Narrator: In 2018, Disney World raised its ticket
prices, twice.
Take the park's platinum pass for example,
it's the standard option that grants access to
all four parks with no blackout dates.
In February, the price went from $779 to
$849, then in October its price jumped from $849 to
$894, as Disney unveiled its dynamic pricing model.
That's a 15% increase in just one year.
This is the fourth time in park history that annual
pass prices were raised twice in the same year.
The first time was 1997 in anticipation of Animal
Kingdom's 1998 opening. Similarly, the price markups
in 2018 are in advance of Disney World and Disneyland's
14 acre Star Wars theme lands, called "Galaxy's Edge."
And Disney parks expansion doesn't stop there.
Hong Kong Disneyland is spending $1.4 billion on
Avengers and Frozen themed attractions.
On top of that, it's adding capacity to Tokyo Disney Sea,
and updating Epcot and Disney Studio park at
Disneyland Paris.
Despite all the costly expansions, Disney Parks and Resorts
reported a $4.5 billion operating profit for the
2018 fiscal year.
That's over 100% increase from 2013.
So, if it is steadily profiting,
why are Disney Parks becoming so expensive?
From the mid-80s into the early 2000s,
Disney Parks pulled way ahead of its competition.
In 2002, Magic Kingdom's attendance alone nearly
doubled its closest non-Disney competitor, MGM Studios.
But in 2010, that changed when Universal opened the
Wizarding World of Harry Potter.
Robert Niles: It was game on
in this business all of a sudden
Disney had a competitor again and
Disney does not like to lose,
not just lose, Disney doesn't even like to compete.
Disney wants to dominate its competition.
Narrator: Disney launched a full out retaliation against
Universal and other competitors.
In 2011, it announced Pandora, its Avatar themed
attraction located in Animal Kingdom.
Then over the following six years, it opened new
attractions in all four major parks. And by 2017
Disney Parks claimed 55% of North American theme
park attendance.
Niles: This has been really successful,
so everybody wants
to come during summer vacation and Christmas when
their kids are out of school.
And the trouble is that if you spent billions of
dollars really to build these attraction facilities.
They are open 365 days a year. It's just not efficient
to have them filled to the brim for four, five, six
weeks out of the year and then not so much the rest
of the time.
So, they really want to use all of their pricing
and promotions to try and equalize the crowds
throughout the year.
Narrator: Disney World's second price hike of 2018
included a switch to dynamic pricing.
Charging higher prices during those peak summer
months and winter holidays and encouraging volume purchases.
Niles: Disney understands the demographic changes that
are happening in the United States at this point.
They understand what's happening with income and
economic inequality.
They know that the money is in the upper level,
the top 10%, the top 1%.
They've created a wide variety of new products
to try and, frankly, extract more money out of the
people who have money to spare.
Narrator: Disney has several new offerings targeted at
its wealthiest visitors, including dinners with
Disney princesses, two Bibbidi Bobbidi Boutiques
that offer a makeover, hairstyling, and costumes.
And even private VIP tours of the parks. But the
luxury offerings go beyond activities in the parks.
In 2014, Orlando's first five-star resort opened on
the Disney grounds, a Four Seasons resort with rooms
starting at $449 a night. And Bora Bora Bungalows
that cost $29 dollars when the park first opened
can reach prices of $3,400 today.
Niles: Now the down side with that is
if you are one of those remaining middle class
people in America, you could get squeezed here.
Narrator: Since 2000, Disney World prices have steadily
increased while wage growth has been falling from
its 2001 high of 5.4%.
And in 2018, Disney Parks reported a 5% increase
in per capita spending in the parks and an 8% uptick
in per room revenue in hotels.
Niles: Disney's done such a good job at
becoming a cultural institution in the United
States. It's done such a good job of becoming
a lifestyle brand that some of the people who may
have been early adopters to this brand are really
feeling some pressure right now, because of the
way the company is growing.
People who were early adopters to this are used to
a middle class pricing model that just doesn't
really work in the modern economy anymore. And they
feel frustrated that they put a lot of loyalty into
this brand, into this company and now they feel like
they really have to stretch to keep up.
And that's tough, but at the same time, if Disney's
going to grow, it's got to go where the money is.
It's got to go in a direction that allows it to get
maximum value from its investments and limiting itself
only to its early adopters isn't going to allow the
company to do that.