The strategic question is whether those whose money is not currently wanted will come back during some future turn of the cycle when their money is - inevitably - needed. JL
Drew Harwell reports with the Washington Post:
Disney has raised the price for the Magic Kingdom 41 times, doubling it over the past decade. This year, a ticket rocketed past $100 for the first time in history.“Disney’s made a strategic decision not to discount to hold onto people at the middle part of the economy. They set their prices at the top 10 percent of family incomes and make money where the money is."
When Walt Disney World opened in an Orlando swamp in 1971, with its penny arcade and marching-band parade down Main Street U.S.A., admission for an adult cost $3.50, about as much then as three gallons of milk.
Disney has raised the gate price for the Magic Kingdom 41 times since, nearly doubling it over the past decade. This year, a ticket inside the “most magical place on Earth” rocketed past $100 for the first time in history.
Ballooning costs have not slowed the mouse-eared masses flooding into the world’s busiest theme park. Disney’s main attraction hosted a record 19 million visitors last year, a number nearly as large as the population of New York state.But rising prices have changed the character of Big Mouse’s family-friendly empire in unavoidably glitzy ways. A visitor to Disney’s central Florida fantasy-land can now dine on a $115 steak, enjoy a $53-per-plate dessert party and sleep in a bungalow overlooking the Seven Seas Lagoon starting at $2,100 a night.
For America’s middle-income vacationers, the Mickey Mouse club, long promoted as “made for you and me,” seems increasingly made for someone else. But far from easing back, the theme-park giant’s prices are expected to climb even more through a surge-pricing system that could value a summer’s day of rides and lines at $125.
“If Walt [Disney] were alive today, he would probably be uncomfortable with the prices they’re charging right now,” said Scott Smith, an assistant professor of hospitality at the University of South Carolina whose first job was as a cast member in Disney’s Haunted Mansion. “They’ve priced middle-class families out.”
As one of the biggest man-made attractions on the planet, Disney World has led the way for the theme-park industry to boost its prices, often on a yearly basis. Universal, Six Flags and other parks in Orlando, Southern California and elsewhere have followed in Mickey’s big footprints, worried they will otherwise look like bargain-barrel runners-up.Disney and theme-park leaders have defended their rising prices as a logical response to record-setting attendance, with Disney spokeswoman Jacquee Wahler saying the company is “committed to ensuring all our guests have a magical experience.”
“We continually add new experiences, and many of our guests select multi-day tickets or annual passes, which provide great value and additional savings,” Wahler said. “A day at a Disney park is unlike any other in the world.”
But some see Disney’s magically ascending price tag as a reflection of the country’s economy, where stagnant wages and growing inequality have transformed even the way Americans take time off.
“When Walt created Disneyland, this was a middle-class country. But Disney now . . . as far as pricing out the middle class, they think: What middle class?” said Robert Niles, the editor of Theme Park Insider, an industry blog.
“Disney’s made a strategic decision that they’re not going to discount to hold onto people at the middle part of the economy,” he said. “They’re going to set their prices at the top 10 percent of family incomes and make their money where the money is.”
Prices rise, but business booms
American theme parks were built on deep roots in middle-class family entertainment, having expanded as outgrowths of low-cost getaways such as New York’s Coney Island, dubbed the “Nickel Empire” for its thrift.
When Walt Disney, the cartoon and business mogul, opened Disneyland in Southern California in the mid-’50s for $1 a ticket, many expected it would fail. Most amusement parks then were raucous affairs, with free admission.
“I could never convince the financiers that Disneyland was feasible,” Disney famously said, “because dreams offer too little collateral.”
But over the years, as Disney’s movie and toy deals helped it explode into a $184 billion behemoth, its theme parks became one of Mickey’s most unstoppable moneymakers. Disney’s parks and resorts’ profits have nearly doubled over the past five years, to $2.6 billion in fiscal 2014.
Card Walker, right, president and chief operating officer for Walt Disney Inc., kicks off Disney World’s tenth birthday celebration by welcoming the William Windsor family in Orlando, Oct. 1, 1981. The Windsors were the first to see the Magic Kingdom, when it first opened ten years before. (AP Photo)
Advertised for years as a once-in-a-lifetime experience, Disney’s parks have continually set new visitor records: During the winter holidays, its Orlando parks hosted 250,000 guests at a time, chief executive Bob Iger told analysts this year. Attendance rose 17 percent last year at Universal Studios Florida, America’s biggest non-Disney park, because of the success of its Harry Potter-themed mini-towns.
Disney park admissions revenue has grown about 10 percent every year for the past decade, to total more than $5 billion in 2014, financial filings show. (That’s not including park food, drinks or merchandise, which brought in another $5 billion.)
The parks have faced little resistance, even as prices have climbed. Tickets for the Magic Kingdom were increased 6 percent this year, to $105 plus tax, while entrance to other Orlando parks — Epcot, Animal Kingdom, Universal Studios — can’t be bought for less than $90.
Those costs have in recent years helped shunt tourists to smaller regional parks — but many of those have raised prices as well. Six Flags, which runs 800 rides across 18 North American parks, increased prices last spring and now charges $62 at its Maryland park. At American theme parks, per-person spending has climbed 33 percent since 2008, to about $56.23, data from the International Association of Amusement Parks and Attractions show.
Park watchers have worried that the rising costs are blocking out wishful visitors, especially because a third of the Americans visiting the country’s theme parks are younger than 18, data from industry researcher IBISWorld show. In a report this month, the Themed Entertainment Association, an industry group, called “the continued stagnation of -middle-class incomes” one of its biggest challenges.
But as long as places like the Magic Kingdom can pull in more than 80,000 visitors a day, experts said the industry is happy to profit off a richer clientele. In recent years, Orlando tourists’ average household income peaked at about $93,000, more than $20,000 higher than the average U.S. household wage, data from the tourism bureau Visit Orlando show.
The price hikes won’t slow until the park sees a dip in demand, experts say. If anything, Disney is experimenting with how to persuade parkgoers to pay even more. Disney surveys sent last month to guests suggested the giant was considering a tiered pricing structure that would clock peak-time “Gold” tickets, during summer and winter holidays, at $125. “Bronze”-level $105 tickets would allow entrance during less busy times, such as weekdays.
Wahler, the Disney spokeswoman, would not say whether the pricing would change, adding, “We regularly survey our guests on a variety of ideas.” But analysts said it could prove to be one of Disney’s biggest, boldest pricing hikes yet.
“They’ve been aggressively raising pricing because they’re looking at themselves as a premium price, a premium brand,” said Scott Sanders, vice president of pricing for Disney’s parks and resorts between 2004 and 2009.
“Every child feels like they’re entitled to a Disney vacation, and I think they’ve played off that, letting the emotions lay in until the family says to do it. They’re recognizing they can capture demand across the price curve. So why not take advantage of what people are willing to pay?”
Views of the private Cinderella luxury suite at the top of Cinderella’s Castle at Walt Disney World’s Magic Kingdom in Lake Buena Vista, Fla. are seen on Friday, Jan. 26,2006. A night’s stay at the castle was one of prizes given randomly to unsuspecting park guests recently as part of the launch of Disney’s “Year of a Million Dreams” campaign.” (AP Photo/Reinhold Matay)Catering to ‘Wall Street dads’
Disney says it has made an effort to keep its gates open to all, offering -packages such as multi-day tickets and yearly passes to help balance out the costs. The “Magical Express,” a free shuttle from the airport into the sprawling park’s center, also shepherds tourists past the rental cars and rival attractions that would allow them to spend more time and money outside its gates.
The fun-per-hour value of the experience is still high, Disney executives say, because a tourist can spend all day there (as opposed to, say, a blockbuster movie). They add that higher gate prices have helped Disney invest in new, better attractions.
Disney World last year spent $425 million to expand Fantasyland, marked by the opening of a new Seven Dwarfs Mine Train roller coaster. Next spring at Epcot, Disney will retool its Norwegian-mythology flume ride, Maelstrom, into Frozen Ever After, where visitors will float past a skating Olaf and Elsa in an ice castle, singing “Let It Go” amid a sparkling, simulated snow.
But much of the recent innovation in the theme-park industry, experts said, has gone toward retooling it as a playground for the rich and their kids. The industry has increasingly “stratified its offerings,” said Sanders, Disney’s former pricing -executive, by offering more to attract visitors like “the ‘Wall Street dads,’ who have the obligation to bring the kids to Disney but want to do it as quickly as they can and are least sensitive to pricing of anyone.”
Parks now offer a variety of special upgrades aimed at the vacationing 1 percent, including after-hours parties, dine-with-princess events and guided tours such as SeaWorld Orlando’s “Private Elite VIP tour,” which bumps buyers to the fronts of lines and allows them to feed dolphins, sea lions and rays.
Disney’s two Bibbidi Bobbidi Boutiques sell a $195 pampering for little girls that includes a makeover, hair-styling, a costume and a princess sash.
The luxury has found its way back to the hotel room, as well. The Polynesian Village Resort — one of Disney World’s first themed hotels, where rents started at about $29 (or $171 in today’s dollars) — reopened this year with stilted Bora Bora Bungalows that can cost up to $3,400 a night.
In August, Orlando’s first five-star resort, a Four Seasons, opened on the Disney grounds, with a 1,000-pound chandelier imported from the Czech Republic and rooms starting at $449 a night.
With gilded offerings like that, Disney clearly has something going for it, and few expect the park will lose its luster with American vacationers anytime soon. If anything, the ascending prices could help solve another of Disney’s problems, by thinning its snaking lines and relentless crowds.
But that hasn’t stopped some Disney lovers from mourning a time when the magic of parks like Disneyland, the “happiest place on Earth,” was something nearly everyone could enjoy.
“As a business professor, it’s the right strategy,” said Smith, the University of South Carolina professor. “But as a kid who started there with his first job at 16, steeped in the tradition? It does make me sad that something that was set up by Walt, who wanted all families to be able to spend time together in a fun atmosphere and be able to afford it, is going by the wayside.”
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