Orlando Sentinel: Disney seeking more profits out of long-term visitors

[crazy4wdw]

From today's Orlando Sentinel:

Disney pricing strategy: Seeking more profits out of long-term visitors

By Jason Garcia, Orlando Sentinel

June 20, 2011
Six years after Walt Disney World radically redesigned its ticket prices to steer guests toward longer stays, the resort is now aiming to wring more money out of passes once priced as irresistibly cheap.

During the past 10 months, the giant resort has begun increasing the premium it charges for longer ticket options — its five-, six- and seven-day passes — relative to the resort's single-day and shorter-term tickets.

It is a shift from the strategy behind Disney World's "Magic Your Way," the revamped pricing structure that Disney introduced at the start of 2005. That pricing scheme was designed to persuade travelers to make repeat visits to Disney World's four theme parks during their vacations by making the added cost for extra visits negligible — particularly when compared with the price of a one-day ticket charged by competitors Universal Orlando and SeaWorld Orlando.

The effect is subtle but significant. For nearly six years, even as it consistently raised its base ticket prices, Disney kept the added charge for upgrading from a five-day ticket to a six-day ticket — the point at which a traveler may be debating whether to visit a Disney theme park for a second time or visit Universal's Islands of Adventure for the first time — to no more than $3.

But last summer, Disney raised that premium to $5. And this month, the resort boosted it further, to $8. That works out to a 167 percent increase in less than a year.

The charge to add a seventh day has also jumped from $3 to $8 during the same period.

Starting with the first adjustment to Magic Your Way in 2006, the difference between a four-day and a five-day pass also remained relatively constant — at $3 or $4 — until last year. But it, too, has now jumped to $8.

The figures are based on an Orlando Sentinel analysis of historical price data compiled by AllEars.net, a consumer website for Disney vacationers.

Disney declined to discuss its pricing strategy. But other experts called the company's changes shrewd.

With Magic Your Way prices now well-established, Disney appears to have successfully conditioned customers to seek out longer passes. Four-, five- and seven-day tickets are Disney World's most popular passes, according to industry analysts and former theme-park officials. Concentrating price increases on those ticket options now gives Disney the most revenue bang for its buck.

In addition, "you assume that folks who are down [in Orlando] over a longer time frame are both more price elastic and dedicated to Disney," said Michael Nathanson, a stock analyst who follows the Walt Disney Co. for Nomura Securities.

Focusing on its longer passes also allows Disney to ease off on the price increases for its basic, single-day tickets, which are rapidly approaching $100 — potentially a psychologically significant threshold. Although single-day tickets account for only a small percentage of Disney's total ticket sales, they are a widely used barometer of the industry's pricing overall and can affect travelers' perception of theme parks' affordability.

Disney World has made seven rounds of price increases since beginning Magic Your Way. During each of the first five, single-day prices rose by an average of 5.7 percent. But during the past two, they have climbed an average of only 3.8 percent. One-day prices are now at $85 before tax.

Experts say Disney likely has other motivations for the shift, as well. Company executives are under pressure to boost theme-park profit margins, which shriveled during the global recession as Disney used steep discounts to continue luring travelers to its resorts.

Lifting prices for the later days of Magic Your Way passes is an obvious target.

"If ticket prices are almost giving [the] park away beyond the four- or five-day products, at some point the financial model may not work," said Joseph Couceiro, a former chief marketing officer for SeaWorld Parks & Entertainment.

There is a limit to how much Disney can squeeze out of such increases without undermining the overarching goal of Magic Your Way. The ticket structure was designed, after all, to make it a no-brainer for guests to add extra days to their Disney passes rather than go somewhere else.

Raising prices for those additional days could threaten that consumer calculus — just as Disney faces stiffening competition from other parks, particularly Universal with its year-old Wizarding World of Harry Potter.

"You have to walk gingerly to see how far you can reasonably push the envelope before you get consumer pushback," Couceiro said.

For now, though, $8 for an extra day at Disney remains a tiny fraction of the one-day entry price to Universal or SeaWorld. And it's possible those other parks could face financial pressure of their own if Disney continues concentrating its price increases on its longer passes.

Like Disney, both of the smaller parks have reshaped ticket prices in recent years to encourage multiple visits. Universal just last year launched a new price structure modeled after Magic Your Way, while SeaWorld has expanded multi-day ticket options with the opening of Aquatica, its 3-year-old water park.

But sales of single-day tickets remain a far more important revenue source for the smaller parks than for Disney. So if Disney makes only modest increases to its single-day ticket price — or even opts to hold it steady — it could put a disproportionate squeeze on Universal and SeaWorld, which typically match Disney's one-day price.

Representatives for Universal and SeaWorld declined to comment on Disney's pricing strategy.

jrgarcia@tribune.com or 407-420-5414

 

[lockedoutlogic]

Management at Disney have spent everyday since the opening of MGM attempting to build week+ vacations to secure all disposable income from their clientele in the orlando travel mecca...

In many ways it has been as singular of a focus at WDW as breaking the seedy, dirty amusement park myth was at disneyland in its first 15 years...

And now they are eating their young...attempting to squeeze every cent from those that still put in many cases their entire vacation budgets into their coffers.

I'm surprised this made it past the disney screeners and into the Sentinel...as it is brutally honest.
They will take whatever they can get to support a net that has been cast too large and maintain a production to stockholders who buy and large show no loyalty to anything that exists off a ledger sheet.

feel free to discuss

 

[mitros]

Well, Disney WILL continue to raise prices as long as they see that people will continue to put up with it and flock to their parks in droves. I haven't seen any downturn in guests at any of the parks or restaurants at WDW.
Will this affect their crowd numbers? Doubtful, it never has. As long as people believe they are getting a decent return on their dollar, whether they actually are or not, it will continue.

 

[DVC Grandpa]

Our family (17 adults) have opted out of going to Disney over Thanksgiving because of the cost of tickets. We have gone three different Thanksgivings, each about three years between visits. This year we added it all up and the kids said we can do something at a less cost this cycle. Always enjoyed going over Thanksgiving but the total cost makes it prohibitive for our family.

 

[manning]

We'll be there, but I think the park visits will be down.

 

[anthony2k7]

seems a bit crazy to do this now with potterland and next year legoland drawing people away from disney for 2 or 3 days.

Maybe this is disney kinda giving up on the restaurant and merch sales from those people and saying they'll settle for a few extra dollars from people buying length of stay tickets but not actually being on site to use them?

Wonder if the hopper pass option might disappear or see a price hike soon?

 

[Peter Pirate 2]

Management at Disney have spent everyday since the opening of MGM attempting to build week+ vacations to secure all disposable income from their clientele in the orlando travel mecca...

In many ways it has been as singular of a focus at WDW as breaking the seedy, dirty amusement park myth was at disneyland in its first 15 years...

And now they are eating their young...attempting to squeeze every cent from those that still put in many cases their entire vacation budgets into their coffers.

I'm surprised this made it past the disney screeners and into the Sentinel...as it is brutally honest.
They will take whatever they can get to support a net that has been cast too large and maintain a production to stockholders who buy and large show no loyalty to anything that exists off a ledger sheet.

feel free to discuss

Good post.

What's sad is that it is painfully honest that Disney is now and probably has been for quite some time, just another entertainment company. All of these websites and all of the delusional posters (like me) who speak of magic and imagination are just dupes being spoon fed remnants of what's left of the absolute genius of Walt Disney (edited to add) by Disney's marketing professionals.

Current Disney doesn't care about quality, guest experience (past taking your money), being imaginative or innovative, the creative process or any other basic business tenant of the original Disney. It's just money and wall st. This is good for Universal, Sea World and Busch Gardens though as Disney ultimately and unwittingly leveled the playing field.

 

[coloneldebugger]

Good post.

What's sad is that it is painfully honest that Disney is now and probably has been for quite some time, just another entertainment company. All of these websites and all of the delusional posters (like me) who speak of magic and imagination are just dupes being spoon fed remnants of what's left of the absolute genius of Walt Disney.

Current Disney doesn't care about quality, guest experience (past taking your money), being imaginative or innovative, the creative process or any other basic business tenant of the original Disney. It's just money and wall st. This is good for Universal, Sea World and Busch Gardens though as Disney ultimately and unwittingly leveled the playing field.

the only price current disney cares about right now is the price of its stock. much the same as any other mega-corp

 

[Peter Pirate 2]

the only price current disney cares about right now is the price of its stock. much the same as any other mega-corp

So you agree with me then.I'm just a bit more long winded than you.

 

[Donut23]

So you agree with me then.I'm just a bit more long winded than you.

Add the short blonde in the back on her scooter to the list.


Hey, fellow castmember Bob. Do you think your most loyal are too stupid to notice what you have begun?

Heck with wishes and dreams coming true. Just add the following to your marketing, at least you will be honest.

"Give 'em less -- Charge 'em more".



I've said before (sorry if I'm repeating for some here)


Last December our little Disney travel group assembled for our December pilgrimage. We left 8 days later less than overwhelmed this trip. Yes, we have traveled to WDW often...heck, we remember when MVMCP tickets were $36 and that wasn't so long ago.

Too much was gone and too much was overpriced.....and we traveled at CASTMEMBER rates.

A quick search after I returned home netted us our December 2011 trip.....first time away from WDW in longer than we can remember......

12 nights, georgous cruiseship, caribbean, suite cabins. When we worked out our budget with all the extras (excursions, parking at the port, onboard expenses) we actually will spend LESS than we did for 8 nights at WDW in 2011.

No brainer.

Fellow Castmember Bob......we aren't the only ones who have noticed this.

 

[DC7800]

Hey, fellow castmember Bob. Do you think your most loyal are too stupid to notice what you have begun?

Indeed, I believe that is exactly what Disney thinks of us (who else remembers "mouth breathing Wal-Mart shoppers"...).

 

[manning]

We own DVC and renewed AP in April.

More than likely this will be the last we will buy AP. Will just go DVC without the parks and eat offsite.

We liked going at Xmas, but the decorations have gone way down. Those who say they are great either have forgot how the did it in the old days or never saw them. Back then everything was decorated.

Scrooge has arrived!!

At one time people would say you paid a good buck At Disney but they gave you a buck worth in return,,,,,now you get a quarter.

 

[eeyorepixie]

Due to the rising cost, we are now going to stay off site, and eat off site. My budget can not change, it is what it is...so that means I have to change how I do Disney.

If others are like me and do the same...not so good for the stock holders, me thinks.

I am amazed that I can get a 3 bedroom private pool next to Disney for well under 100., this in itself is my own "free dining" special.

 

[Mikelly1221]

We were priced out last year...we were seasonal AP holders more years than I can count, and now we're Universal passholders. It's a combination of children getting older and ticket prices being less expensive.

Disney's gotta do what they gotta do, but so do I. The value wasn't there for us anymore. With kids in school, we really couldn't go very much during the school year and we're blocked out in the summer. We can't afford full year Disney AP's, and we're not totally blocked out of Universal in the summer. The change worked best for our families.

 

[lockedoutlogic]

Here's what i see as the realities:

It's not Iger...though he's every bit the weasely cheap suit that Eisner's described him as during his "Madness of King George" era rants...

Disney was irreversibly damaged the minute they bought Captiol Cities/ ABC.
All of the media conglomerates who have bought or owned tv companies have suffered badly or divested themselves...Vivendi, Westinghouse, Viacom, Time Warner...
TV is the mush in the entertainment world...its an anchor that drags the ship under.
They even managed to completely destroy ESPN...its garbage...not even sports anymore...all crappy character pieces.

So that's the first problem...i can remember Eisner standing at the podium all smiles in front of the ABC logo...he got to buy his old boss. Good for him.

But there will no be focus on quality because it drags down profit to earing ratio and that is not allowed in a public beast company. quality costs money...and accountants can't see any argument - or make any as the case may be - that it is financially justified.

There are fixes...but they'll never happen:

Disney needs to be private. No stock...no pension funds and daytraders involved...nothing. A board or individual who runs the company at a break even mentality. They do whatever possible with every dollar at their disposal. I'm not talking about a commune...they can still make millions...just not have 600,000 options available to them that completely warps the mind. There can be no quality in public corporations. There's not enough profit in it and pride and ego are really cheap.

but it won't happen.

Divest of ABC and go back to parks, kids, movies and shows to sell to networks and the internet market. Stand or fall on your simple creative product...the only way to insure that the motive is good product not the perceptions of the markets.

but it won't happen.

Isolate the income from parks and reserve it for parks. There would be a cost benefit to both the company and the consumer. I spend more, they build more...they build more, i come more and spend more. A cycle that is self sustaining and provides the right incentives.

Never gonna happen.


As far as myself, i'm increasing my frequency of travel to WDW. not because i like it...but because i have two little kids and i've decided to give them a huge dose of it so they experience it and become bored with it at the same time. And then i will sell my DVC and move on. Because they are not on a path that leads me to believe i will retain enough value longterm. If in 10 years RCI exchanges are more attractive...then this cat will not give one penny to Anaheim. I've already given enough and i'm ashamed of how things are being repositioned.

the continually eroding of food quality and exploitation of pricing over the last few years in particular is enough for me to wash my hands of them.
that in conjunction with the destruction of downtown, lack of investment in mgm or animal kingdom, their closures without replacement - in particular much of the services at port orleans for no good reason, river country without replacement - and the development of the nauseating Flamingo Crossing and infuriating Golden Oak being the tipping points.

 

[Peter Pirate 2]

Here's what i see as the realities:

It's not Iger...though he's every bit the weasely cheap suit that Eisner's described him as during his "Madness of King George" era rants...

Disney was irreversibly damaged the minute they bought Captiol Cities/ ABC.
All of the media conglomerates who have bought or owned tv companies have suffered badly or divested themselves...Vivendi, Westinghouse, Viacom, Time Warner...
TV is the mush in the entertainment world...its an anchor that drags the ship under.
They even managed to completely destroy ESPN...its garbage...not even sports anymore...all crappy character pieces.

So that's the first problem...i can remember Eisner standing at the podium all smiles in front of the ABC logo...he got to buy his old boss. Good for him.

But there will no be focus on quality because it drags down profit to earing ratio and that is not allowed in a public beast company. quality costs money...and accountants can't see any argument - or make any as the case may be - that it is financially justified.

There are fixes...but they'll never happen:

Disney needs to be private. No stock...no pension funds and daytraders involved...nothing. A board or individual who runs the company at a break even mentality. They do whatever possible with every dollar at their disposal. I'm not talking about a commune...they can still make millions...just not have 600,000 options available to them that completely warps the mind. There can be no quality in public corporations. There's not enough profit in it and pride and ego are really cheap.

but it won't happen.

Divest of ABC and go back to parks, kids, movies and shows to sell to networks and the internet market. Stand or fall on your simple creative product...the only way to insure that the motive is good product not the perceptions of the markets.

but it won't happen.

Isolate the income from parks and reserve it for parks. There would be a cost benefit to both the company and the consumer. I spend more, they build more...they build more, i come more and spend more. A cycle that is self sustaining and provides the right incentives.

Never gonna happen.


As far as myself, i'm increasing my frequency of travel to WDW. not because i like it...but because i have two little kids and i've decided to give them a huge dose of it so they experience it and become bored with it at the same time. And then i will sell my DVC and move on. Because they are not on a path that leads me to believe i will retain enough value longterm. If in 10 years RCI exchanges are more attractive...then this cat will not give one penny to Anaheim. I've already given enough and i'm ashamed of how things are being repositioned.

the continually eroding of food quality and exploitation of pricing over the last few years in particular is enough for me to wash my hands of them.
that in conjunction with the destruction of downtown, lack of investment in mgm or animal kingdom, their closures without replacement - in particular much of the services at port orleans for no good reason, river country without replacement - and the development of the nauseating Flamingo Crossing and infuriating Golden Oak being the tipping points.

Thanks for the concise and accurate explanation.

I think you are making a wise move with you kids as well. Enjoy it! My oldest is now 18 and was a Disney kid since birth. Her thrill with current Disney is waning fast. She prefers DL to WDW. Recognizes the quality of PIXAR vs. the crap of the Disney label and sees with her own eyes how the new attractions are no rival to Disney's past like Indy or Universal's present, Harry Potter.

 

[Figment632]

Yes more profits and still be Etickets in the near future!

 

[Josh Hendy]

Wasn't the whole point of low prices for 5,6,7 day tickets to prevent families from visiting Universal, Seaworld and Busch Gardens on their week-long vacation? I.e. to lock them in the WDW. If they're making these tickets a little bit less attractive then they're going to make some people look a little bit harder at whether to limit their Disney park days to 4 - or even 2 or 3 days if there are parks that they don't particularly care for. If these people are going to visit non-WDW parks then they're also going to consider staying at non-WDW hotels and eat at non-WDW restaurants. Once people have experienced non-Disney parks, hotels and restaurants then some of them might decide that paying extra for the "magic" isn't worth as much as they previously thought.

My feeling is that Disney is being pinched financially by rising costs, so at the advice of their beancounters they're making a quick cash grab by cranking up prices in a way that goes against their best long-term strategy. That certainly explains why they jumped up the prices only 10 months after the last price increase. Their beancounters probably advised them that it would "look bad" on their next quarterly financial announcement unless they showed a certain level of revenues and earnings, so they decided to slip a burlap bag over the heads of the visitors who have already committed to visiting in the next 6 months or so and mug them.

I'm an exception to my own point however ... after experiencing all of the non-WDW parks two years ago my teenaged kids concluded that they prefer WDW after all because of the mildness of the rides and the warmer, happier feeling of the park ambiance. We'll probably get 6-day passes for the next trip, but we'll definitely stay offsite and do a fair bit of shopping and dining offsite at places like Citywalk and Millenium Mall. We would like to visit Harry Potter Land for one day, but at over $80 each it's hard to justify so we'll probably make do with riding It's A Small World with our eyes half-closed and screaming our heads off in order to get some adrenaline pumping.

 

[bartleby1]

Wasn't the whole point of low prices for 5,6,7 day tickets to prevent families from visiting Universal, Seaworld and Busch Gardens on their week-long vacation? I.e. to lock them in the WDW. If they're making these tickets a little bit less attractive then they're going to make some people look a little bit harder at whether to limit their Disney park days to 4 - or even 2 or 3 days if there are parks that they don't particularly care for. If these people are going to visit non-WDW parks then they're also going to consider staying at non-WDW hotels and eat at non-WDW restaurants. Once people have experienced non-Disney parks, hotels and restaurants then some of them might decide that paying extra for the "magic" isn't worth as much as they previously thought.

I totally agree with this. Our first few trips as a family, we stayed offsite and did 5 park days (this was pre-MYW tickets). When then did Seaworld for a day or two and left the Orlando area to spend a week at the beach.

When they introduced the MYW tickets and we realized how cheap it was to add extra park days, we began maxing out our tickets to 10-day tickets and spending 12 nights onsite for the whole disney experience. Sometimes we only used 8 or 9 days of our tickets, but since the extra days were so cheap ($3 per day per person), we kind of looked at it as having insurance in case the rain, heat, exhaustion, etc, got to us one day and we left the park earlier than we hoped.

We are skipping disney for the first time in 10 years this summer. However, when I price out a vacation for next summer, the price increase is ridiculous compared to last summer (roughly $300 more for the same tickets, $200 for the same hotel, and I haven't figured out meal increases yet). I don't know for sure about going offsite yet, but I am definitely entertaining the thought. And, for SURE we will not be going for 12 nights like we did for many years. We haven't done Universal yet because Disney had us locked in with the cheap tickets but I think now is the time to try it. I'm thinking 5 days at Disney, 2 at Universal, and heading to the beach for 5 nights. I'm kind of sad about not having as much time at Disney, but kind of excited at the thought of changing things up a bit too.

Bottom line is, Disney pricing hit my breaking point. They no longer are giving me a large enough incentive to spend my whole vacation in one place.

 

[Donut23]

I totally agree with this. Our first few trips as a family, we stayed offsite and did 5 park days (this was pre-MYW tickets). When then did Seaworld for a day or two and left the Orlando area to spend a week at the beach.

When they introduced the MYW tickets and we realized how cheap it was to add extra park days, we began maxing out our tickets to 10-day tickets and spending 12 nights onsite for the whole disney experience. Sometimes we only used 8 or 9 days of our tickets, but since the extra days were so cheap ($3 per day per person), we kind of looked at it as having insurance in case the rain, heat, exhaustion, etc, got to us one day and we left the park earlier than we hoped.

We are skipping disney for the first time in 10 years this summer. However, when I price out a vacation for next summer, the price increase is ridiculous compared to last summer (roughly $300 more for the same tickets, $200 for the same hotel, and I haven't figured out meal increases yet). I don't know for sure about going offsite yet, but I am definitely entertaining the thought. And, for SURE we will not be going for 12 nights like we did for many years. We haven't done Universal yet because Disney had us locked in with the cheap tickets but I think now is the time to try it. I'm thinking 5 days at Disney, 2 at Universal, and heading to the beach for 5 nights. I'm kind of sad about not having as much time at Disney, but kind of excited at the thought of changing things up a bit too.

Bottom line is, Disney pricing hit my breaking point. They no longer are giving me a large enough incentive to spend my whole vacation in one place.

I have been saying this for a while now.

It's all about value. When the value for a specific guest errodes, he/she will begin to look elsewhere. Sometimes it's just wasting time on the internet. Sometimes you find a 12 night cruise (and all expenses) for less than your 8 night castmember stay the year before.

In our case, our little Disney group of 8 will be filling Royal Caribbean's pockets (and 4 suites for 12 nights in the Caribbean) this December instead of Disneyworld.

Disney says....that's OK.....we will still get plenty of new-bees. So much for returning the loyalty of loyal guests.