The Disney Price Increase and Theme Park Economics: Will Attendance Suffer?
Posted by Elizabeth Alton on Monday, March 10th, 2014
Last year, Disney posted record operating profits of more than $2.3 billion dollars. The number is doubly impressive when considered in the context of the recent economic downturn. Yet amidst record profits, another increase in Disney’s ticket prices went into effect earlier this year. What’s behind the decision to raise prices, and what implications does it have for long-term park attendance? Can a unique themed entertainment experience such as the Disney parks ever price themselves out of the market (or a specific segment of the market)?
Over the past two years, we’ve witnessed ticket price hikes at many of the most popular Disney parks. Magic Kingdom, Epcot, Hollywood Studios, and the Animal Kingdom have all seen rising admission costs. Last year, price increases happened during the month of June. This year, prices went up during the last week of February. The cost of a one-day pass to each of these popular Walt Disney World parks has increased by $4 across the board. Magic Kingdom’s ticket prices jumped from $94 to $99; and Epcot, Hollywood Studios and Animal Kingdom went from $90 to $94 for single day passes. Four-day and ten-day park multi-park passes each increased by $15, bringing total costs up from $279 to $294 and $339 to $354, respectively. It’s not just Disney that’s increasing prices; many theme parks have noted small increases in ticket costs, retail, and food for the 2014 season.
If you’ve been following the cost of Disney World park tickets recently, you’ll notice that there have actually been slight increases in price over the past two years. At the same time, total park revenue has also skyrocketed to over $3.6 billion. From 2012 to 2013, Disney saw a 6% spike in revenue generated by their theme parks. This includes ticket prices, food, souvenirs, and other in-park merchandise. If we consider the basic laws of supply and demand, the increase in ticket prices is a good business move for the company. More guests are visiting the Disney World theme parks despite recent price hikes, and those visitors are spending more money as a result.
While it’s still early in the year and thus difficult to predict how Disney’s recent price increases will affect total park attendance in 2014, we predict that visits to the happiest place on earth will continue to increase. If the last few years are any indicator, Disney World theme parks will welcome more guests through their gates in the coming year than ever before. Travelers planning trips to Disney may not be excited about the increased ticket prices, but slightly higher costs are unlikely to deter them from enjoying a day out with their families.
The longer-term views may be different, however. There’s increasing discussion in online forums and travel sites of how to minimize the cost of a Disney vacation. Staying offsite, eating outside the parks, and other tricks are common tradeoffs that families make to be able to afford a trip to Orlando. Some people are going so far as to ask the question of whether Disney is intentionally pricing out middle class and working class families. It seems unlikely that Disney would purposely disenfranchise its core demographic. But it does raise a real question about when something goes from being an affordable family activity to a luxury item.
Recent reports also suggest that Disney’s Unions are placing increasing pressure on the entertainment giant and negotiating hard for higher pay. Depending on how discussions go, this could impact both profits and attendance through press. During the last Union negotiations, attendance levels plummeted.
As long as park attendance and total revenue continues to increase, it’s likely that Disney will move forward with their price hike strategy in the years ahead. The Disney team has built a branded, billion-dollar business that offers something truly unique to customers. Whether ticket prices will eventually have detrimental effects on park attendance remains to be seen, but all signs indicate that 2014 will be another great year for Disney despite rising costs.
Image source: Undercover Tourist, Disney Tourist, WDWDads