A recent report in the Wall Street Journal indicates that Disney is growing concerned at the results of its own strategy, as a bid “capitalize on parks demand” with higher prices is scaring off consumers who are balking at the cost of a visit to the Magic Kingdom. A Harris poll of 2,000 households commissioned by the paper found that 74% of respondents felt that a Disney vacation was “financially out of reach.” The Journal also cites a LendingTree survey of another 2,000 households from June of last year finding that 45% had gone into debt in order to finance their visit to Disney Land. But Disney doesn’t have to take anyone else’s word for it, as their own surveys of theme park guests have found that fewer are planning return trips, a development that former employees tell the Journal is raising “serious concerns” at the company.
Executives are seeing that stated intent in lower-than-expected park attendance growth, which only grew by 1% in the fiscal year ending last September, a far cry from the previous year’s 6%. Overall revenue did not suffer as much of a blow, as they’ve also seen a 3% rise in per-person spending on food, merchandise, and tickets over the past two years. Still, the figure reflects the company’s increasing reliance on fewer consumers accepting their higher prices. “There’s concern that maybe they’ve pushed it as far as they can,” said Doug Creutz, an investment bank analyst who covers Disney.
The decision to squeeze more out of the parks business is attributed to Bob Chapek, Disney’s CEO from February 2020 to November 2022. Seeking a speedy recovery from the COVID crisis and exploit pent-up demand, Chapek and Disney’s Experiences (the division that runs Disney Parks) chairman Josh D’Amaro tweaked prices and cut services across the whole experience of a Disney Park visit, from rising food and merchandise prices, to the scrapping of the free airport shuttle. Each one of the tweaks could have a major effect on Disney’s bottom line. The line-skipping payment system implemented by Chapek called Genie+ (now known as Lightning Pass), which replaced the previously no-cost FastPass ride scheduling system, netted the company $724 million in pre-tax revenue between October 2021 and June 2024 at just one park, according to the Journal.
Chapek has since left and former CEO Bob Iger is back in the driver’s seat, but there’s no painless way to make up for the lost goodwill from fans without eating into the bottom line. In the short run, backing off planned price hikes only looks like money left on the table to shareholders, especially with no direct guarantee that it will bring people back. This could send the media conglomerate’s share price tumbling farther than it already has since announcing a dip in revenue last August. All this comes as the Experiences division has become the media conglomerate’s key business, accounting for 70% of Disney’s overall operating income in 2023, up from 35% in 2018.
Disney’s CFO Hugh Johnston in December called last summer’s feeble demand a “hiccup,” confident that the Experiences division’s newly constructed attractions and expansions will bring people in.
