October 6, 2015 6:52 PM

I wanna go back to Jason's point about habits, because it's a good question. People know Magic Kingdom gets slammed on and around Christmas, and yet, people still show up that way. I know people like that, and I can't for the life of me understand them. Their response is always, "Well, that's the window of opportunity I have." They're apparently willing to show up on those days and pay what they have to pay. So the question is, how much of the Disney guest pool shares that sentiment? If it's significant, even dynamic pricing may not influence habits.

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Tuesday, October 6, 2015 8:22 PM

slithernoggin said:

LostKause said:

... they should build more rides and attractions and increase overall park capacity. They seem to be doing this, but I don't think they are doing enough, or fast enough.

They have been and are doing quite a bit: off the top of my head, the Fantasyland expansion, the changes to the hub at Magic Kingdom, Rivers of Light and Sunset Kilimanjaro Safaris at Animal Kingdom, the Soarin' and Midway Mania capacity enhancements.

The New Fantasyland expansion was in ride count numbers, a direct replacement for the long gone 20K League under the Sea and Snow White Scary Adventure. The last "brand new attraction" that did not replace anything at the MK were the Flying Carpets in 2001 and before that... Splash Mountain in 1992.

One interesting aspect pushed in more realists Disney fan circles is this one: why did WDW push all theirs eggs into the MK basket? Animal Kingdom until Rivers of Light opens can barely stay open for banker's hours (9-5 or 9-6), the Studios is currently being gutted pretty badly in preparation for its makeover and Epcot is kept floating by Food and Beverage sales. I understand for many people WDW is the Magic Kingdom, but why not try to make the other parks more interesting? In its hayday, Epcot was nearly head to head with the MK attendance wise, but years of neglect and shuttering facilities have left poor Epcot a shell of itself.

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Tuesday, October 6, 2015 9:58 PM

I've often wondered about the Epcot neglect as well. I'm assuming many of the attractions simply weren't popular over time. But then, people still love things like The Land. Still, seasonally, Epcot is a zoo. Food & Wine draws insane crowds, and they're crowds of people spending a ton of money. I can't even imagine the per caps.

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Tuesday, October 6, 2015 10:07 PM

At some price point, the behavior of the limited window folks is affected. Resources are limited. And there are other competing entertainment options available.

But its working more of a bell curve than a straight line. At some point along that curve, you lose a lot of people with smaller changes.

May well be the case that demand for the peak times is less elastic than Disney understands. Or that they just don't want to take the leap necessary to significantly influence behaviors. For various reasons.

Either way it works for Disney. They still have more than enough people interested in the peak times. Probably a mix of first and last time people (for peak times in any event) and peak time regulars.

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