Wouldn't Disney Make More Money!

[crisi]

My concern, vernon, (playing Disney exec here) would actually be that the perk was used at a high level (discounting something that is not used much is cheap - that may be why we get our UPH discount) on something already bought by a significant percentage of the population (say the aforementioned APs), but doesn't change the behavior (i.e. spending on Disney property on things for which there is margin) to "pay for" the discount.

I suspect Disney's FL resident discount has as much to do with Disney lobbying and politicking in Florida as it does with wanting to drive the behavior of Floridians. We DVCers don't vote in Florida (at least not the ones not getting the Florida resident discount).

 

[vernon]

So what you're saying ( with your exec head on) is that a perk that no one uses is cheap to offer. Granted that's true but I would ask you " what's the point of the "offfer" if it's of no use to anyone. Other than window dressing it's a waste of time. Looking at the poll ( granted a small section) but less than 10% of people go for it as their ticket option. It's pretty obvious what the members think of it.

I would tend to agree with what seems to be your view that the execs who make the choice are too scared to take a potentially radical view aimed at increasing turnover. I would disagree with your view that it would have no effect on spending and the areas that IMHO it would increase spending are mostly high margin areas, food and drinks.

By the looks of it Disney would drop $100 a ticket on a PAP and $80 a ticket on a regular annual pass on those that already take those options ( not forgetting that many of those buying AP or PAP could well be Fl residents anyway). I would guess Disney would lose on average $90 on maybe 35-40% of it's ticket sales. UMPs would be regligable as the costs are the same or slightly less than the AP. If half the 34% of members upgraded from the park hoppers to AP or PAP that's an average of $150 per person ( assuming the hoppers are used fully each trip and many people seem to use them for two trips). Nett it looks like a $90 loss on 37.5 % to a $150 profit on 17.5% ( I think I'm being fairly generous on the # of Florida residents). Spead over the DVC membership I'd guess that the "cost" in terms of ticket entries would be less than $25 per member, the net result would be getting an extra 35-40 % of the membership into the parks probably another 10-12 days for at least some of the day. I'd estimate break even to be the guests that you have coerced into the parks would need to spend on average an extra $10 a day in the parks. DAMN !! two sodas and an icecream bar would cover that.

With the greatest respect to Florida voters, I don't think the discount makes a blind bit of difference to how people vote or feel about Disney. If you're going to shell out $400 a year to visit Disney, you do it because you like going there, not to see if they are doing anything that adversely effects your environment. The people that voice concern or dislike of Disney are unlikely to buy a ticket to the parks if it was half what they are currently charged. IMHO Disney knows if it can get the people in the parks, they will spend money while they are there.

 

[KNWVIKING]

We purchase AP's and this year got 4 weeks out of them,that comes to $93.75 for passes per week. My discount is my DVC ownership because of the way I chose to vacation.My DVC ownership allows me to spend a much greater amount of time in WDW then I could without it,so this allows my park pass average daily price to be minimal. I don't know if i'm explaining this very well but that's the best I can.

As for additional discounts: They will come when Disney see's us stop going to the parks- plain and simple. Unless we use cash for everything "Disney" that we purchase, then they will know exactly what,where,when,how much,etc that we spend. If you pay anything with plastic-CC or room key- that gotcha. Now, this is a case of "do as I say,not as I do" because don't intend on ever paying with cash.

 

[anniet]

Originally posted by KNWVIKING
My DVC ownership allows me to spend a much greater amount of time in WDW then I could without it,so this allows my park pass average daily price to be minimal. I don't know if i'm explaining this very well but that's the best I can.

Either I don't understand what you are trying to say, or I do and would have to respectfully disagree. We used to stay on 192 right by Old Town and I think we were in the parks a LOT more then than we are now that we are DVC owners.

Because our room is so convenient and MUCH nicer than where we stayed before...we are more likely to spend a full day there and skip the parks. Pre DVC we would pretty much OPEN AND CLOSE the parks. (okay maybe it's because we were a little bit younger then too! )

 

[KNWVIKING]

***Either I don't understand what you are trying to say, or I do and would have to respectfully disagree. We used to stay on 192 right by Old Town and I think we were in the parks a LOT more then than we are now that we are DVC owners. ***

I'll try again

If I didn't own DVC, I would probably only make one trip a year to WDW for 9 days,8 nights. My park media would cost over $300.00 per person. Now I own DVC. I will make three, 8 day,7 night trips per year. That brings my average price down. I also like staying at other resorts so if the right price for room and flight come along, I'll make additional trips - made two such trips like that this year- bringing my average down even lower. Without the DVC ownership, I never would have bought AP's. Without AP's, maybe I don't take those extra trips. Sooooo.... for me, DVC ownership is my best discount.

 

[anniet]

Got it!

 

[CaptainMidnight]

Perhaps we should mail them a polite note, or visit thier offices and tape a note to thier doors regarding our interest in florida resident discounts for DVC members?

Hope we get the notes on the right doors....

 

[RobDoc]

Originally posted by vernon
IMHO the demographics for this would be the same as for Florida residents, you'd simply move it in line with whatever Disney thinks viable for the Florida residents. IMHO the same arguments/rationale can be made for both groups. If it's worth giving Florida residents a break on park passes because Disney feels they spend more time and money that way, the same argument can be made for DVC members, JMHO.

I look at the FL Resident's Pass in a different light and don't see the same demographics at all.

The FL Resident's Pass is aimed at bringing in guests who otherwise might not visit WDW on a regular basis. It provides an incentive to get those who live within a couple of hours drive to "drop in" for a spur-of-the-moment trip when the opportunity arises. Clearly there are those who would come regardless, but the real intent of the pass is to attract the other FL residents who are not frequent visitors. Many will not take advantage of the heavily discounted room rates and will make it a day trip, but are still likely to eat a meal and purchase some momentos of the trip. Some will decide to make a weekend out of the trip and grab a discounted room onsite.

DVC members are already coming to WDW to use their points. Disney does have extensive data showing just how many days the "average" guest spends in the parks based on how many days they stay onsite. Even in the poll currently on this board, 67% either have an AP or use the UPH- which suggests that these members plan to spend a significant amount of time in a WDW Theme Park during their stay. My assumption is that the 67% is far greater than the time spent by the "average" guest. (I'd estimate that average as 3 days in the parks for a 7 day stay- but that is speculation on my part.)

Disney already knows the number of FL Residents who venture into the parks (did you ever have a CM ask you for your zip code as you enter a park?) and also knows how many DVC members are staying onsite on a given day. By applying the "average" number of days those onsite guests will go to a park, they know how much time we (DVC members) will spend in the parks. From a poll like this one and the data they have available at WDW they may even assign a higher-than-"average " amount of time for DVC members.The result is that they can extrapolate that DVC members already spend 2/3 of their stays in the parks and that 90% of DVC members come to WDW for at least 7 days per year. They can also extrapolate that only 1% of FL residents within 3 hours come for a week each year. (I'm making up numbers here, but you get the idea.) Which group would you try to attract with discounted rates- those who are not already planning to visit or those who are already coming (and already have AP's and discounted UPH's)? I know the group I'd target.

 

[CaptainMidnight]

Yep, makes sense. It doesn't support our personal desire for a discount on APs, but it makes sense.

 

[crisi]

This is really simplified, because there are far more variables here than the ones I'm considering and the numbers are guesses. But here is what I am talking about. Once again, I don't have REAL data to work with, so this is more an example of how you'd do the analsysis than anything real.

Lets say 60,000 DVC members purchase 180,000 tickets a year (3 tickets per member - its probably higher, but that lets singles be singles and families of four be families of four - also, not all of us buy tickets every year - some of us do the "two trips on an annual pass 11 1/2 months apart yearly trip" Some of us bank and borrow to go less often, or use our points to cruise or trade out). 50% of those tickets are APs. Disney offers a 10% discount to DVC members on the $400 AP. This means that Disney loses $3.6 million dollars in discounts that people take that are already buying Annual Passes. (And that's a 10% discount - personally if they were going to bother giving me an AP discount, crisi the DVC member would hope for more than 10%. The Florida resident rates are more than 10% - using the FL resident discount, discounts would cost Disney on the order of $6.7 million.) This $3.6 million is the program "cost."

Variable not considered: Some percentage of DVC members are FL residents and already get the FL discounts. These members would not "cost" anything under the program.

We will assume that a discount on APs will not drive those currently holding APs to spend any more time and money in the parks. AP holders have already made the maximum per year committment - they aren't avoiding the parks due to the cost of tickets. So 30,000 DVC members (their guests, families, renters) have to spend enough to make up that $3.6 million. Its about $120 per member.

Now that $120 isn't additional spending, its profit Disney needs to clear in order to make the discount pay for itself. Say they have 100% margin (for every dollar spent, they make 50 cents). Its low on lots of stuff, but high on some things. So the 30,000 members who don't already commit to APs need to spend an average of $240 more to make up for the discount.

Now we figure capacity. Last I checked, most in park restuarants were not sitting empty at meal times. Not only do you need to spend $240 to me it worth my (the Disney Exec) effort to give you the discount, you need to spend that $240 where I need you to. I don't care if you spend it at CRT for breakfast or Chef Mickeys - those seats are already full, there isn't any lost opportunity there. You need to spend it at Marrakesh, or Akershus. And even there I don't care if you spend it at Christmastime or over Easter. I need your body in that seat when a guest paying full price isn't using it - otherwise, your spending doesn't count towards paying for the discount I'm giving you. Granted if you are taking that seat in Alfredo's you are probably driving someone to a burger over at the American Adventure - so it isn't a total loss - it just isn't a total net gain either.

Some people won't change their spending habits at all - with or without the AP discount. That's where my own personal myopia comes in - our family would not travel any more, spend any more, or spend any more time in the parks if discounts were available to us. We aren't money driven. We will take advantage of easy to use discounts, but won't use that to justify more spending. Other people are money driven - but in the opposite way, they will take any discount you give them, and eat in their unit and not spend a dime more than they would have without the discount. Because of this - as well as the capacity issue covered above, you need an even more significant behavior change from the people you are looking for the behavior change in - maybe they'd need to spend an extra $500 per trip on Disney property.

Now comes the 3.6 million dollar question - will they?

As I said above, this is extraordinarily similified, and little changes in the numbers (what is Disney's expected actual margin, how many APs do DVC members buy per year currently, what is the actual impact of capacity) have a huge impact on the numbers. As well as additional variables I'm not even thinking about. I don't have real data and I have little knowledge about theme parks management, I'm just showing you how you'd start analyzing it.

 

[vernon]

Crisi unless I missed it, you don't seem to have allowed for any of the members that currently get hopper tickets getting AP or PAP. Using your figures ( 60,000 members buying a total of 180,000 tickets) Our rough poll has 35% of members buying the cheaper passes. If half those were to buy the more expensive passes it would yield ( 180,000 x 35%= 63,000/2 = 31,500 x $150= $4,725,000. If you work on an even more conservative figure that just one third of those currently using hopper passes upgraded it would nett $3,240,000.

Although you agree they exist, you also don't seem to take into account in your "loss"figures the percentage of DVC members that are Florida residents and are already AP or PAP pass holders I think they would be a considerable figure. I've forgotton the % of memebrs that come from Florida, but I believe they make up the largest number of any State am I correct? I think it was somewhere in the region of 10% of the membership in the early years, but that may have changed as membership has grown. I would place the "cost" being in the region of $2.8-3 mill if you allow for Florida residents.

Now I understand that with your Disney exec head on ( one that obviously doesn't want to consider the idea of a discount working in Disney's favour) it's perfectly understandable that you try to skew the figures and ignore possible benefits, but as we're doing this as a intelectual exercise I think at the least you need to make some concessions to the potential upsides.

This is a risk and reward business, the risk ( using your figures) is $3.6 mill ( this is assuming NO increase in people attending the parks more by buying more expensive tickets) , the reward is an increase in ticket sales from other sources that could be somewhere in the region of $2.5-4.5 mill plus the extra sales generated from putting an extra 21,000 people in the parks x the extra number of days. I'd guess that # of days would be somewhere between 5 and 10. It's the equivelent of putting an extra 100,000-200,000 people in the park for one day. I don't know the average spent per person per day on food,drink and souverirs but I don't think $20-30 would be too far out ( if anything a little low) so the potential reward would be somewhere in the region of $2-6 million. That isn't allowing for the likelyhood, IMHO, that the people making a saving of $100 or so on their PAPs would plough a lot of that original cost you're fretting about ( $3.6mill) back into Disney.

Put basically the risk is $3.6 mill, the reward is somewhere between $4.5- 10.5 mill (and a lot of satisfied regular customers). I'm not inherently a gambler, but I don't think it's that big a gamble. Personally I would take the chance to see if it worked. Obviously the execs that make the choices either haven't looked at it in this manner, don't want to put their necks on the line or simply don't want to put the majority of the extra $$ into someone elses department's profitability (my favourite as the reason).

Doc, I would agree with you that DVC members are already coming to stay at WDW but the question is are they spending their time exclusively in the Disney parks spending their money at Disney outlets. I would suggest the answer is no, and as more members become long standing members I would suggest they will spend less and less time( and money) at Disney outlets unless they feel they are getting good value for money. The excellent point you make ( and I agree with it ) that the FL resident pass encourages people who wouldn't go into the parks regularly to (and I quote you)
" Many will not take advantage of the heavily discounted room rates and will make it a day trip, but are still likely to eat a meal and purchase some momentos of the trip"
is exactly the same argument I'm making for DVC members.

Your final comment
"Which group would you try to attract with discounted rates- those who are not already planning to visit or those who are already coming (and already have AP's and discounted UPH's)? I know the group I'd target"

I don't understand why you ( and others) feel that there is a choice of one group or the other.In many ways Fl residents and DVC members have similar profiles (and this similarity grows the longer the membership of the individual). The same solution for both areas may well work. Many DVC members already feel they don't need to visit the parks "ALL DAY", yet there is no concession made for that lack of desire and it seems no attempt to address it. Many people baulk at paying top $$ for just a few hours in the park, their choice is pay up or not visit. It's my contention that this phenomon will increase unless this issue is addressed. If not the answer could well be, not visit the parks. If it's a solid argument for Fl residents, why is it not for DVC members? Finally ( for now ) Why just "target" one group, when you can hit both targets with one weapon ?

 

[MickeyMcMouse]

Originally posted by vernon
Doc, I would agree with you that DVC members are already coming to stay at WDW but the question is are they spending their time exclusively in the Disney parks spending their money at Disney outlets. I would suggest the answer is no, and as more members become long standing members I would suggest they will spend less and less time( and money) at Disney outlets unless they feel they are getting good value for money. The excellent point you make ( and I agree with it ) that the FL resident pass encourages people who wouldn't go into the parks regularly to (and I quote you)
" Many will not take advantage of the heavily discounted room rates and will make it a day trip, but are still likely to eat a meal and purchase some momentos of the trip"

Forgive me for joining in a discussion half way through but I have to agree with Vernon. :-

Here's our story .

We've been around 13 or 14 times in the last 10 years and bought into dvc 2001.

We bought ap's in jan 2002, used them well on our 10 day stays in jan 02 and aug 02. Used them that well that I don't think, out of the 20 days we were there in total, we were not in the parks for maybe 2 days.

Much of that time was enjoying the parks, but probably the large majority of that time was shopping (that big shop in epcot is a killer ) or more specifically going into the parks for meals, expensive meals may I add, but very good meals. And of course after the meals, there probably was a bit of shopping.

Its kinda funny when you realise with ap's you can nip into a park for only lunch or dinner and your not losing any days.

Looking at cc bills, many, many $100's of dollars where given to Mr Disney.

Now .... our ap's expired in jan 03, and as we "thought" we would not be back until nov/dec this year we did not renew them - NO INCENTIVE.

As it happened, we had a last minute trip during july, which was a long weekend at VWL. ( The great benefits of DVC ). The 4 full days, we were in wdw, we did NOT visit any parks, didn't eat in any disney restuarants, bar once at Artist Point(ap cobbler ) ,and once at Rain Forest at DD. We only went to dd once (no dc disc available) and so did the vast majority of out shopping, spending, outside of the Disney Empire at the outlets.

There where no incentives to buy ap's and Disney lost many many $100's to other vendors. We will probably purchase ap's in dec which will cover another trip next year, but, and here is the killer blow, both of us did NOT miss the parks. We still very much enjoyed our visit, but our funds were spend elsewhere.

To cut a long story short (too late), on the trips when our aps were valid, we would have probably wondered into a park for a meal or some shopping ( don't know if anyone has seen us before, but we are the ones with the hand fulls of bags struggling thro the lobby of Wilderness Lodge ) and spent a great deal of money bolstering the share price of the Disney Co.

On our last visit with no annual passes, we were the ones sitting at the quiet pool, reading a few books and shuttling between Roaring Forks and our seats with those fantastic refillable mugs and not really wondering about the contents of the Disney shops.


If I where a Disney Exec, this is surely got to be a very worrying trend.


David

 

[KNWVIKING]

***" . We will probably purchase ap's in dec which will cover another trip next year, " ***

See, I think that is what Disney knows. For four days, they got very little of your money, but what's going to happen with your next two 10 day trips ?

Also, look at how you vacation. You buy an AP for first trip,then it's good till next trip,then it expires. You buy AP for Dec '03 trip & plan on using it for your Oct '04 F&W trip- just as an example,but you got 20 days use.Suddenly your July '03 trip pops up. Say the AP had a 20% discount and instead of waiting till Dec, you buy in July, use it in Dec, but it's expired before Oct '04 trip. You only got 14 days out of your AP. Sometimes the best choice may be to just stay out of the parks.

 

[RobDoc]

Originally posted by vernon

Doc, I would agree with you that DVC members are already coming to stay at WDW but the question is are they spending their time exclusively in the Disney parks spending their money at Disney outlets. I would suggest the answer is no, and as more members become long standing members I would suggest they will spend less and less time( and money) at Disney outlets unless they feel they are getting good value for money.

....

I don't understand why you ( and others) feel that there is a choice of one group or the other.In many ways Fl residents and DVC members have similar profiles (and this similarity grows the longer the membership of the individual). The same solution for both areas may well work. Finally ( for now ) Why just "target" one group, when you can hit both targets with one weapon ?

Good points, Vernon. I'm basing my comments on the poll on this board about admission media- where over 60% have indicated that they use either AP's or UPH- thus already having access to the parks every day of their trips. I'll assume that Disney has similar imformation and has decided that there is no direct benefit to courting a group that already goes to the parks at least as much as their "average" guest. They will aggressively try to attract the FL residents who can get there easily and may NOT be already planning to come.

DVC members are already coming and are already planning to enter Disney Theme Parks at a rate at or above the "average" Disney guest (based on their polling data). They have chosen to try to attract some small percentage of the millions of FL residents who otherwise may not take a trip (or two or three) to WDW.

While I'd be delighted to accept a discounted rate for something I'm already going to purchase, I can certainly see where the decision to try to attract possibly hundreds of thousands of "new" guests (FL Residents) would be a wise business plan with much to gain. I don't disagree that they could "hit both targets with one weapon". I just don't see why Disney (from a business position) should consider DVC members a target.

 

[Shamus]

Originally posted by Doc
I just don't see why Disney (from a business position) should consider DVC members a target.

But Disney DOES consider DVC members a target, one which I believe they have hit dead on. Disney targets DVC Members for the UPH. There is currently no value for them to target with the AP or other media types. (Is that what you meant Doc??)

Ask yourself this question "Why would Disney Target DVC Members with the UPH and not the PH, PHP, AP, or PAP?"

Because the other types of admission do not guarantee that a guest will "Pay Admission" each day of their stay( first and/or last day dropoffs excluded). "USE it or Lose it" "Captive Audience"

The Park Hoppers and Annual Passes don't do that. "Let’s go to USF or SW or stay by the pool or ..................."

You may say "I paid for my admission for 365 days with an AP, is that not the same as UPH?" Most APs and PAPs are purchased because the consumer has calculated that APs are cheaper for them then the UPH and PH based on the number of days they plan on attending the Parks not their length of stay. Lets call this the AP TEST LINE -- "the old 7 Park Days Breakeven". Once the AP holder crosses the line they’ve broken even. It may or may not then change their visiting habits but they first need to cross the line.

AP discounts would only provide a change to the visiting habits of those who just fall short of the "AP TEST LINE" maybe those planning 6 days of park visits. Thus, only those who are affected by the "NEW AP TEST LINE" will likely purchase an AP solely because of the discount.

I'm sure Disney's numbers tell them that the number of NEW DVC AP holders would be so small that the Projected Revenue Increase would not make up for Overall Cost of the Discount to all DVC AP holders.



Shamus

 

[JimC]

Let me rejoin this very interesting discussion. Twenty years ago I participated in a project regarding a new major multipurpose sports/entertainment venue. The same issues arose.

What are the profiles of the attendees (families, couples, singles, income strata, etc)? How often will they visit? How far will they travel to get here and by what means? How much will each spend (there are some interesting norms regarding spending habits)? Will discounts change the mix of attendees, or the distance they will travel or the frequency of the visits or the length of the visit or some combination? Will separate pricing or bundled pricing improve revenues and profits?

Some of the conclusions the experts came up with: There is a fairly tight range of dollars that each attendee will spend per visit or per day by category and income strata for a particular venue. Spending included travel (hotel, gas, tolls, etc), meals, drinks, programs, souveniers. Disney must factor in long multi-day length of stay and broader geographic reach issues than we did. We only needed to deal with the length of stay for mostly one, but some two or three day setups (much like WDW in its early days of operations, I suspect) and a geographic reach of generally less than one day's drive.

Discounts can change the mix of attendees or increase the frequency of visits or increase the distance attendees are willing to travel to visit or a combination. But discounts will have little impact on those initial spending ranges or the length of time for each visit. Travel costs factor in to this, but it is not a dollar for dollar offset either direction. So it is a complex analysis.

On pricing (separate or bundled) the conclusions were that you need to do both. Bundled pricing simplified transactions for both attendee and operator, but had a negative impact on revenue (ie the venues with one price, one payment for everything consistently resided in the lower half of the spending ranges -- that may have changed over the years as I have seen some more recent evidence that single pricing (like an all inclusive resort) can actually charge a premium for convenience.

Cost management is important and managing variable costs must not be ignored; but once the level of service is set, the costs are relatively fixed and revenue becomes the primary variable to improve profits.

Totally separate pricing (a la carte) increased frustration for the attendee (constantly reaching for the wallet and back then having the cash - few ATMs and less use of charging) and cost for the operator (additional cashiering operations) and oddly (at least to my thinking) also did not result in being in the upper end of the spending range. The venues that were in the upper range were those who combined bundled pricing and separate pricing.

I don't know how these patterns have fluctuated, except for the one item I mention above. There are also behavior studies that enter into this becuase some discounts and pricing programs are designed to alter long-term behaviors and have little to do with short-term economics.

But I think it does suggest that senior management must be involved. Multi-divisional organizations are going to struggle with turf battles over recognition, budget, and other resources. Having your own revenue stream and control over pricing is generally considered part of the arsenal one needs to do well in that arena. But for the organization, the data indicates that individual divisions may not naturally act so that the organization is as well off as it could be.

Having said all of this, I still believe that Disney would benefit from a discount program on APs. I believe it would increase the number of visits to WDW parks, capturing the spending per day that was going elsewhere. It would also open up the opportunity for lengthening the number of days on property and adding the per day spending (I believe the FTP pay for 4 and stay for 7 package was designed for just that result).

Alas, I must confess that I lack the hard evidence to support my conclusions.

 

[CarolMN]

Originally posted by JimC
...(snip)....Alas, I must confess that I lack the hard evidence to support my conclusions.

No one except select Disney employees has any data to support their conclusion. As far as I know, none of them ever post here. Even if they did, I doubt they'd be sharing proprietary info on a public bulletin board. All any of us have is our own opinions based on our own experiences. Yours is certainly as welcome as everyone else's.

We won't ever come to agreement on this subject - FWIW, count me in crisi's camp, but IMHO, this thread/topic makes for very interesting reading! And that's one of the main reasons I love spending time here!