Demand based ticket pricing

[Josh Hendy]

But if they want even more guests to visit-why would they artificially inflate line times and dining wait times etc, making the experience worse than it needs to be? Why have that unnecessary negative experience inflated even further? There is no way that "increases" the amount of guests wanting to visit.

Imagine if Disney charged 1 million guests 100 dollars each to visit in the past, and made 25 million dollars profit after subtracting 75 million dollars in expenses for salaries etc.

Now what if they reduced expenses by 20 percent to 60 million dollars, by reducing the headcount of employees and other cutbacks, thus reducing guest experience. And also raised ticket prices by 25 percent to 125 dollars. If those changes happened to cause the number of guests to drop by 25 percent from 1 million to 750,000, they will now make:

(750 thousand x 125) - 60 million = 33.75 million profit ... an increase of 35 percent

Assuming that they correctly estimated the reduction in paid guests based on the double-whammy of reduced services and increased prices.

They wouldn't do it exactly like this ... more like, they would aim for a slower increase in the number of guests rather than a reduction.

But I have no doubt that this kind of equation is considered, even if it involves the deliberate reduction of quality and a potential tarnishing of brand name. Especially during times of financial stress or stock market upheaval. Even if the stock market fluctuations of Disney are not a direct incentive, other things like the bond market could affect decisions like this, e.g. the more expensive or difficult it is to borrow money for new projects, the more important it is to preserve cash and try to make things pay for themselves out of actual cash receipts. Such as for example paying for road and parking garage improvements out of increased parking fees instead of floating a bond and trusting to an increase in revenues 5 years down the road to pay it off.

Even if they "guess wrong" and the reduction in bookings is greater than they estimated, they can correct things on the fly by offering discount programs such as dining plans, discount PINs and so on. Up to a point of course.

The really interesting question is ... will they tarnish their reputation so much by becoming extremely cash-conscious and somewhat lackadaisical about guest experience, that they lose significant mindspace and market share to the competition? Assuming that their competitors can give guests the impression of receiving a more generous experience for their $$$.

 

[minnie-apple-mouse]

Imagine if Disney charged 1 million guests 100 dollars each to visit in the past, and made 25 million dollars profit after subtracting 75 million dollars in expenses for salaries etc.

Now what if they reduced expenses by 20 percent to 60 million dollars, by reducing the headcount of employees and other cutbacks, thus reducing guest experience. And also raised ticket prices by 25 percent to 125 dollars. If those changes happened to cause the number of guests to drop by 25 percent from 1 million to 750,000, they will now make:

(750 thousand x 125) - 60 million = 33.75 million profit ... an increase of 35 percent

Assuming that they correctly estimated the reduction in paid guests based on the double-whammy of reduced services and increased prices.

They wouldn't do it exactly like this ... more like, they would aim for a slower increase in the number of guests rather than a reduction.

But I have no doubt that this kind of equation is considered, even if it involves the deliberate reduction of quality and a potential tarnishing of brand name. Especially during times of financial stress or stock market upheaval. Even if the stock market fluctuations of Disney are not a direct incentive, other things like the bond market could affect decisions like this, e.g. the more expensive or difficult it is to borrow money for new projects, the more important it is to preserve cash and try to make things pay for themselves out of actual cash receipts. Such as for example paying for road and parking garage improvements out of increased parking fees instead of floating a bond and trusting to an increase in revenues 5 years down the road to pay it off.

Even if they "guess wrong" and the reduction in bookings is greater than they estimated, they can correct things on the fly by offering discount programs such as dining plans, discount PINs and so on. Up to a point of course.

The really interesting question is ... will they tarnish their reputation so much by becoming extremely cash-conscious and somewhat lackadaisical about guest experience, that they lose significant mindspace and market share to the competition? Assuming that their competitors can give guests the impression of receiving a more generous experience for their $$$.

Too risky IMO, but even if so-then why throw in $10 Billion dollars in expansion this decade? That would vastly improve guest experience and at a very high cost-exactly the opposite of what your claiming (maximize profits, reduce costs, reduce the guest experience).

Don't get me wrong, I think they will maximize profits with all of the expansion-but they are obviously not reducing costs and not reducing the guest experience with those expansions, and certainly not reducing crowd sizes.

I mean even simply the hub expansion and the Main Street bypasses-why spend all of that cash if they are trimming the crowd size?

 

[minnie-apple-mouse]

So which came first, the chicken or the egg, the stacking of lines or the increase in prices. It makes me wonder about a lot of things one of which is the actual goal in all of this. Disney has either been caught by surprise by all of this or they weren't and this is all a part of the plan. And I don't mean to sound like they're as sinister as I might be doing.

Also prices have gone up every year. Now finally just this year they decided to slow everything down, 45 years into it?

 

[Planogirl]

Also prices have gone up every year. Now finally just this year they decided to slow everything down, 45 years into it?

They were in a constant building mode through much of that time. They've really slacked off on that and I would say that capacity has become a problem.

None of this really makes any sense to me. I think that Disney is too smart to be caught flat-footed by all of this. I just don't get it.

 

[minnie-apple-mouse]

They were in a constant building mode through much of that time. They've really slacked off on that and I would say that capacity has become a problem.

None of this really makes any sense to me. I think that Disney is too smart to be caught flat-footed by all of this. I just don't get it.

Disagree, they are in constant build mode now and they have always had building decades-this is another one. If by flat-footed you mean more successful than ever......they probably are smart.

 

[Planogirl]

Disagree, they are in constant build mode now and they have always had building decades-this is another one. If by flat-footed you mean more successful than ever......they probably are smart.

I don't agree that they have constantly been in build mode and I believe that the sad state of three of the four parks indicates that. Yes, they have plans now and eventually things will improve but they let many areas just get outdated.

And no I didn't mean more successful than ever. Success doesn't necessarily mean quality and I can list businesses all day long that are successful but not particularly high quality. I mean a lack of capacity so that such nonsense as tiering and making ADR's so far in advance isn't necessary. Disney had to project that their crowds would increase, that is if they actually have. I've seen good arguments that their crowds haven't increased all that much overall. If that is true then all of this is really puzzling.

 

[minnie-apple-mouse]

I don't agree that they have constantly been in build mode and I believe that the sad state of three of the four parks indicates that. Yes, they have plans now and eventually things will improve but they let many areas just get outdated.

And no I didn't mean more successful than ever. Success doesn't necessarily mean quality and I can list businesses all day long that are successful but not particularly high quality. I mean a lack of capacity so that such nonsense as tiering and making ADR's so far in advance isn't necessary. Disney had to project that their crowds would increase, that is if they actually have. I've seen good arguments that their crowds haven't increased all that much overall. If that is true then all of this is really puzzling.

After NFL and 7DMT, MM+ and DVC projects, Disney Springs is a huge current build, MK Hub, Soarin 2, Frozen, Avatar. ROL, TSM 2 and TS Land isn't a current constant build?

If crowds haven't increased-why is there a lack of capacity?

And there have always been slower build times, that is normal-now they are building again.

 

[Eoghann]

So which came first, the chicken or the egg, the stacking of lines or the increase in prices. It makes me wonder about a lot of things one of which is the actual goal in all of this. Disney has either been caught by surprise by all of this or they weren't and this is all a part of the plan. And I don't mean to sound like they're as sinister as I might be doing.

The goal is always to increase the profit percentage. ROS is more important than revenue or raw profit. You can do that by increasing prices, reducing costs or some combination of the two. The PR stuff that's just fluff they invent after the fact to make their goals sound more palatable. Same as everyone else.

I don't believe for a second that Disney were caught by surprise. They have all the data they could possibly have needed to see this coming. But I don't really put much value in conspiracy theories either. Most things relating to humans can be explained by some combination of greed and laziness rather than Machiavellian genius.

The price increases were always coming. I would bet that demand based pricing is an idea they've been analyzing for several years. Sending out surveys about it and then floating it in the business magazines is the final step and it's not about getting information just pre-introducing the notion to their customers so the shock isn't as big. And the cost cutting measures? Well when your bonuses are tied to stock price wouldn't you want an easy way to goose the profit margins in the short term?

 

[Eoghann]

Don't get me wrong, I think they will maximize profits with all of the expansion-but they are obviously not reducing costs and not reducing the guest experience with those expansions, and certainly not reducing crowd sizes.

You can reduce costs and expand at the same time. You reduce costs in one area (say staffing for example) and then spend in another area. Different buckets of money.

 

[Eoghann]

After NFL and 7DMT, MM+ and DVC projects, Disney Springs is a huge current build, MK Hub, Soarin 2, Frozen, Avatar. ROL, TSM 2 and TS Land isn't a current constant build?

If crowds haven't increased-why is there a lack of capacity?

You could argue this one both ways. You could say they have been in constant build mode for some years now since they have had one big project or another under construction for most of the decade. But their pacing has been deliberately sedate and until the last year or so we've really only seen one project worked on at a time (MM+ wasn't an expansion it's really a separate category of infrastructure). And during that same period they have let multiple attractions degrade without attempts to refurb them and even shuttered quite a few. So is that build mode or "doing just enough"?

I'm not sure anyone is trying to argue that crowds haven't increased, what seems to be up for debate is whether the increase really explains the huge jump in reported crowding and wait times. My pet theory is that those are a result of cost cutting measures.

 

[minnie-apple-mouse]

You can reduce costs and expand at the same time. You reduce costs in one area (say staffing for example) and then spend in another area. Different buckets of money.

True, I'm just saying throwing $10 Billion at it isn't cost cutting, and the expansions are not to erode the guest experience. They could max profits and not expand. If they are slowing things down to make it look busier than it is-why would they expand further? Those extra areas will make it that much harder to make it look busier than it is.

Now if somebody says they are slowing things down to make it look like they need to expand-that would at least make a little sense, but still degrading the experience (some on here have said by double wait times) would not make enough sense to rather just simply expand and keep things flowing and guests happier.

And again-cost cutting measures they just decided to implement after 45 years?


My pet theory is:

It is getting more popular than ever, and crowds actually are increasing. And they want them to continue to increase-esp over the entire year. Prices do matter. Give more options for park tickets because some percentage will be spread into lower season visits. Some percentage will choose the less expensive gold route, and stop going peak weeks.

Expansion is needed to increase options for guests. Make DHS and AK attract more all day guests and reduce pressure from MK and EPCOT by adding Avatar and ROL as well as TS Land and Star Wars and PH3. Rework DTD for more guest attraction. Add Frozen and Soarin 2 for EPCOT and TSM 2 for DHS. Widen the MK Hub and bypasses. FP+ also spreads visitors throughout the day-allowing more guests to visit each day. These will further improve the guest experience and increase capacity as well as attendance further.

 

[Planogirl]

The goal is always to increase the profit percentage. ROS is more important than revenue or raw profit. You can do that by increasing prices, reducing costs or some combination of the two. The PR stuff that's just fluff they invent after the fact to make their goals sound more palatable. Same as everyone else.

I don't believe for a second that Disney were caught by surprise. They have all the data they could possibly have needed to see this coming. But I don't really put much value in conspiracy theories either. Most things relating to humans can be explained by some combination of greed and laziness rather than Machiavellian genius.

The price increases were always coming. I would bet that demand based pricing is an idea they've been analyzing for several years. Sending out surveys about it and then floating it in the business magazines is the final step and it's not about getting information just pre-introducing the notion to their customers so the shock isn't as big. And the cost cutting measures? Well when your bonuses are tied to stock price wouldn't you want an easy way to goose the profit margins in the short term?

Many seem to theorize that Disney never expected such crowds and just have to make these changes as a result of those. I do believe that they had an idea that all of this would happen and planned all of this out for some time. I don't buy the conspiracy theories either but think that this was just a long range plan to maximize profits.

That doesn't make any of this more palatable but of course we all have to weigh the good or bad of the final outcome for ourselves. How crowded the parks are won't be something that convinces me that all is well however the quality of the upgrades might.

 

[Madteaparty001]

As for the crowding, or perception of crowding ... remember that Disney can either operate all the rides, restaurant, lunch counters, shows at high capacity, or they can cut back on staff and reduce the number of tracks, vehicles, tables, servers, cashiers, cooks and adjust individual venue operating hours and schedules. Plus bus and monorail schedules. Mode 'B' might give the feeling of huge crowds due to people milling around. Waiting for the parade starting over 1 hour before because they're not certain of being able to get in and out of Pirates in that time ... for example.

It may be that there really is an unprecedented surge of travelers to Orlando this autumn ... or it may be Mode 'B'.

I'd be interested in hearing evidence to support either theory. Are the resorts super busy, in the places where it would show like around the pools (assuming pools aren't roped off and in mode 'B')

Is Universal crazy busy this month? Are the offsite resorts full and is I-Drive jammed most of the time? (compared to previous autumns)

A Disney-only surge would tend to make me suspicious. I know about pixie dust and everything but ... what about flue powder. And we know that announcements of future attractions (Frozen, Avatar, Toy Story, Star Wars) don't cause a surge of visitors, they tend to cause a drought as people "save up" and wait in the weeds for the new thing.

Was just ate at Akershus this week, one would argue it's one of the more in demand restaurants, I had been checking availability because I wanted to add a person to my party and there was none. When we got there they let us add on the extra person and no wonder, half the tables weren't in use! Talk about creating demand.

 

[Josh Hendy]

Was just ate at Akershus this week, one would argue it's one of the more in demand restaurants, I had been checking availability because I wanted to add a person to my party and there was none. When we got there they let us add on the extra person and no wonder, half the tables weren't in use! Talk about creating demand.

Thanks for sharing your observation.

I wonder if this could be because of cutbacks on shifts, either to create demand as you say (or just to save money) or if it's a consequence of cutting off the dining buddy websites.