The furture of Discounts

[havoc315]

As goes the quarterly custom, Disney executives had some things to say about discounts yesterday. So here are there statements, and then we will read between the lines:

“During the last few days we haven’t see any change in the pace of activity,” said Robert A. Iger, Disney’s chief executive. Referring to the price cuts that Disney put into place at its resorts at the height of the recession, but has since scaled back, Mr. Iger added, “If the economy weakens will we reconsider a promotions strategy? Yes.”

QUESTION: If the economy does weaken domestically, how would you address that in the parks? Would you revisit the promotion strategy that you implemented back a few years ago? Or would there be a different approach?

RESPONSE: (Iger) If the economy weakens will we reconsider promotion strategy? Yes. At some point we might. We will take a look at what impact a weakening economy has on us. As I mentioned at the beginning of my comments, so far in the last few days we haven't really seen that much of a change. Now we're currently selling basically a shoulder period mostly, which is the fall where there is some discounting anyway. We'll take a look at holiday bookings as the year progresses. It's way too early to predict whether we'd be discounting or not, but my gut is, based on the trends that we've seen this past year, that it's not something I think we'll necessarily have to do quickly.

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So, what does it mean. First off, has Disney scaled back discounts in 2011?
We have not seen the absolute most generous offers -- the book 4, get 3. We've seen shorter booking windows for discounts. We've seen extra conditions on discounts at times. Summer discounts were limited compared to the past couple of years.

Clearly, Iger is saying that discounts are not over. He basically admitted that "shoulder periods" such as the fall will continue to be discounted.
They further realize that the economy may be souring again, and they will consider expanding promotions.

But for now, they are trying to be patient. They are trying to wait longer before they announce discounts. (In 2009 and 2010, fall free dining was announced in July, this year it waited till August).

 

[padawans]

I am expecting the discounts in 2012 to be better than the ones we have seen this year. We had what a little fake recovery in 2011, but I think will see the customer start to pull back again. I'm going on three years no raise and the prices of everything keep going up up up.

 

[havoc315]

I am expecting the discounts in 2012 to be better than the ones we have seen this year. We had what a little fake recovery in 2011, but I think will see the customer start to pull back again. I'm going on three years no raise and the prices of everything keep going up up up.

It's possible. Especially if the recent stock market downturn accompanies a major downturn in the economy.

 

[jackskellington01]

It's possible. Especially if the recent stock market downturn accompanies a major downturn in the economy.

I agree!

 

[mickeystoontown]

I'm holding out hope that there will be discounts for our last week of May/first week of June, 2012 travel dates. The price I am booked at now is lots higher than it would have been for this year (even without a discount). Even though I work for a divorce attorney and pretty much have job security (as long as people keep getting married, there will be divorces....sad but true ), my pay has not increased as much as the increase in the cost of food, clothes, gasoline, etc.

 

[padawans]

It's possible. Especially if the recent stock market downturn accompanies a major downturn in the economy.

I would rather see the economy improve and less discounts. I would trade a raise for a disney discount in a heart beat.

 

[mickeystoontown]

i would rather see the economy improve and less discounts. I would trade a raise for a disney discount in a heart beat.

amen to that!

 

[canopynut66]

I'm holding out hope that there will be discounts for our last week of May/first week of June, 2012 travel dates. The price I am booked at now is lots higher than it would have been for this year (even without a discount). Even though I work for a divorce attorney and pretty much have job security (as long as people keep getting married, there will be divorces....sad but true ), my pay has not increased as much as the increase in the cost of food, clothes, gasoline, etc.

ALL and I mean all the attorney's I work for got new cars this last year and we have not had a raise in two years. but they have us over a barrel job wise then telling us about the "new"office were moving to will be so nice???? it is what it is I guess. at least have a job

 

[flickwizard]

I've said this before, but discounts at the parks will be influenced by a number of factors, in addition to the economy. Disney will look at its overall financial picture as well as its corporate outlook. The economy is one piece of that puzzle (albeit a big one).

Disney recently reported its 3rd quarter financials; net income was up 11% overall. However, Disney shares fell. Why? There are a few reasons: ESPN added a nice chunk to the net income increase but a lot of that was due to fee timing and was not "real." Movie Studio operating income dropped 60%. The Parks group (which includes Disneyland, Tokyo Disney, and the Cruise line) was up 12%. But a good piece of that growth was tied directly to the Disney Dream. Analysts believe the Parks are the most susceptible to the economic environment and consumer spending. While Disney Parks have not taken a hit yet from the economic turmoil (lower revenue from the resorts due to discounts is being more than offset by higher revenue from spending in the parks), analysts are taking a wait and see approach and expect consumers to pull back on spending, which will directly influence Disney Parks' financials.

What seems to be happening at the Parks is that people have been continuing to go (perhaps fueled by recent discounts), and once there, are spending more. Disney will want to continue to entice people to visit since they know they more than make up for any discounts offered by the increased spending from rsort guests. If people pull back from vacationing given the economic turmoil, Disney will up the ante to get people in the door.

 

[kerplop]

What seems to be happening at the Parks is that people have been continuing to go (perhaps fueled by recent discounts), and once there, are spending more. Disney will want to continue to entice people to visit since they know they more than make up for any discounts offered by the increased spending from rsort guests. If people pull back from vacationing given the economic turmoil, Disney will up the ante to get people in the door.

I think a lot of that has to do with historical precedent. Even in the Great Depression and in other recessions people still paid a premium for entertainment. Box office sales go up, theme park attendance goes up, etc. It's all a psychological thing really because the more depressed people are, the more they value a cheering experience rather than stuff for them to buy. It's why entertainment businesses have traditionally fared better in bad economies than businesses that sell necessities and other more "boring" stuff.

 

[mickeystoontown]

ALL and I mean all the attorney's I work for got new cars this last year and we have not had a raise in two years. but they have us over a barrel job wise then telling us about the "new"office were moving to will be so nice???? it is what it is I guess. at least have a job

I am a paralegal in a one paralegal/one attorney law office and my boss is not the stereotypical lawyer. He only takes a certain number of cases per month and only takes cases that he knows he can win. His dad was a well known civil rights attorney and worked pro-bono. Needless to say, their income was pretty limited. Given my boss' upbringing, he's a pretty frugal person who drives a car that's several years old, doesn't spend money this way and that, etc. Fortunately for me, he gives me a raise every year on the anniversary of my hire date. Unfortunately for me, the raise isn't quite as much as the rise in the cost of living. But, like you said, at least I have a job.

 

[goofybabe]

We were pretty excited last week to book our trip in January. but are having 2end thoughts after this past week with the economy.My husband thinks its a big chunk of change and maybe we should wait and see what happens.We have a college student and her 529 is dropping qiuck.The promblem is I wanna go I love Disney so politicians come back and lets make America resume on a solid path to prosperity!