News Disney CFO Hugh Johnston Says Dynamic Pricing Is Coming to the Parks

[monothingie]

One question I have is how does this affect the broader travel agent exosphere? Maybe @PREMiERdrum and others can speak to this, but how in the world could they reliably quote a possible series of options with the 60-minute price hold? Unless there’s a special 24-hour for TAs.

With the current system, TAs can hold reservations for 2 or 3 days before it goes back to the pool unless a deposit is made.

 

[FerretAfros]

Dynamic pricing on food would be hilarious. Oh, you want to eat lunch at 12:30 when everything is busy? That will cost $45. You want to eat lunch at 3? Only $25.

Or, it's hot today and we're selling a lot of ice cream. Double the price.

They already tried a simplified version of dynamic pricing for food about 10 years ago: popular character buffets like Chef Mickey's and Crystal Palace charged $5 or $10 more during the peak Christmas week. Not because anything different or better was offered, but because Disney felt that they could.

Of course, this was unpopular with guests and was quietly retired after only a year or two.

And the year-round prices increased instead.

 

[monothingie]

I'd be curious to see how this affects hotel occupancy. Put aside the general disgust for the concept of Dynamic pricing, but an empty room generates $0 in revenue. We pretty much know that the price changes will only be upwards, and Disney constant moves inventory around to different promotion campaigns and also to wholesalers like Priceline and Hotels.com.

Does this mean more empty rooms as a result of ironically a dynamic pricing scheme that is inflexible to make available rooms that will never be sold?

Most guests aren't chumps and are not going to look back, especially if the price point only goes up. If they're basing a US rollout on how the Europeans did it and with data collected and feedback derived from DLP, they're going to be very surprised at how big of a mistake they're making.

 

[JoeCamel]

So you're telling us that Disney management has been supplanted by AI...?

Could you tell the difference if it were?

 

[drizgirl]

I'd be curious to see how this affects hotel occupancy. Put aside the general disgust for the concept of Dynamic pricing, but an empty room generates $0 in revenue. We pretty much know that the price changes will only be upwards, and Disney constant moves inventory around to different promotion campaigns and also to wholesalers like Priceline and Hotels.com.

Does this mean more empty rooms as a result of ironically a dynamic pricing scheme that is inflexible to make available rooms that will never be sold?

Most guests aren't chumps and are not going to look back, especially if the price point only goes up. If they're basing a US rollout on how the Europeans did it and with data collected and feedback derived from DLP, they're going to be very surprised at how big of a mistake they're making.

I don't know how many hotel rooms they have at DLP, but my hunch is that it's nothing like WDW. It's a mistake to base this model on that one.

 

[Tha Realest]

Could you tell the difference if it were?

An infinite number of monkeys tapping a an infinite number of keyboards couldn’t have composed the phrase “Authentically Disney and Distinctly Chinese,” but they also wouldn’t have done a lot of the things the Park division’s done in the last few years.

 

[monothingie]

I don't know how many hotel rooms they have at DLP, but my hunch is that it's nothing like WDW. It's a mistake to base this model on that one.

Comparing European purchasing behavior to American may be problematic.

 

[Tha Realest]

I don't know how many hotel rooms they have at DLP, but my hunch is that it's nothing like WDW. It's a mistake to base this model on that one.

Wasn’t the word on DLP that they had a huge glut of rooms?

 

[DCBaker]

And as mentioned above, this is for rooms and park tickets, not for meals or water.

Whoever said that (not going to check) cannot read and you just parroted bad information.

From the main article:

Here's a section from the transcript of the Q&A about this:

Stephen K. Hall, Media and Cable Analyst, Wells Fargo: Just to go back to your comment on the higher-income decile, where you tend to index to on the consumer side, and you talked about the strong per caps spend you saw in the year, I think you’ve had this yield-based approach to managing your domestic parks over the last few years. Some of the work we’ve done suggests that’s a lot of the reason those margins have been so strong. Can you speak a bit about the yield-based approach and what that means for how you manage the assets?

Hugh Johnston, Chief Financial Officer, The Walt Disney Company: Yeah, we do very much focus on how to basically generate incremental revenue, both at the ticket price level, as well as food and beverage and merchandise and all the ancillary services that we offer, like Lightning Lane and VIP tour guides and those types of things. The team has really gotten increasingly better at getting that yield up, particularly in years where we’re not adding capacity in a particular park. That’s going to be the primary growth driver, is all of that yield focus. In addition to that, we’re actually investing in creating dynamic pricing. We’re doing it in Paris right now. We’ve been doing it for about a year. It’s off to a very good start, but we’re really going to make sure we optimize it before we bring it into the domestic park.

That’s probably something that you won’t see this year, but you may see in the subsequent years.

Stephen K. Hall, Media and Cable Analyst, Wells Fargo: Is the kind of airline pricing model the best way to think about it?

Hugh Johnston, Chief Financial Officer, The Walt Disney Company: I’d like to not think about it that way, to be honest with you. Yeah, similar. We already do it in the hotels to some degree, so this is basically just bringing it in the parks, but done in a way that obviously doesn’t create guest experience issues or consumer negative feedback and all of that. Frankly, so far in Paris, we haven’t seen any.

 

[Sirwalterraleigh]

They already tried a simplified version of dynamic pricing for food about 10 years ago: popular character buffets like Chef Mickey's and Crystal Palace charged $5 or $10 more during the peak Christmas week. Not because anything different or better was offered, but because Disney felt that they could.

Of course, this was unpopular with guests and was quietly retired after only a year or two.

And the year-round prices increased instead.

I believe they still do this?

Or they just increase them $5 a year

Both would be big hits!

 

[Sirwalterraleigh]

Here's a section from the transcript of the Q&A about this:

Stephen K. Hall, Media and Cable Analyst, Wells Fargo: Just to go back to your comment on the higher-income decile, where you tend to index to on the consumer side, and you talked about the strong per caps spend you saw in the year, I think you’ve had this yield-based approach to managing your domestic parks over the last few years. Some of the work we’ve done suggests that’s a lot of the reason those margins have been so strong. Can you speak a bit about the yield-based approach and what that means for how you manage the assets?

Hugh Johnston, Chief Financial Officer, The Walt Disney Company: Yeah, we do very much focus on how to basically generate incremental revenue, both at the ticket price level, as well as food and beverage and merchandise and all the ancillary services that we offer, like Lightning Lane and VIP tour guides and those types of things. The team has really gotten increasingly better at getting that yield up, particularly in years where we’re not adding capacity in a particular park. That’s going to be the primary growth driver, is all of that yield focus. In addition to that, we’re actually investing in creating dynamic pricing. We’re doing it in Paris right now. We’ve been doing it for about a year. It’s off to a very good start, but we’re really going to make sure we optimize it before we bring it into the domestic park.

That’s probably something that you won’t see this year, but you may see in the subsequent years.

Stephen K. Hall, Media and Cable Analyst, Wells Fargo: Is the kind of airline pricing model the best way to think about it?

Hugh Johnston, Chief Financial Officer, The Walt Disney Company: I’d like to not think about it that way, to be honest with you. Yeah, similar. We already do it in the hotels to some degree, so this is basically just bringing it in the parks, but done in a way that obviously doesn’t create guest experience issues or consumer negative feedback and all of that. Frankly, so far in Paris, we haven’t seen any.

Well that totally confirms the worst case scenario

 

[DLR92]

Disney need to stop thinking their parks and resorts are world class destinations when it a glorified theme park complex.

 

[wdwmagic]

I can’t find any articles on it right now, but years ago during peak times they would print little "coupons" on your receipt that offered 10% merch or food discounts if you ate or shopped outside of specific times, I could see something like that happen again

Dine at Magic Kingdom quick service and receive discount coupons for Disney Springs Marketplace shopping

A 10% discount at many Marketplace stores and a 15% Disneys Days of Christmas discount is available with certain purchases from tomorrow.

www.wdwmagic.com

 

[KDM31091]

At this point, I think Disney coffee mugs and collectable pins might be a more sound investment than their stock.

At least with the merch, you're guaranteed consistent year-over-year gains.

Yup. Mugs were $12 ish in the not distant past and are now $25 a lot of the time

 

[KDM31091]

Disney need to stop thinking their parks and resorts are world class destinations when it a glorified theme park complex.

Especially when they seem intent on destroying a lot of things that make it what it is

 

[Sirwalterraleigh]

Here's a section from the transcript of the Q&A about this:

Stephen K. Hall, Media and Cable Analyst, Wells Fargo: Just to go back to your comment on the higher-income decile, where you tend to index to on the consumer side, and you talked about the strong per caps spend you saw in the year, I think you’ve had this yield-based approach to managing your domestic parks over the last few years. Some of the work we’ve done suggests that’s a lot of the reason those margins have been so strong. Can you speak a bit about the yield-based approach and what that means for how you manage the assets?

Hugh Johnston, Chief Financial Officer, The Walt Disney Company: Yeah, we do very much focus on how to basically generate incremental revenue, both at the ticket price level, as well as food and beverage and merchandise and all the ancillary services that we offer, like Lightning Lane and VIP tour guides and those types of things. The team has really gotten increasingly better at getting that yield up, particularly in years where we’re not adding capacity in a particular park. That’s going to be the primary growth driver, is all of that yield focus. In addition to that, we’re actually investing in creating dynamic pricing. We’re doing it in Paris right now. We’ve been doing it for about a year. It’s off to a very good start, but we’re really going to make sure we optimize it before we bring it into the domestic park.

That’s probably something that you won’t see this year, but you may see in the subsequent years.

Stephen K. Hall, Media and Cable Analyst, Wells Fargo: Is the kind of airline pricing model the best way to think about it?

Hugh Johnston, Chief Financial Officer, The Walt Disney Company: I’d like to not think about it that way, to be honest with you. Yeah, similar. We already do it in the hotels to some degree, so this is basically just bringing it in the parks, but done in a way that obviously doesn’t create guest experience issues or consumer negative feedback and all of that. Frankly, so far in Paris, we haven’t seen any.

@Dranth

…which way are we leaning on those 2 scenarios?

 

[Sirwalterraleigh]

Disney need to stop thinking their parks and resorts are world class destinations when it a glorified theme park complex.

They work(ed) when they presented them as world class theme park complexes…expectations were met far more often than not.

What’s the ratio (in reality…not nametag ) now?

Hell…when people 30 years into their timeshare that got it for a song are constantly underwhelmed…ask around

 

[Biff215]

I believe they still do this?

Or they just increase them $5 a year

Both would be big hits!

Agreed. Last I looked you couldn’t find the current price for a fixed price meal.

 

[HauntedPirate]

Agreed. Last I looked you couldn’t find the current price for a fixed price meal.

Prices are in MDE.

 

[HMF]

How long has this guy been CFO?