A Couple Lessons We Can Learn from Disney Pricing
Bloomberg (via Zero Hedge) had this chart on Disney theme park entrance prices:
A few random thoughts:
- This highlights how hard it is to do inflation statistics correctly. For example, the ticket being sold in 1971 is completely different from the one being sold in 2015. The 2015 ticket gets one access without additional charge to all the attractions. The 1971 ticket required purchase of additional ride tickets (the famous, among Disney fans, A-E tickets). So this is not an apples to apples comparison. Further, Disney has huge discounts for multi-day tickets. The first day may cost $105, but adding a fourth day to a three day ticket costs just a trivial few bucks. Local residents who come often for a single day get special rates as well. So the inflation rate here grossly overestimates that actual increase in per person, per trip total spending for access to park attractions
- This is a great case in pricing strategy. Around 1980, the Bass family bought into a large ownership percentage of Disney. The story I am about to tell is often credited to their influence, but I am not positive. Never-the-less, someone had a big "aha!" moment at Disney. They realized that families were taking trips just to visit DisneyWorld. These trips cost hundreds, even thousands of dollars. The families were thus paying hundreds of dollars per person to enjoy Disney, of which Disney was reaping... $9.50 a day. They had a stupendously valuable product (as far as consumers were concerned) but everyone else in the supply chain was grabbing most of the value they created. So Disney raised prices, on the theory that if a family were paying over a thousand dollars to get and stay there, they would not object to paying an extra $50 at the gate. And they were right.
J_W_W:
Not only that but they greatly expanded the number of resorts and hotels they have for you to stay at while you are going to their parks.
May 26, 2015, 1:19 pmEconoMichael:
Magic Kingdom only opened in October of 1971, so that's the very start of pricing for ONE park with fewer attractions than exist today even in that ONE park. The other three parks came about during that time in 1982 (EPCOT), 1989 (Hollywood Studios) and 1998 (Animal Kingdom). But just thinking about the Magic Kingdom by itself, it's also worth considering the role Disney World played in building up the city of Orlando -- one source pegs the population going from 560,000 in 1971 to 1.2 million by 1990 (http://iml.jou.ufl.edu/projects/fall07/Van_Owen/orlando.html).
Adding attractions to just the one park, building three additional parks and growing the local population are all things not captured in those statistics/graphs, but which certainly play into the rising prices.
May 26, 2015, 2:02 pmdonald:
Agree with J_W_W. they also made a concentrated effort to capture a larger share of the supply chain of the vacation itself by increasing it's market share of the hotel, transportation, food, and entertainment. expansion of the park as econoMichael stated is part of the increase in the entertainment side, but the inclusive packages where you are essentially a caged rat at one of their hotels for a four or five day period, being marketed to (you and your kids) non stop is genius business strategy. you won't get out of there without a few mickey mouse toys and trinkets. Then they sell you your food, lodging, and entertainment all at one place for days. Their share of the "1000" dollar vacation is getting larger and larger.
May 26, 2015, 2:08 pmDan Wendlick:
There were really three innovations that led to the replacement of the week-long Florida Vacation with a stop at Disney World with the Week-long Disney World vacation:
May 26, 2015, 2:30 pm1. Single-price admission: People seem to think that paying $60 to go on 20 rides is a better deal than $3 to go on a single ride, whether or not they end up on all 20. It also streamilined thier internal cash handling and payment logistics.
2. Building their own hotels in all price categories. The orignal 2 hotels had high demand, which led to high prices, which then meant they had to serve the top of the market. By expanding accross the spectrum from Holiday Inn to Wyndam quality, they were able to keep people inside the main gate for their entire vacation.
3. Adding the "Free" airport shuttles and building out the internal transportation network, meaning people would not need to rent a car for their stay. This pretty effectively keeps people from running over to Universal or the beaches for a day, since transportation costs of leaving the park vs. an additional day's ticket tilt heavily toward staying in the park.
They've come a long way from the early 1970s when they actually ran free transportation to Cypress Gardens to give people a reason to stay an additional night in the hotel.
Andrew_M_Garland:
Thinking about going to a Disney park? Find out about the amazingly long times waiting in line, say 1 hour each for the top 3 rides. Find out if the big rides are even in service.
There is nothing like a vacation spent 80% waiting in lines. But, you can spend a wonderful time walking around admiring the sets.
May 26, 2015, 4:14 pmNot Sure:
"The 1971 ticket required purchase of additional ride tickets (the famous, among Disney fans, A-E tickets). So this is not an apples to apples comparison."
No, it's not, but a 10 ride ticket book + admission was $4.95, 15 rides cost a dollar more, at $5.95. How many rides can you go on in a day when you have to wait 30 minutes or more for each?
May 26, 2015, 7:08 pmDon:
Wow! I forgot all about the A-E tickets. I do, however, remember waiting FOREVER to ride Peter Pan and Captain Nemo.
For a 7 year old, an hour wait is an eternity and I'm sure I made it an eternity for my parents :).
May 26, 2015, 7:39 pmslocum:
As it happens, the last time I was at Disney was as a kid...in 1971. I was young enough that 'It's a Small World' wasn't even annoying. First time I ever flew on a jet, too. I don't remember any long lines, but I do remember the A-E tickets and trying to find rides to use up the low value tickets in the books (though I don't remember if the A was good and E bad or vice versa).
You couldn't pay me go back as an adult, though (the heat, the crowds, the long lines, the 1001 strategies to empty your wallet). But, like Las Vegas, I do appreciate Disney for soaking up a lot of travelers who otherwise might be where I want go.
May 27, 2015, 6:18 amDan Wendlick:
But also remember that that 10-ticket book contained 1 E-ticket. If you wanted to go on both "It's a Small World" and "20,000 Leagues Under the Sea", you were shelling out more cash. See http://disneyparks.disney.go.com/blog/2013/05/vintage-walt-disney-world-an-a-attraction-or-an-e/ for which attractions were at each level. IIRC, the 10 ticket book gave you 2 "A", 3 "B", 2 "C", 2 "D", and 1 "E". FOr your extra dollar, I think you got one more of each ticket type. An individual "E" set you back 75 cents, so the 15 ticket book was a deal.
May 27, 2015, 8:56 amSTW:
One of the values of the old A-E tickets is that it spread out the ride load. You only had so many E tickets so you were forced (unless dad was willing to pay more. Um, no.) to go on rides of lesser worth. You spent less time waiting in line for the best stuff and more time doing something else.
The all in one ticket also forced Disney to up their game. At one time there were only five (as I recall) E ticket rides in the park and one of those always seemed to be closed. Now, if you're spending over $100 to walk in the gate everything has to better reflect the price of admission. Bigger rides cost more to develop and operate. Meet Mr. Lincoln doesn't cut it anymore.
Lastly, Main street has also changed to better impact the Disney pocket book. There used to be a fairly eclectic mix of stores at Disneyland selling products from cheap magic tricks to Pendleton blankets. Now each store is just a variation of Disney themed merchandise, everything from a Mickey Christmas ornament to a Mickey t-shirt. Big whoop.
The food is better than the 1960's and 70's though.
May 27, 2015, 9:08 amBrad Warbiany:
It's a classic exercise in pricing. Why do they keep raising prices? Because the park is full.
Disney is an addiction. It's the addiction of a parent not wanting their child to "miss out" on one of the classic cultural experiences of growing up in America--a hot, crowded trip to go see Mickey. It's the sort of vacation that frankly it doesn't matter if anyone actually *enjoys* their time there... You just have to go. Otherwise you're seen by your peers as a terrible no-fun parent.
So people keep going. And Disney realizes that the market is far less elastic than they thought, so they keep raising prices.
I try to explain this to my wife. We live 25 minutes away from Disneyland. She was raised here, and one day a year, her parents would take her and her sister out of school for a Disneyland day. So because that's what she did growing up, she expects that's what our kids will do growing up. If I dare suggest we do it every *second* year rather than every year, I'm suddenly an arsehole. But she got caught up in the addiction (sorry, they call it "tradition") as a child, and the cycle repeats.
May 27, 2015, 11:12 amNot Sure:
Ticket books had more than one E ticket.
From here: http://www.yesterland.com/tickets.html
Summer 1972 Prices
May 27, 2015, 4:02 pmHere are Disneyland's prices for the Summer 1972 season from Disney News, Vol. 7, No. 3, Summer 1972. 10-Ride Ticket Book Coupon Makeup: A-10¢ (1), B-25¢ (1), C-40¢ (2), D-70¢ (3), E-85¢ (3), General Admission Ticket (1)
Dan Wendlick:
I stand corrected on the details, but the larger point stands. The ticket books provided fewer "e" tickets than the number of "E" ticket attractions. There was also a ticket, I believe denoted "X" that was good on any attraction, usually given out on a complimentary basis
May 27, 2015, 5:39 pmNot Sure:
There were fewer of any of the tickets, A-E, than there were rides to use them on. Still, it wasn't unusual for people to leave the park not having used them up. As you noted, you could buy individual tickets, but most people didn't.
May 27, 2015, 8:04 pmTom:
Annualized crudely (3.50*1.08^44 = 103.45), it's 8% inflation. Given all of the other hypothetical causes, it's not a ridiculous growth rate.
May 27, 2015, 10:11 pmIke Pigott:
...and it was this logistical nightmare that was an impediment to fun for most. Having to stop and calculate your optimum book/ticket purchase, carried out across several variations, knowing your kids might change their minds.
There is a reason all-inclusive pricing works for resorts, Disney or Sandals or otherwise. People are willing to pay extra for the privilege of not having to think during the vacation. They just want to hedonistically enjoy themselves. For families on a budget, knowing the costs up front, without surprises, also eliminates the anxieties that can mar the experience.
May 28, 2015, 3:58 amDan Wendlick:
If you went home with tickets, you went home with As and Bs. For one thing , there were the fewest attractions at these levels, and many of them did not run all day (streetcar and firetrucks, for example). For another, the attractions at those levels were really kind of lame.
May 28, 2015, 8:33 amNot Sure:
Generally, yes- the As and Bs would be left. If you look on eBay, however, it's not at all hard to find used ticket books for sale with higher value tickets remaining.
May 28, 2015, 12:16 pmDan Wendlick:
Look more arefully at those eBay entries. Most of them with Cs, Ds, and the few with Es, even those that say Magic Kingdom, are actually Disneyland, not Walt Disney World. This reflects that over half of the guests at Disneyland were from Southern California and visited several times a year, making holding onto tickets for future use a more viable proposition. I'd also suspect many of the complete books were reprints issued in 2007 as part of the 25th anniversary of the beginning of the single pricing era.
May 28, 2015, 2:55 pmmlhouse:
I think they should doubt the prices. The parks are so crowded that you really cannot get that many rides in. Double the prices, cut the crowd in half. Same revenue. You go once instead of twice but you probably get more than double the enjoyment. That is, unless you like standing 60 minutes to get a ride on Space Mountain and walking in crowds as thick as a Manhattan sidewalk.
May 29, 2015, 11:03 amBill Drissel:
Missing in the post and comments: the enormous affluence of Americans who can crowd a huge park @$400 for a family of four.
May 30, 2015, 10:40 amBest regards,
Bill Drissel
Frisco, TX