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

Discussion in 'General News & Rumors' started by Wendy, Jun 20, 2011.

  1. Wendy
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    Wendy A hui hou kakou makuakane Staff Member Administrator

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    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.

    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.

    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.


    Source: Orlando Sentinel
     
  2. DisneyFreak
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    DisneyFreak Serious Forum Regular

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    We enjoyed out Florida Resident Annual Pass this year (JUL 2010-2011). I think we paid $373 each and ended up going in JUL/OCT/NOV/DEC 2010 and FEB/MAY/JUN 2011. We definitely got our monies worth. We also got a Florida Resident Annual Waterpark pass in May 2011-2012 and with three visits that has already been paid for.

    We are not renewing the Annual pass for the parks for next year just because we want to do some other things but we were happy with the value. I just hope the new pricing doesn't effect the Florida Resident 4-day pass for $130 they usually offer in the winter.
     

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