Disney (DIS) knows it has consumers wrapped around its finger, and when it comes to its parks, it’s taking advantage of it. The company recently introduced its demand-based pricing for its Walt Disney World and Disneyland theme parks. Here’s how it’s going to work:
- At Disneyland, located in Anaheim, California, a single-day ticket currently costs $99. Moving forward, Monday through Thursday tickets will cost $95; most weekends and many summertime weeks will cost $105; and tickets at peak times like most of December, spring break weeks and July weekends will cost $119.
- At Walt Disney World, located in Orlando, Florida, the prices will vary by park (there are four major theme parks). At the Magic Kingdom, the most popular of the theme parks, value period tickets will remain the current price of $105. Regular and peak periods will result in ticket prices of $110 and $124, respectively.
Why Disney’s doing it
Attendance at Disney U.S. parks was up 10% last quarter, and with Star Wars and King Kong attractions coming soon, you can bet that attendance growth will continue. So the idea behind the new pricing structure, at least according to Disney, is to help keep overcrowding to a minimum during peak times and to encourage people to go during off-peak, or value, times.
Of course, that’s not really going to happen, is it?
Disney has a very low price elasticity to its theme park ticket prices, meaning it can continue to raise its prices without worrying that it will scare off visitors. The company taken advantage of that over the years, hiking ticket prices at an alarming rate.
Take the steady rise of Magic Kingdom tickets. Adjusted to inflation, tickets were about $70 ten years ago, which means ticket prices have increased 50% since then. And guess what? People still keep coming and paying the higher prices.
The new pricing model won’t change visitor behavior all that much and here’s why: People go to Disneyland during peak times because that’s when they can. Kids can’t take time off whenever they want during the school year, so parents rely on long weekends and school breaks to haul their kids out to Anaheim or California for a treat. Disneyland’s price changes aren’t going to change that.
Furthermore, the Mouse House has already proven to us that people aren’t going to be fazed by higher prices. They’ll simply adjust their vacation budget and make it happen.
Conclusion
Disney’s demand-based pricing for its parks isn’t going to stop overcrowding during peak seasons. What that means then is that Disney is doing itself and its shareholders a favor by continuing to increase revenues from its parks without making it sound like it’s giving visitors a bad deal.
Sure, the overcrowding issue may be alleviated temporarily as people generally have a strong reaction to such a drastic price hike initially. But over the course of the year, people will get used to the new model and won’t have any scruples paying up.
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