We’re Disney fans – at least, that’s how we identify. Those of us who love visiting Walt Disney World, or who surf the web looking for that one song from that attraction we love, or who cruise eBay waiting for that vintage piece of Disney memorabilia to pop up. We think we’re fans.
Unfortunately, we aren’t. We may have love for Disney – love borne out of nostalgia, fun, and family – but we aren’t really fans. Not to Disney. They call us guests, yes, but that’s not who we really are to them. We are their customers. Plain and simple. Because, despite acting like our friends, they aren’t – they’re a supermassive corporation.
And that’s not inherently a bad thing!
It may be a bit on-the-nose to put it so bluntly, yes, but it’s totally OK to like the products a corporation sells, and even to feel loyal to them. That relationship is part of the fundamental fabric of our country – supporting entities which give us the products we like. But it’s important to acknowledge that, beneath the pleasant and friendly exterior, there exists a machine designed to do one thing and one thing only: Separate you from your money as efficiently as possible. As long as you feel like you’re getting your money’s worth, it’s a win-win for everyone.
But there is a negative to the kind of loyalty we’re all grown to have for Disney. As much as we may love them, they cannot love us back. “They” are really an “it” – a soulless entity that, officially, is only embodied by a sheet of paper registered in California. “It” has shareholders. “It” is judged not by the smiles that it creates, but by the increased revenue it generates. “It” cannot have friends. Cast Members can be your friend. Bus drivers, mousekeeping, and desk attendants can be your friends. Disney, however, cannot.
Because Disney isn’t your friend, it doesn’t feel the same loyalty to us as we do to it – it feels loyal only to its shareholders, who grow more demanding year after year. It’s not enough for the shareholders that Disney makes money – which it does – instead, they want the company to be making more money each consecutive year. That’s how corporations work. And now, to please those shareholders, Disney is adopting a new strategy – one which is pricing out a lot of people.
This is a gross simplification, but go with me here – there are two ways to build a business: The first is to price your product in such a way as to encourage the most amount of people possible to purchase it. This means you have a slightly lower pricing structure, but a broader consumer base. The second method is to charge higher prices – meaning you have a smaller consumer base, but that lesser number of people pay more and more.
For the longest time, Disney did business from that first group, as evidenced by its structure of “Deluxe, Moderate, and Value” resorts – they wanted everyone. But recently, they’ve begun the shift toward the latter group, opting for more private, luxurious experiences to a select few.
Why would they want to do that? What does it mean for those of us who love Disney? What will it mean for the future of the company? We’ll get to that, but first, let’s look at the one company Disney looks up to: Apple.
How Apple has Become America’s Most Valuable Brand, and Why Disney is Copying It
The common story of Apple Computers goes like this: Steve Jobs and Steve Wozniak invent the personal computer. After a few years of growth, Jobs gets pitched out on his own, where he starts his own company – building better computers – knowing that Apple would eventually have to buy his company and bring him back. They do, and his obsession to detail means that Apple creates the best (and, you know, most expensive) products on the market, pushing them to higher and higher heights.
It’s a good story, but here’s the thing: Why are Apple products are inherently better? They work with fewer applications. They are more expensive to repair. And, perhaps most importantly, they are vastly more expensive than their non-Apple competitors. Even if they are better, which is largely subjective, are they hundreds or even thousands of dollars better?
It doesn’t actually matter, because Apple isn’t selling you a laptop. Apple is selling you a piece of art that makes you feel a certain way when you look at it and use it. The guts of it aren’t worth the extra thousand dollars, but the feeling you get when you feel the cool metal in your hands might be.
That’s what made Steve Jobs a genius – he knew that what makes technology valuable isn’t necessarily what it can do, but how it makes you feel. Apple products make you feel like a cooler version of yourself, and people pay a premium to achieve that feeling.
And that’s Apple’s business model: They aren’t trying to sell laptops to as many people as possible, they’re trying to sell expensive laptops to as many people as possible. That’s a unique thing in business, and it only really works when you have customers that are loyal – and Apple customers are as loyal as can be.
So, if you look at Apple’s valuation – which is over $700 Billion – it’s not hard to see why Disney might be envious. And it’s definitely not hard to see why Disney might try to follow in their footsteps and become, for all intents and purposes, a luxury brand. Disney already creates amazing experiences, and so they clearly think those experiences are worth more than what they’re currently getting for them.
Disney is getting more expensive by the year … a lot more
Disney’s ticket price increases have nearly always outpaced inflation, but in recent years, they’ve grown at an ever faster rate. A one-day ticket to the Magic Kingdom currently costs $105. In the year 2000, it cost $46 – which, if you adjust for inflation, would be only $63.40 in 2015 money. That means that, in real dollars, it costs about $40 more to visit the Magic Kingdom today than it did 15 years ago.
If you go even farther back, that increase is even more striking. In 1985 one-day ticket cost $23. In 2000 dollars, that equals $36.81 – which means the cost of a Disney ticket only increased about $10 in real money between 1985 and 2000.
So, why have ticket prices increased by roughly $40 in the last 15 years when they only increased by $10 in the 15 years before that? Not only is it getting more expensive to go to Walt Disney World, it’s getting expensive more quickly than it ever has before.
And this holds true not just for tickets, but also for hotels. Kevin Yee at MiceChat put together a similar comparison of hotel rates from 2003-2013 and noticed the same thing – Disney doesn’t just increase its rates, it increases them at a greater rate over time.
This all came to a head with this year’s announced Annual Pace price increases, which seemed to be a tipping point for many. And, interestingly, Disney defended its decision by pointing to increased attendance and capacity issues throughout its parks – a more expensive ticket price means a more manageable crowd. Supply and demand, it says, dictates that when demand gets this high, the price must follow too.
And so, now, Disney has ticket prices that vastly outstrip those of their competitors. Yet, not only to people still go, but they go in record numbers. Why? Because Disney has successfully positioned itself as an item of luxury – you aren’t just paying for the rides and shows, you’re paying for the specific Disney experience.
Ultimately, if Disney loses a few guests in the process, it doesn’t actually care – the company makes enough money off the increased prices that it is still a net gain in the long run. Thus, it can make more money off fewer sales – the very business Apple perfected.
What are “event packages” and why are they taking over?
But the base ticket price and rack room rates aren’t the only ways Disney has been increasing the overall cost of its vacations. The company has become an expert in the art of the “event package,” which truly came to take over Walt Disney World in 2015.
Take, for example, the Fantasmic Dining Package – one of the classic examples of Disney’s event packages. That package includes dinner at one of the Disney’s Hollywood Studio’s signature dining restaurants, as well as a guaranteed seating area for a showing of Fantasmic. That package is $63 per adult dining at the Brown Derby, or $45 per adult dining at Mama Melrose’s. That is a lot of money for what amounts to a dinner and a Fastpass.
Nevertheless, that package has always been immensely popular, ever since the show debuted in 1998. And, it has since inspired similar packages all throughout Walt Disney World. Some aren’t even tied into special events – some are just special events. During Illuminations at Epcot, guests have the opportunity to join a special dessert party that includes preferred viewing of the nighttime spectacular. Its cost? $49 per adult.
And then, of course, there’s the biggie: the New Year’s Eve Dinner party at the California Grill, which costs a whopping $625 per person. That’s not a typo.
All of that isn’t counting the various holiday parties and Villians Unleashed-style events that occur throughout the year – all of which require their own special ticket, separate from theme park admission.
Why are these events taking over? Well, they’re a way for Disney to bring in more money while offering up a luxury experience. Sipping champagne, eating a cannoli, and watching Illuminations is as luxurious as it gets – and Disney knows, correctly, that a great many people will pay for that privilege.
The problem isn’t that these events exist, of course. They’re actually pretty cool, albeit quite expensive. The problem is that Disney is choosing to spend its time and resources on these types of events, rather than things that everyone can enjoy. And that, ultimately, might be a miscalculation.
Why This Strategy Might Be a Mistake for Disney Long-Term
Walt Disney World is a success because of its cultural ubiquity. Everyone knows what it is, and a large percentage of the U.S. population has visited it at least once. There are a number of reasons for that, but the biggest is its accessibility.
For generations, Walt Disney World was an attainable vacation destination for millions of middle-class families. So attainable, in fact, that many made it an annual tradition. Out of this annual tradition, the Disney Vacation Club was born. That business has been so popular, each year seems to see the announcement of new construction projects for DVC properties.
Now, with price increases being what they are, the average returning Disney guest will be back once every three years. As the prices for tickets and lodging continue to rise, the time between visits will grow as well.
When an annual Disney trip was an attainable dream for a middle-class family, that family’s connection to the place was more powerful. They couldn’t afford to go to Paris, no, but they could visit the World Showcase. Now, if it’s a more fleeting memory, the passion wanes and – in time – so too will the desire to spend more money on it.
And so, what Disney is hoping is that a new class of wealthy traveler will chose to visit Disney, thereby making up the cost of those families who don’t vacation to Disney each year. The fault in this logic, however, is that it assumes those wealthy travelers will return again and again – not a certainty when you consider the price of a Disney trip is now on par with a European vacation. Why keep coming back to Walt Disney World when you can see the rest of the world, too?
For Disney to continue to grow with a smaller consumer base, it has to continue to grow, change and differentiate itself from its competition. At a more expensive price point, that competition includes pretty much anywhere else people want to take a vacation. If it continues to operate at the lackadaisical pace it has been operating at when it comes to developing new rides, attractions, hotels, and experiences, that smaller consumer base will move on to something else.
If Disney wants to be more like Apple, it needs to give the same level of instant gratification Apple does with its new product launches, which come nearly every year. That means it can’t keep taking most of a decade to build things like Pandora: The World of Avatar.
Why the Middle-Class Should Matter to Disney
Perhaps with America’s dwindling middle class, Disney is making the right move by turning itself into a luxury commodity, but it’s hard not to look at its newest parks abroad – those in Shanghai and Hong Kong – and see destinations bolstered by China’s burgeoning middle class. Clearly Disney sees the virtue of that demographic overseas, but perhaps it thinks America’s middle class isn’t large enough to be worth the effort.
But if Disney continues to price out the middle class, it will be in for a shock if that middle class grows once again in the United States. It was in such an environment in the 1950s that America’s first recreation boom came about – seeing the growth of things like bowling alleys, movie theaters, and amusement parks. If that happens again, Americans will once again look to leisure activities, but if the middle class can’t afford Walt Disney World, their eyes might turn elsewhere – like, maybe, Universal.
That would be a real tragedy for Disney, a company which grew into the enormous enterprise it is today due to the devotion of the middle class to its works. Disneyland was built for the vacationers of the 1950s. The old cinemas were filled with Disney films. Disney was the company of leisure, and generations felt connected to them because of it.
The goal of a vacation should be to escape all of these problems – to turn your mind off and simply relax. And for now, Walt Disney World is still such a place. But as the prices continue to rise, it’s hard not to enjoy it while also having a nagging thought in the back of your head: “Yes, I’m enjoying it – but is it actually worth it?” For some, that answer will always be yes – even if they have to come back less and less often just so they can afford it.
For others, the answer will be no, meaning their children will no longer have that same emotional connection to the place, and so on down the line. The experience Disney is selling will, to that next generation, be worth slightly less.
And so, for Disney, the goal shouldn't always be to make the most money in the short-term, or even the near long-term. There's added value in teaching the next generation to love Disney, even if that means making a little less per family. We're all Disney fans because of the memories we created there -- but those memories aren't tied to a hotel room, a MagicBand or a Fastpass+ reservation. They're tied to the people we were with and the times we spent together. And families will continue to have those experiences, they just might not be at Walt Disney World.
Thus, years from now, when the next generation takes their own kids to enjoy the world beyond the Mouse, Disney will have no one to blame but themselves.
Or, rather, itself -- it's a corporation, remember?