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

[flynnibus]

And a major reason for the hyperinflation of all those take-out joints is that demand has plummeted due to those who used-to do it, so these places (mostly mom & pops) have to still make-ends-meet by (in part) drastically increasing their prices for those who can still swing it (although that continues the cycle of less and less affording to take out).

Their biggest expense is labor... and labor costs are through the roof due to pressures for higher minimum wages and trouble staffing. Inventory prices are up due to prior disruptions. Overhead expenses only increase.

When labor rates more than double in a short period of time... the downstream effects are multiplied in so many ways. When you boost the lowest wages by 50%.. literally 'everything gets more expensive'. Throw in there politics like disrupting globalism and further messing with labor.. and you get even bigger inflation pressures.

Disney's labor impacts shuffled by the union contract windows. Disney is dealing with higher cost of goods, but is also highly optimized and best positioned to work with vendors. The problem is, Disney's model means they can't really risk cutting margins without hurting the key stock numbers.. so they are constantly trying to use pricing to fuel revenue increases. They either expand, or increase prices. They can't increase volume/utilization really.. so as those 'low periods' are filled in.. we're at the stuff we see how.

 

[jah4955]

Sadly, it is looking like we will never have grandkids, only step grandchildren.

I know of so, so many from the Silent Generation and Boomers (several dozen...maybe 100+ that I personally know) who will never have biological grandchildren, especially since their daughters are beyond childbearing age.

I even know some, yes still alive, from the "Greatest Generation" who lament they will not have great-grandchildren (b/c they're granddaughters are already past childbearing years.

We're in big trouble imho.

 

[DisneyHead123]

The issue for Disney is this isn't just normal churn. Without the repeat customers Disney's EXISTING demand line would collapse. Disney today has an insanely high percentage of their annual demand from customers who are loyal repeaters. Disney doesn't just have to advertise to the new age group to stay afloat, they have to gain many times over the number of customers they lost.. because the loyal repeater who maybe came 4-5 times every two years is gonna take 4-5 NEW customers to replace them. So it's not just 'lose one, win one, repeat annually'..

I mean it's not unthinkable that new visitors will visit as much as current visitors. And I'm sure there are ways Disney could either encourage or disincentive that. That said, we are mostly talking about how to woo the next generation here, so I'll move on to that.

(Note - if this is getting too off topic I'm happy to start a new thread to discuss.)

This is my take. I think Disney gets locked into an un-winnable situation with fans here. The idea is that they are supposed to make park prices cheaper so that lots of families can attend, with the assumption that today's children will fall in love with Disney like Boomers and Millennials did. And yet parks are already too crowded, and fans want lots of expensive updates and high tech new rides each year, which cost quite a bit, and the highest level of 1970's-reminiscent service.

There's also a sentiment of "No updating parks to include things that weird Gen Alpha actually likes because ew." (That sounds critical but honestly I kind of agree with the sentiment - I want Gen Alpha to fall in love with Disney but I simultaneously do not want Disney to become the hyperkinetic, meme filled digital experience that Gen Alpha seems to favor. Oh, also with random building blocks, Gen Alpha can't get enough of building random stuff with blocks, be they real or digital. They crave the highest tech in the world so that they can essentially build with Duplos, it's the weirdest thing.)

I'm not sure where you fall on any of this, but my thought is there has to be compromise. If people really want the next generation to love Disney, they may have to tolerate some of that Gen Alpha ADHD Thinking Style in the parks. If not, they can enjoy classic, nostalgic Disney which I love, but with the realization that this may be more niche with the next generation. If people really want tickets to be less expensive there may need to be a realization that there's a tradeoff between ticket prices and crowds, as well as ticket prices and spending on the parks. And yes, I understand that Disney could spend more on the parks and not go bankrupt, of course - but it's also reality that they are working in a capitalistic framework, they are not a nonprofit. So the need for those margins to remain large is what it is, and that's not changing, as much as I as a park goer would like them to just put 80% of the extra back into the parks.

 

[jah4955]

Their biggest expense is labor... and labor costs are through the roof due to pressures for higher minimum wages and trouble staffing. Inventory prices are up due to prior disruptions. Overhead expenses only increase.

When labor rates more than double in a short period of time... the downstream effects are multiplied in so many ways. When you boost the lowest wages by 50%.. literally 'everything gets more expensive'. Throw in there politics like disrupting globalism and further messing with labor.. and you get even bigger inflation pressures.

Disney's labor impacts shuffled by the union contract windows. Disney is dealing with higher cost of goods, but is also highly optimized and best positioned to work with vendors. The problem is, Disney's model means they can't really risk cutting margins without hurting the key stock numbers.. so they are constantly trying to use pricing to fuel revenue increases. They either expand, or increase prices. They can't increase volume/utilization really.. so as those 'low periods' are filled in.. we're at the stuff we see how.

to quote Piglet: "what a...what a mess"

 

[jah4955]

I mean it's not unthinkable that new visitors will visit as much as current visitors. And I'm sure there are ways Disney could either encourage or disincentive that. That said, we are mostly talking about how to woo the next generation here, so I'll move on to that.

(Note - if this is getting too off topic I'm happy to start a new thread to discuss.)

This is my take. I think Disney gets locked into an un-winnable situation with fans here. The idea is that they are supposed to make park prices cheaper so that lots of families can attend, with the assumption that today's children will fall in love with Disney like Boomers and Millennials did. And yet parks are already too crowded, and fans want lots of expensive updates and high tech new rides each year, which cost quite a bit, and the highest level of 1970's-reminiscent service.

There's also a sentiment of "No updating parks to include things that weird Gen Alpha actually likes because ew." (That sounds critical but honestly I kind of agree with the sentiment - I want Gen Alpha to fall in love with Disney but I simultaneously do not want Disney to become the hyperkinetic, meme filled digital experience that Gen Alpha seems to favor. Oh, also with random building blocks, Gen Alpha can't get enough of building random stuff with blocks, be they real or digital. They crave the highest tech in the world so that they can essentially build with Duplos, it's the weirdest thing.)

I'm not sure where you fall on any of this, but my thought is there has to be compromise. If people really want the next generation to love Disney, they may have to tolerate some of that Gen Alpha ADHD Thinking Style in the parks. If not, they can enjoy classic, nostalgic Disney which I love, but with the realization that this may be more niche with the next generation. If people really want tickets to be less expensive there may need to be a realization that there's a tradeoff between ticket prices and crowds, as well as ticket prices and spending on the parks. And yes, I understand that Disney could spend more on the parks and not go bankrupt, of course - but it's also reality that they are working in a capitalistic framework, they are not a nonprofit. So the need for those margins to remain large is what it is, and that's not changing, as much as I as a park goer would like them to just put 80% of the extra back into the parks.

all good points....I can't not acknowledge there's no "one easy" fix. Yesterday I was reflecting on all the mountains of data Disney must process to make their conclusions (Disney+ program views, attraction visits, etc, etc)....

 

[Nubs70]

Surge Pricing: The joy of flying on Spirit Airlines/Ryan Air with the ambiance of MD 2020 in a paper bag.

 

[HauntedPirate]

I don’t think anyone ever said “the parks need to be cheap”. But overall price increases on a steady line instead of being shaped like a hockey stick may have been wiser. Maybe.

 

[flynnibus]

I mean it's not unthinkable that new visitors will visit as much as current visitors.

Only if they can create loyalists like they did before. Those aren't just 'visitors' -- Those are full on converts who not just buy a product, but are integrated with it. Lifestyle, life choices, etc.

Point is, it's not a 1:1 replacement to say "your spot will be taken by someone else". It takes getting many customers to replace a single loyalist because the loyalist is coming so often, and spending in other synergist ways too.

So imagine facing the world of.. "We are finding it difficult to recruit 5% new customers..." "Well, you gotta do better, because you really need 20% new customers.. every year"

This is why repeat loyalty is so valuable and every business focuses so much on satisfaction because return customers are cheaper to get.

This is my take. I think Disney gets locked into an un-winnable situation with fans here. The idea is that they are supposed to make park prices cheaper so that lots of families can attend, with the assumption that today's children will fall in love with Disney like Boomers and Millennials did. And yet parks are already too crowded, and fans want lots of expensive updates and high tech new rides each year, which cost quite a bit, and the highest level of 1970's-reminiscent service.

The negative impacts from crowds can be managed in other ways.. Modern Disney has used it as an excuse to use pricing as a way to deter and shape demand. The Disney of 1970s used crowds as the justification to work out how to increase their park capacity and reduce the negative impacts of long waits.

The pressure to deliver non-stop leads companies to focus on short term vs broader fixes.

There's also a sentiment of "No updating parks to include things that weird Gen Alpha actually likes because ew." (That sounds critical but honestly I kind of agree with the sentiment - I want Gen Alpha to fall in love with Disney but I simultaneously do not want Disney to become the hyperkinetic, meme filled digital experience that Gen Alpha seems to favor. Oh, also with random building blocks, Gen Alpha can't get enough of building random stuff with blocks, be they real or digital. They crave the highest tech in the world so that they can essentially build with Duplos, it's the weirdest thing.)

But this isn't new either.. Eisner forced the company to look beyond it's stale and aging profile to collaborate with others and break old stereotypes. Iger made the company a conglomerate of brands.

Change is always disruptive and not always welcomed by all - but if done WELL, it tends to grow on people and win out in the end. The difficult part for the company is to predict the kind of entertainment that will remain appealing to both new and old.. and that's what separates the creators from the copy-cats. Challenge is, Disney's track record here in recent times is pretty spotty.

I'm not sure where you fall on any of this, but my thought is there has to be compromise. If people really want the next generation to love Disney, they may have to tolerate some of that Gen Alpha ADHD Thinking Style in the parks. If not, they can enjoy classic, nostalgic Disney which I love, but with the realization that this may be more niche with the next generation. If people really want tickets to be less expensive there may need to be a realization that there's a tradeoff between ticket prices and crowds, as well as ticket prices and spending on the parks. And yes, I understand that Disney could spend more on the parks and not go bankrupt, of course - but it's also reality that they are working in a capitalistic framework, they are not a nonprofit. So the need for those margins to remain large is what it is, and that's not changing, as much as I as a park goer would like them to just put 80% of the extra back into the parks.

There are trends.. and there are specific implementations. Supporting a trend like interactivity, and getting an implementation like Sorcerors of the Magic Kingdom.. is an example of embracing change. Supporting digital experiences.. and getting app based queue elements is an example of embracing change. Shifting food options.. is an example of embracing change.

I don't lump punitive pricing strategies or monetizing demand in with those same kinds of lines of thought. "its busy, so prices had to go up" is overly simplistic rationalization and isn't the only option. It's one of the easist, and logical, but it is not the only way for a business to operate.

 

[Tha Realest]

I think demographic and societal changes are going to upend a lot, but may be particularly acute in Disney’s case. Look to who is actually having kids in the United States. Every person or family has their own reasons for having or not having kids, but increasingly the answer is “no” or later/maybe/TBD. According to recent data, the birth and fertility rates are highest the lower the economic group.

Birth rate by family income in the U.S. 2021| Statista

In 2021, the birth rate in the United States was highest in families that had under 10,000 U.S.

www.statista.com

Anecdotally, it seems the most fecund of those I know come from more conservative religious families. That bears out in some studies out there.

So, we have a growing situation where their paying customers is and continues to dwindle, where what remains of the middle class keeps getting pinched, and their future customer base will look a lot different than their current multigenerational one. So, the solution appears to be leaning most heavily into catering to fickle .

 

[KDM31091]

from Philadelphia (where most of my US-based family is from):

"a personal experience with rising prices. [1 woman] recently received a stack of take-out menus in her mailbox. After being surprised by the prices on the menus, she compared them to some older menus she had. A plain large cheese pizza ... has nearly doubled from $12 to $22. A regular hamburger is up to $9.50 from $4.95. A hoagie which was once about $7 is now $14.95. A nearby bagel shop which once sold a dozen bagels for $10 now charges $27. Her local Chinese take-out spot now offers fried rice or lo mein noodles for $17 – items which were once $7.95."

The ongoing inflation certainly doesn't make a superinflated WDW trip more feasible.

And at some point people just stop doing it as it's not affordable - in this case eating out. I know we have way, way cut back on it. It's not that we don't enjoy it but at some point it's just not worth the prices.

In my opinion, if Disney does not start stepping up their game and creating the quality they used to be known for, the younger generation will not think it's "worth it" and will not develop the affinity many of us have developed from prior years.

 

[Tha Realest]

Their biggest expense is labor... and labor costs are through the roof due to pressures for higher minimum wages and trouble staffing. Inventory prices are up due to prior disruptions. Overhead expenses only increase.

When labor rates more than double in a short period of time... the downstream effects are multiplied in so many ways. When you boost the lowest wages by 50%.. literally 'everything gets more expensive'. Throw in there politics like disrupting globalism and further messing with labor.. and you get even bigger inflation pressures.

Disney's labor impacts shuffled by the union contract windows. Disney is dealing with higher cost of goods, but is also highly optimized and best positioned to work with vendors. The problem is, Disney's model means they can't really risk cutting margins without hurting the key stock numbers.. so they are constantly trying to use pricing to fuel revenue increases. They either expand, or increase prices. They can't increase volume/utilization really.. so as those 'low periods' are filled in.. we're at the stuff we see how.

I appreciate this very thoughtful and cogent post. I’d also add this is why there is an intense pressure to replace than actually expand, because physical expansion and new attractions on top of what’s already there only increases ongoing operational and labor costs.

 

[DisneyHead123]

Only if they can create loyalists like they did before. Those aren't just 'visitors' -- Those are full on converts who not just buy a product, but are integrated with it. Lifestyle, life choices, etc.

Point is, it's not a 1:1 replacement to say "your spot will be taken by someone else". It takes getting many customers to replace a single loyalist because the loyalist is coming so often, and spending in other synergist ways too.

So imagine facing the world of.. "We are finding it difficult to recruit 5% new customers..." "Well, you gotta do better, because you really need 20% new customers.. every year"

This is why repeat loyalty is so valuable and every business focuses so much on satisfaction because return customers are cheaper to get.


The negative impacts from crowds can be managed in other ways.. Modern Disney has used it as an excuse to use pricing as a way to deter and shape demand. The Disney of 1970s used crowds as the justification to work out how to increase their park capacity and reduce the negative impacts of long waits.

The pressure to deliver non-stop leads companies to focus on short term vs broader fixes.


But this isn't new either.. Eisner forced the company to look beyond it's stale and aging profile to collaborate with others and break old stereotypes. Iger made the company a conglomerate of brands.

Change is always disruptive and not always welcomed by all - but if done WELL, it tends to grow on people and win out in the end. The difficult part for the company is to predict the kind of entertainment that will remain appealing to both new and old.. and that's what separates the creators from the copy-cats. Challenge is, Disney's track record here in recent times is pretty spotty.


There are trends.. and there are specific implementations. Supporting a trend like interactivity, and getting an implementation like Sorcerors of the Magic Kingdom.. is an example of embracing change. Supporting digital experiences.. and getting app based queue elements is an example of embracing change. Shifting food options.. is an example of embracing change.

I don't lump punitive pricing strategies or monetizing demand in with those same kinds of lines of thought. "its busy, so prices had to go up" is overly simplistic rationalization and isn't the only option. It's one of the easist, and logical, but it is not the only way for a business to operate.

That's a lot to respond to so I'm going to do bullet points:

- On Disney demographics - anything I say there will be just a guess. I'm sure Disney has plenty of data about the percent of occasional vs. frequent repeat visitors, the percent of new guests who become repeat visitors and so on, but I can't say I have strong opinions or intuitions about that one way or the other.

- On "price increases vs. other strategies such as capacity" - I do think it's fair to say that capacity has not kept up. But I don't think there's one "fix it" strategy that Disney has simply been avoiding. New lands are wonderful but increase attendance to some extent. New shows and small attractions are great but the parks actually have many walk-on attractions already, which guests don't generally utilize, as there's a tendency for everyone to ride the hottest new rides. That doesn't mean I'm in favor of "raise prices without any new offerings" - I'm not - but I do think that if Disney wants to keep up with fan demands for new things, they need to find ways of generating revenue to do that.

- What happened in the Eisner era seems a bit different than what is happening with Gen Alpha. Just look at the reception to Zootopia Better Zoogether, which was more Gen Alpha centric, to my mind (And trust me, that show looks like In Search Of Lost Time compared to half of what's on kid-centric Youtube. My son wants to watch Among Us Slap Battles at the moment.) But I do think they will have to incorporate some of this eventually, and you're right, fans will probably adjust.

My overarching point here is simply that I think the "make younger kids nostalgic for Disney" picture is more complex than it looks at first glance. I don't think it's like a simple, easy step that Disney obviously needs to take but is missing - I think there are a lot of tradeoffs involved that they are probably trying to balance.

 

[Ayla]

I know of so, so many from the Silent Generation and Boomers (several dozen...maybe 100+ that I personally know) who will never have biological grandchildren, especially since their daughters are beyond childbearing age.

I even know some, yes still alive, from the "Greatest Generation" who lament they will not have great-grandchildren (b/c they're granddaughters are already past childbearing years.

We're in big trouble imho.

I'm only 51!

 

[jah4955]

My overarching point here is simply that I think the "make younger kids nostalgic for Disney" picture is more complex than it looks at first glance. I don't think it's like a simple, easy step that Disney obviously needs to take but is missing - I think there are a lot of tradeoffs involved that they are probably trying to balance.

You just reminded me of the "Discover Disney" pass!

Early childhood: I only thought about Disney while I was there.
Later childhood: it was dern near impossible not to think of Disney every last moment of every day (that was in-part me recognizing more deeply the greatness of the experiences I had in early childhood, plus, plus, plus).

Gotta get these kids to see while they're still kids!

 

[DisneyHead123]

You just reminded me of the "Discover Disney" pass!

Early childhood: I only thought about Disney while I was there.
Later childhood: it was dern near impossible not to think of Disney every last moment of every day (that was in-part me recognizing more deeply the greatness of the experiences I had in early childhood, plus, plus, plus).

Gotta get these kids to see while they're still kids!

I sort of agree but I think there’s an assumption that childhood is the sweet spot, and I’m just not so sure about that. I did love Disney as a kid but I didn’t think about it from age 20-ish to my early 30s, when my nephew was born. Now it’s kind of a mom respite thing for me (not just the actual trips, the dreaming of the next trip, reading online news, etc.), which anecdotally seems to be a thing for a lot of moms juggling new levels of busyness and responsibility. To be fair, I have no way of knowing if I would feel differently now without the childhood memories. I like to assume I would, but who knows?

 

[jah4955]

I sort of agree but I think there’s an assumption that childhood is the sweet spot, and I’m just not so sure about that. I did love Disney as a kid but I didn’t think about it from age 20-ish to my early 30s, when my nephew was born. Now it’s kind of a mom respite thing for me (not just the actual trips, the dreaming of the next trip, reading online news, etc.), which anecdotally seems to be a thing for a lot of moms juggling new levels of busyness and responsibility. To be fair, I have no way of knowing if I would feel differently now without the childhood memories. I like to assume I would, but who knows?

it's nature and nurture

I can't think of possibly having a greater childhood. One of the privileges I had was being able to think of Disney as much as I did, before more and more responsibilities took precedence.

My overall impression is that WDW is best enjoyed by adults (especially if they went as children) BY seeing their children enjoy WDW, as they're enjoying it.

 

[BrianLo]

That estimate is based on what exactly?

Sorry forgot to hit post!

The percent of declared DVC rooms to current total onsite rooms. Not incredibly scientific, just some napkin math from Touring Plans.

Since you are questioning it: I’ll totally add that it fails to capture the tilt towards bigger units and likewise that Disney still rents out breakage for revenue rooms. I also wouldn’t know how to classify the guests who are renting from DVC guests. Not direct Disney revenue, but that crowd are still cash adjacent. It was just a quick calculation talking point.

 

[DisneyCane]

How about if you look it a couple times and the AI “shark” smells blood in the water and adjusts you just because?

The same AI that serves ads. Like when last night I needed to look something up in the owner's manual of my oven so I went to the Best Buy website to get the model number to look it up. Now today, on this very website, I keep getting ads for ovens. I'm sure I'll be getting some email deals for them shortly.

If the AI is reading this, I AM NOT LOOKING TO PURCHASE AN OVEN.

 

[Alice a]

He’s a Zillennial but also way ahead of the curve. The majority of the lucky core of Gen Z still are in various stages of higher education, living at home, on their parents cell phone plan, the older ones leaning on their parents for a house down payment. Or even with all that in the bag - I still bet using their parents DVC. The young end of the cohort is finishing high school, obviously.

When I say independent I mean DVC purchasing age, paying for their own Disney trips and cruises. Some of my cohort is helping finance their parents retirement, myself included. If your kids are there they are awesomely ahead of their average peers, but your eldest is also very in between.

Gen Z broadly are not the demo financing the families vacation choices - yet!

Of the 5 late-20s Gen Z employees I’ve hired in the past 2 years, all but 1 either still live with their parents or regularly receive financial assistance from them.

All but 1 have at least an undergrad college degree from an accredited institution.

They’ve all been hard workers, good people, but the cost of living is so high here

No one I work with, even management, would consider a WDW vacation or cruise, mostly due to cost, although several could easily afford it; it’s either not their thing, or they’re too fiscally responsible to consider it a reasonable expenditure.

One of them just spent $10K for a couples trip to France, and one just went on a very pricey 2-week fishing trip out west to a historic resort while his wife did the full spa package almost the whole time.

We’re a 6-hour drive from WDW. Almost all the staff went as children or young adults, depending on age, some multiple times.

 

[Sirwalterraleigh]

It tends to be a bit overstated how large the DVC pool is. We’re only coming up on 12.5% of onsite/onsite-partner guests. If you mix in off site, DVC are still single digits of the attendance mix.

It’s still important strategically and contributes some attendance smoothing.

Likewise the locked in part is a bit of a lie the people who still clearly want to go tell themselves. Exceptionally easy to rent out points.

I do think DVC functionally is analogous to Disneylands AP base.

…..ummmm

I’m waiting to live on your planet…the one where there’s a 75,000,000 member customers pool of seldom/one timers who line up outside Disney gates each year…
With a ridiculous level of churn by default