Disney's business is selling fantasy. But there is business to be made in selling fantasies about Disney, as well.
The Wall Street Journal today posted an article, Even Disney Is Worried About the High Cost of a Disney Vacation, by Robbie Whelan. It's a great headline - one that will elicit clicks from many current and former Disney theme park fans who grown frustrated with the ever-increasing costs of visiting Walt Disney World or Disneyland. There's nothing demonstrably factually incorrect in the headline, either. Everyone in Disney's C-suite who has anything to do with the parks has expressed public concern about maintaining price points that will continue to make a Disney visit accessible to most American families.
But if you take from this article that Disney is approaching a breaking point where it either will need to cut prices or watch its attendance fall, well, you just bought into a fantasy.
Despite what some voices within the article might claim or suggest, Disney has not out-priced the market. Heck, even the data cited in the Journal piece illustrated that the hypothetical Disney vacation they envisioned remains within the budget of a supermajority of American families - at least three out of five households.
After an anecdotal lead that seems to conflate Walt Disney World and Disneyland, the Journal piece claims that Disney's internal research showed that the percentage of Walt Disney World and Disneyland visitors planning return visits began declining in late 2023. From there, the piece continues with a detailed accounting of the cost of Disney vacations, comparing it with the buying power of American households.
That's certainly interesting. But a cost analysis is the wrong context for interpreting Disney's reaction to its survey data - data which I have no reason to dispute. Ever since the Michael Eisner era began in the 1980s, "value" at Disney does not mean low prices. Disney's institutional concept of value is to deliver strong return for the money that its guests spend.
So when Disney's theme park guests collectively started telling the company that they were not planning to return to the parks as often, that is the reason why Disney announced so many new attractions in development at last summer's D23 event in Anaheim. You cannot look at pricing independent of what that pricing buys. And Disney's plan seems to be to try to deliver more of the attractions that its guests want in the years to come.
The Journal article includes ubiquitous references to Walt and Disney's business practices under the company's founder. But the distribution of wealth among Americans has changed dramatically since Walt died in 1966. If Disney had stuck with Walt-era business models, the company would be as dead today as the original Six Flags and SeaWorld. So Disney has changed the way that it sells its theme parks, with annual passes, seasonal discounts, and time-share deals providing a back door through which millions of families now enjoy the Disney parks.
You cannot make a comprehensive analysis of the affordability of a Disney vacation without accounting for the fact that so many visitors use products such as Magic Key and Disney Vacation Club when they visit the parks. Even people who are not DVC members now routinely rent DVC points to obtain nights in Walt Disney World Resort hotels are rates below what Disney charges guests for regular bookings.
Now that does create a problem for Disney. Any business model that relies on people buying in bulk requires a fresh supply of new consumers who have that level of demand for a product. Disney uses seasonal discounts to try to introduce new visitors to the Disney theme park experience, with the hope that those new visitors will find upsells such as annual passes and DVC a more affordable way to pay for return visits - in exchange for committing to make so many of their future vacations ones with Disney.
But it's the new rides that really drive Disney's plans to build its audience. Only with unique new experiences can Disney win back or win over families who decide to visit Universal Orlando or Dollywood or someplace else because they can get great experiences at those parks for less money.
For decades now, I have watched people predict an impending breaking point for Disney's theme parks. I once thought that Disney would find a price ceiling, too. But for all those years, I also have watched Disney report break record after record for increased revenue and income from its theme parks. The fantasy has remained that - a fantasy.
Of course, as the economy and society continue to change, Disney will need to continue to change in response if it is to remain a viable player and not a takeover target like the old Six Flags and Paramount chains companies became. But that's already happening. Just look at the company's growing commitment to the cruise business as it uses the Disney Cruise Line to serve more international markets at lower costs than building new theme park resorts.
Let's tell the truth here. A lot of Disney's prices have gone up over the years. But so have the prices of a lot of other out-of-home entertainment and recreation. The American middle class is getting squeezed, but that's not Disney's fault, even though Disney so often gets cited as an example of the effects of that squeeze. Disney, like many other mass-market businesses, has had to change its pricing and product mix to stay relevant in the modern economy. That provides a constant source of anxiety and concern for effective leaders in those C-suites... as well as for the customers who have come to love and rely on their products.
That's the story. If Disney's theme parks truly were overpriced, attendance would be tanking. It's not, even if it is flat at the U.S. parks for the moment. Disney has a plan to fix that, but a return to 20th century pricing is not part of that plan. No matter how much some fans might fantasize about that.
* * *
To keep up to date with more theme park news, please sign up for Theme Park Insider's weekly newsletter.
My feeling is that the overall price of a vacation (not just Disney) has gone up exponentially in the past decade or so, and even more in the past 3-4 years as part of the YOLO and revenge travel movements. I thought prices (and upcharges as an extension) would calm down a bit as we get further away from the height of the Pandemic, but that just isn't happening. In fact, it seems that the travel and tourism industry is doubling down on the trend by offering even more and more expensive ways to travel and vacation, and Disney is just keeping with the trend, though I do think they're following trends instead of establishing them like they have in the past.
It's interesting, because just when it feels like the trend is going to start reversing itself, it finds a way to reestablish itself and push to new levels.
Prices are up for any vacation as my parents were mulling a cruise but passing for a cheaper option. My sister was hoping a Disneyland trip this month but put off less on cost and more my mom's health.
As Russell says, it's not just Disney, the entire travel industry seems to be going for higher costs on stuff. Read Travel & Leisure, and you'll see that. Just how the business is.
The bottom line is greed. it was bad in the 80's but nothing like today. eisner started the money grab at Disney and unfortunately this plunder has comtinued unabated.
@davehr - The greed is not unique to Disney, it's pretty much EVERY publicly traded company that insists on increasing revenue and profits year over year regardless of the financial conditions, trends, market share, or other uncontrollable forces. "Greed" is an insatiable thirst for every business in the US, and Disney is just doing what everyone else is doing in trying to deliver value to their shareholders.
We're seeing this with every company in the travel/tourism industry as prices have skyrocketed for everything from hotel rooms, to airfare, to tickets/admissions, to food, to the targeted taxes local municipalities use to generate revenue to fund their districts without raising taxes on residents.
This article has been archived and is no longer accepting comments.
Great article Robert. Even if attendance at the domestic parks takes a hit, the success of international parks and the cruise line can make up for it, and create a higher value and ROI for passholders and DVC and those who can still afford a Disney vacation with less crowds, shorter lines, and ability to do more rides in one day. Ultimately the overall profit the Disney Experiences division makes is more important than domestic attendance numbers, so Disney is not panicking like this article makes it seem like they are.