At Disney tourist meccas around the globe, theme park tourists have suffered death by a thousand cuts. The price hikes have come so regularly that they’ve started to blur together. Coincidentally or not, Disney’s theme park attendance has struggled ever since the debut of Star Wars: Galaxy’s Edge, the exact opposite of what most analysts expected. We’ve clearly reached a turning point. Let’s examine the events that have led to Disney increasing prices one too many times.
The genius of annual price increases
Image: DisneyFrom a price perspective, I’m lost in admiration for what Disney has accomplished. They’ve done something so remarkable and so subtle that you might not even recognize it. Disney has altered your perspective of what a fair admission price is.
Before I give you the details, let me offer a comparison. I’m a semi-recovered Coca-Cola addict. For a part of my life, it wasn’t unusual for me to go through a 2-liter bottle in a day. The caffeine kept me sharp for writing, or that’s what I told myself anyway.
I always expected the price of a 2-liter bottle to cost $0.99, although I could find it for less at times. A few years ago, The Coca-Cola Company introduced 1-liter bottles for $0.79. They’re not $0.99 in stores, which means that they reset expectations enough that they could sell half as much of their product for the same price. That’s impressive, right? Well, Disney has Coca-Cola crushed.
Fifteen years ago, guests happily paid the cost of admission at Walt Disney World, which was $54. In 2019, the same ticket is as much as $159. Had Disney raised rates at the rate of American inflation over that timeframe, tickets would cost $73.44. Yes, a Disney park visit has roughly tripled when it should have increased 36 percent.
Tracking 15 years of steady increases
Image: DisneyThe remarkable aspect is how efficiently Disney pulled off this economic magic trick. The company started with annual park increases that seemed reasonable at first. Prices increased by $5.75 in 2005, which isn’t a lot in terms of actual dollars. It’s more than a 10 percent increase, though. Another 10 percent increase came in 2006, and more were done in 2007 and 2008. In just five years, tickets went from $54 to $77.
The deft nature of the price increases always seemed reasonable. In 2010, the ticket range went from $79 to $82. The following year, it was $82-$85, and then the company stretched again with $85-$89 prices in 2012. Do you follow that?
Image: DisneyWalt Disney World was only raising rates $3 per year, but they did it for two straight years. Then, they added an extra dollar at the top-end the next year. None of it seems unfair in a vacuum. It’s the totality where customers get screwed. It’s like VIG in gambling. That small bit of compound interest keeps expanding over time.
By 2015, Disney was ready to make the jump. They broke the feared $100 barrier for the first time on a single-day ticket. To the surprise and relief of corporate executives, attendance at all four Walt Disney World theme parks went up steadily. People willingly accepted this pain point, which has continued unabated.
The sharpest increases are recent
Image: DisneyOnly four years later, the cheapest base ticket at Walt Disney World costs $109. That’s a nine-percent jump from the highest-priced ticket in 2015, but it’s not the jaw-dropping number. The most expensive ticket now costs $159…and that’s not including Park Hopper. Yes, the top end of Disney admission prices has gone up more than 50 percent in just four years!!!
Here’s the stat that will blow your mind. The Seven-Day Ultimate Park Hopper admission ticket in 2004 cost $326. You can’t buy a two-day Park Hopper ticket for that amount during the 2019 Christmas holidays!
Image: DisneyA two-day Walt Disney World admission without Park Hopper costs as much as $310. Disney’s steadily increased their prices over the past 15 years to the point that they can sell you one-third of their product for the same price.
Putting this in theme park terms, Disney has just slowly lifted your coaster cart all the way up to the top of Expedition Everest. And yes, the tracks are broken. This analogy applies to Disney just as much as it does to you. With the advent of Star Wars Land, the company’s found a pricing pain point that consumers have deemed too much. Let me explain…
The hidden cost of building a better themed land
Image: DisneyNo one denies that Star Wars: Galaxy’s Edge is exceptional. This revolutionary new themed land redefines excellence in the industry. It’s simply the best thing in the business right now. And such quality comes at a high price.
Disney invested $1 billion in the development and construction of Galaxy’s Edge. The company has to receive a return on that investment, and one of the plans involved raising rates. It didn’t just stop at the fictional world of Batuu, though.
Image: DisneyIn the run-up to the debut of Black Spire Outpost, Disney increased prices on *deep breath* beverages, snacks, refillable mugs, restaurants, the Disney Dining Plan, all official resorts, souvenirs, theme park parking, wheelchairs and strollers, admission tickets, and even Minnie Vans.
The company even introduced new charges for hotel package delivery (!) and hotel parking, both of which had been free. Disney even raised the price of bottled water to $3.50 now. As a reminder, $3.50 was the cost of admission when Walt Disney World opened in 1971. Yikes.
At the same time, Disney canceled shows and attractions, replaced cast members with automated photography, and cut corners with meal preparations. Simply stated, guests pay much more for the same stuff from just a couple of years ago. Meanwhile, Disney has methodically reduced the value of the services provided at the parks.
The bombing of Black Spire Outpost
Image: DisneyLess than a year ago, I asked a group of Disney experts about their expectations for Galaxy’s Edge. All of these people work in cottage industries related to Walt Disney World, and each one expressed confidence that the new themed land would drive a surge in attendance. Nobody would have taken the bet against that belief. Star Wars Land seemed like the biggest slam dunk in the business.
With the benefit of hindsight, we all had our evaluations wrong. Disney overplayed its hand here, which we found out quickly. On the opening day of Disneyland’s version of Batuu, everyone braced for mobs of guests. Then, reports came in that crowds were manageable. Only a few days later, livestreamers revealed that the lines were stunningly short…on a Saturday. By that point, everyone knew the deal.
During a quarterly earnings report, CEO Robert Iger and his team confirmed that Disneyland attendance had not performed as projected. While revenue increased a modest amount, attendance dropped at Disneyland in the months after Black Spire Outpost opened. The notion seemed inconceivable six months ago, but the facts were undeniable. Theme park tourists rejected Star Wars: Galaxy’s Edge, at least at Disneyland.
Who takes the fall for this, and what happens next?
Image: DisneyIn August, the Walt Disney World version of Galaxy’s Edge opened. While crowds were more substantial, they once again fell below forecasts. In the weeks that followed, the woman in charge of Disney Parks West, Catherine Powell, was released from her duties. She’d held the position for only 18 months, meaning that she couldn’t possibly have been responsible for all of the mistakes that Disney made along the way, ones that had begun almost 15 years ago.
Somehow, the Chairman of Parks, Experiences and Products, Bob Chapek, survived this first round of disappointments. For a time, he’s seemed like the inevitable choice to replace Iger at the top of Disney. Currently, he appears just as likely to get tossed out on his keister due to the shocking woes at Disney’s American parks.
Image: DisneyWould Chapek deserve this fate? Well, he would more than Powell, who became a fall guy woman for Disney’s pricing miscalculations. As my wife stated bitterly at the time, “Of course they hold the one woman at the top of the org chart accountable.” And that’s a Disney superfan saying that. It’s a bad look for a company that got too greedy in too short a timeframe.
We’ll know the extent of Disney’s struggles when the next quarterly earnings report gets released next week. No matter how bleak the picture is, revenue should still be up because – you guessed it – Disney increased prices so much that the per-person earnings offset the dip in attendance. This tidbit almost justifies the entire situation from Disney’s perspective.
Were the company not facing hostile headlines about Star Wars Land, the earnings report would seem glowing. Since perception matters so much in the current media landscape, Disney’s not that lucky, though. The disappointing attendance combined with the sustained price increases have finally caught up to all involved.
The turning point here is more of a tipping point. Disney finally priced out too many consumers, forcing even the most passionate of fans to reevaluate the current prices. Smart leadership is called for right now. Iger and his team should get in front of this pressing problem and announce that they’re going to slow down on price increases for a while. That’s what they should do.
