This morning, ticket prices rose at Walt Disney World by $4 for a single day ticket to the theme parks. To enter Epcot, Disney’s Hollywood Studios and Disney’s Animal Kingdom will set you back $94 plus tax. If you’re looking to hit up the Magic Kingdom for a day, it will cost you $99 plus tax.
Without even having to look, I can tell you that Disney and other theme park message boards are lighting up, just like they always do, with people saying Disney is greedy, stupid, arrogant and probably far worse. If I am wrong and all the message board junkies aren’t groaning and snarling like they always do when this happens, I apologize. Also, I will eat my shoes if even a quarter of the comments are neutral to positive. If Disney was the company of morons the message boards say they are, the parks would be dead and Disney stock wouldn’t be over $80 per share and climbing.
I think a lot of the frustration comes from theme park fans who don’t know why park ticket prices increase in the first place. They often claim it’s because executives just need bigger bonuses or to pay for a certain project or movie that tanked and the price increase will cover that up like a Band-Aid. While those things may play a tiny factor in the decision making process, in the long run, it really doesn’t have anything to do with greedy executives making stupid decisions. (Disclaimer: Executives do make stupid decisions from time to time. Today’s price increase isn’t one of them.)
Today, I will take a look at some common misconceptions and maybe try to throw in some common sense as to why these decisions happen. If you’re convinced that ticket price increases at any theme park is a snap decision that executives just make without putting any thought into how it will affect the business, this is not the article for you. Please go back to eating your bowl of Lucky Charms and go about the rest of your day.
My favorite defense from Disney fans on keeping ticket prices lower is, “I can hear Walt roll over in his grave because of how the company is run these days.” If only Walt were around today just to see what his empire has become: Theme parks all around the world, hotels, water parks, thousands of movies since his death, several television networks and so much more. I can’t imagine what Walt would think, but that doesn’t matter. Disney, for better or worse, is enormous now and there is no possible way to know how Walt would be running it. Let it go.
Frankly, ticket price increases are based on a fairly simple factor: Will the park continue to make the same amount of money or more than it did in the past with an increase? If the answer is, “We are extremely certain that we can make increase revenue and adjust prices accordingly with an increase,” then you start to look around and do some feasibility studies.
Whether you want to believe it or not, they look at other entertainment options on the higher-end and see where a one-day ticket to a theme park would fall within those options. For example, a Broadway play isn’t exactly cheap these days. Currently, the average full price ticket to Kinky Boots (which won the Tony Award for Best Musical in 2013) is roughly $110 plus taxes and service charges. Most Broadway shows are within this price range and that’s three hours of entertainment versus around eight hours you can get at a theme park.
If you’re looking to see the Orlando Magic shoot some hoops, the average price is right around that same number – about $110 per game. Sure there are certainly cheap seats that go for as little as $25, but the average price still sits above $100. Again, it’s about three hours of entertainment in total versus eight or so in a theme park.
I am fully aware that a day at a theme park, a Broadway play and even a sports game are totally different experiences. However, they are all fighting for the same thing which is your entertainment dollar. Not only do big theme parks like Disney and Universal compare their ticket prices to other options like sports, theater and concerts – but Broadway shows and sports events do the same when they are pricing their own events. You’d better believe that they all look at theme park ticket prices too. I compel you to do your own research on this topic, I promise you’ll find that Disney theme park tickets are within range of what is considered reasonable in the entertainment world, if not cheaper. Depending on how you look at it? A better value. However, thats a personal decision, not one I can make for you. Nor am I trying to.
So let’s say that some people will look at the new prices and scoff. These same people will decide to spend their entertainment dollars elsewhere like a more local theme park to where they live, a Broadway show or something else entirely. That means less people at Walt Disney World is bad, right? Not only is less people coming a possibility, it can even be a probability if you’ve out priced yourself and a small percentage decide to not visit Walt Disney World this year… or ever again for that matter.
As a hypothetical, let’s say that as a direct result of the increase, there is a 3% decrease in attendance at Walt Disney World. Now let’s do some simple math with a number we can all understand. Let’s say last year on this day, 100 people entered the Magic Kingdom and paid the $95 ticket price. That means Disney netted $9,500 that day from ticket sales. However, let’s say that only 97 people visited the Magic Kingdom today versus the 100 from last year – a 3% decrease. Those 97 people are now paying $99 which means Disney nets $9,603. An increase of $103 versus last year with even less people.
I know what you’re thinking here. “So why doesn’t Disney just keep the prices low so more people can come in and bring in even more money at a lower price that more people can afford?” In this case, more people doesn’t mean better people.
Last week, for example, I was in Las Vegas getting a tour of Le Reve at the Wynn Hotel and Casino. My tour guide told me that no seats at the show have ever sold for less than $100, even when they are being discounted to try and fill the house. They would rather have empty seats at the show than make it more affordable for everyone from one simple reason: Per cap.
If Le Reve sold tickets for $50 on slower nights just to fill the house, that doesn’t mean they will make more money. If you can afford over $100 a ticket for a show in Las Vegas, odds are you aren’t a value shopper. You aren’t looking for the food court within the hotel, a $5 per hand blackjack table or a room that will only set you back $39 a night. Odds are, you can afford the finer things in life and once you are at the hotel, you can afford a nice meal after the show or even stick around to spend the night.
Similarly, if you are a family that can afford to visit Walt Disney World and pay their ticket prices, more than likely you can afford some finer amenities too. Like a dinner at California Grill, or an afternoon at the spa, maybe even a more luxurious hotel like the Grand Floridian. Keeping a higher price means attracting a certain type of clientele that will also raise the per cap (the average each guest will spend once they are there, beyond just the ticket price).
The value resorts at Walt Disney World generally don’t need any more families than they already have. They run at fairly high occupancy as it is. However, the deluxe resorts run at a slightly lower occupancy rate throughout the year. In other words, keeping ticket prices lower isn’t going to put any more heads on beds at value resorts, they are all pretty much full as it is.
Another thing theme park fans often forget is the market is constantly fluctuating. As the economy gets better, people are willing to spend more money on things like an Orlando family vacation. When more people have jobs and good paying ones at that, they have more discretionary income. That means, if the economy continues to improve, more people visit Orlando this year versus last year and even more the year after that – simply because there are more people who can afford it.
As a nice easy number to swallow, let’s say 10 million people came to Orlando last year. However, because the worldwide economy is thriving, more people can afford to come this year and that number is 10.25 million. It’s a huge increase and some will be able to afford the new ticket prices and some will not. However, that 3% drop off in attendance we talked about earlier could very well be balanced out by more people coming to Orlando this year versus last.
Nothing is a guarantee and to an extent, every time you price any item in a capitalist society, it could come back and bite you. However, I promise you there are teams of people who weigh out the decision and crunch the numbers far more than you or I would take the time to do so. It’s a calculated risk that has very rarely not worked in the favor of Walt Disney World.
Regardless of if you think the parks are declining by degrees, that the NextGen project is a waste of money or Avatar is stupid idea for it’s own land at Disney’s Animal Kingdom, people are still coming to Walt Disney World. Luckily, the opinions of many who like to make fun of theme park management for not spending every penny earned in building, maintaing or updating attractions is not that of the majority of families who visit the parks in Orlando. If it were, the market would correct itself and there would be a sharp decline in not only people visiting the parks, but in revenue as well. However, time and the past have proven differently.
No one like paying more for anything. Ever. However, it’s a fact of life in this crazy world we live in. Here’s hoping that Disney and theme park fans can understand why ticket prices increase. You don’t have to like it, but maybe this will help you understand it. Your thoughts, please?