Iger: Disney will dial back on park discounts in latter part of 2010

[JeffH]

Disney loses nothing with room discounts

Annual Passholder discounts for January are 45% off. No amount of "HUGE" price hikes can save Disney from losing money. Same for the 30/35/40% deal offered to everyone.

Those discounts are on rooms that they haven't been able to sell, so they aren't losing squat...in fact they are filling the empty rooms with people who now almost HAVE to buy their food from Disney.

 

[jakeman]

So can we expect a drop in attendance? I would love that.

Maybe, maybe not. It depends how the discounts are tapered.

You can boil a frog and just offer less and less discounts until there aren't any more and the average consumer that goes every 2-5 years won't notice it. Especially if the economy improves at the same time.

 

[TURKEY]

Those discounts are on rooms that they haven't been able to sell, so they aren't losing squat...in fact they are filling the empty rooms with people who now almost HAVE to buy their food from Disney.

But how many of those rooms would be sold without the discounts?

 

[EPCOT Explorer]

Maybe, maybe not. It depends how the discounts are tapered.

You can boil a frog and just offer less and less discounts until there aren't any more and the average consumer that goes every 2-5 years won't notice it. Especially if the economy improves at the same time.

All true. But boiled frog?!:lookaroun:lol:

 

[Christi22222]

What I am curious to know is whether or not the attendance will actually go down, or if folks will still come but stay off site. I have to admit, it's not very nice of me, but I'd love it to thin the crowds out a bit. However, my gut says folks will still go, just stay in their budget and avoid on site hotels. Of course, I'd really like the WDW hotels to be a little less busy as well. They have been pure madness and we've gotten terrible rooms on the huge discount times. When you pay for a water view at a moderate and still have to look at a mechanical room door that is a hedgerow away from the pool at the building next door, and get the LAST room at CSR that wasn't remodeled, it tends to ________ you off. Of course, maybe that's WDW's plan. We left saying we'd never stay at anything but a deluxe again. Back to the topic, though, they really need to bring crowds down a bit and profit margins back up.

 

[misterID]

What I am curious to know is whether or not the attendance will actually go down, or if folks will still come but stay off site. I have to admit, it's not very nice of me, but I'd love it to thin the crowds out a bit. However, my gut says folks will still go, just stay in their budget and avoid on site hotels. Of course, I'd really like the WDW hotels to be a little less busy as well. They have been pure madness and we've gotten terrible rooms on the huge discount times. When you pay for a water view at a moderate and still have to look at a mechanical room door that is a hedgerow away from the pool at the building next door, and get the LAST room at CSR that wasn't remodeled, it tends to ________ you off. Of course, maybe that's WDW's plan. We left saying we'd never stay at anything but a deluxe again. Back to the topic, though, they really need to bring crowds down a bit and profit margins back up.

They don't want the crowds down. That's why they're in a conundrum. If they lose the discounts they will lose a ton of money. They want their cake and eat it, too. It won't work.

Oh, and if the crowds thin, expect the park to go downhill fast.

 

[DougK]

I figure that the recent HUGE hikes in prices throughout the parks have easily made up for any discounts being offered. If you haven't noticed, prices have been jacked up (especially food/snack costs...about 20%) all over WDW.
I doubt that when they get rid of all the discounts that they will bring THOSE prices back down to normal (reasonable)...but they will hope that we will "get use to" THOSE hiked prices.
Not to mention all the money they are now making on the illusion that the Dining plan somehow saves you money (you might break even if you manage to eat at the most expensive places and manage to use up all your credits) and is clogging up all the restaurants (even the Crystal Palace is booked up weeks in advance when you used to be able to book just hours in advance)
Fortunately we have had more than our share of visits to all of the character buffets (dozens and dozens) and have been settling for off-site meals now where/when we used to ALWAYS eat on-site...hell, Tasha is fine with cooking a TV dinner in the room, and it's a nice change of pace to simply sit down at Peco's Bill's for lunch.
Sure we celebrated my birthday/Thanksgiving on 11/28 with a nice dinner at the Liberty Tree Tavern.
And fortunately, as a result of all the Dining Plan people who make reservations then fail to show up, walk-ins are easier, so we did manage to walk into the Crystal Palace for lunch as well. that weekend.
Otherwise, aside from a birthday celebration at Chef Mickey's in Sept, we've avoid all these restaurants that we used to frequent nightly.

and it doesn't seem that the non-Disney restaurants in Downtown Disney have been affected so far, so we will continue to frequent The Rainforest Cafe, T-Rex and Planet Hollywood.
Example Crystal Palace lunch for 2 last year = $43.33, last month $51.58

I agree with this 100%! Nicely said!

Plus even in these rough economic times they continue to raise prices. Maybe if a room with a nice view at say The Polynesian wasn't $400 - $600 I wouldn't be seeking a discount so often, but with those kind of rack rates they can't really expect to be 90% sold out all the time can they? It seems the approach they are taking is have really high prices and then discount the heck out of them. Maybe they need to rethink that.

 

[Uncle Lupe]

Discount or no discount people will still go to WDW. It would be nice to receive a discount when I go but that is not going to keep me away for my first trip in 15 years. I agree that with the discounts it seems the idea of Value season as gone out the window.
The parks need to be kept on a schedule of expansion and refurbishment and I think we are starting to see the beginning of that strategy. If you build it they will come

 

[TURKEY]

Of course, I'd really like the WDW hotels to be a little less busy as well. They have been pure madness and we've gotten terrible rooms on the huge discount times. When you pay for a water view at a moderate and still have to look at a mechanical room door that is a hedgerow away from the pool at the building next door, and get the LAST room at CSR that wasn't remodeled, it tends to ________ you off. Of course, maybe that's WDW's plan. We left saying we'd never stay at anything but a deluxe again. Back to the topic, though, they really need to bring crowds down a bit and profit margins back up.

People will still get put in crappy rooms that don't match the description. It was happening before discounts and will continue to long after (if) they stop the discounts.

People were assigned "water view or pool view" rooms that didn't have but a glimmer of water behind a hedge even when resorts were 50% full.

 

[Christi22222]

They don't want the crowds down. That's why they're in a conundrum. If they lose the discounts they will lose a ton of money. They want their cake and eat it, too. It won't work.[\QUOTE]

But won't folks just stay off site? How will that be good for Disney? Or are there really enough folks to fill ALL the rooms, on and off site, when the economy is good. I honestly don't know. There is just so much more room capacity than there used to be.

 

[Christi22222]

People will still get put in crappy rooms that don't match the description. It was happening before discounts and will continue to long after (if) they stop the discounts.

People were assigned "water view or pool view" rooms that didn't have but a glimmer of water behind a hedge even when resorts were 50% full.

That sucks.

 

[CoasterKing]

Without the discounts and/or free dining, we will not be able to go once a year as we have been. We will have to go either every other year or every three years. It's just a simple case of not having enough money to pay for the steep prices at WDW. We could save money by staying offsite, but that wouldn't be the same as staying in the magic! Also, with few new attractions being added lately, the need to go every year is not as important anyway.

CoasterKing :king:

 

[Computer Magic]

Without the discounts and/or free dining, we will not be able to go once a year as we have been. We will have to go either every other year or every three years. It's just a simple case of not having enough money to pay for the steep prices at WDW. We could save money by staying offsite, but that wouldn't be the same as staying in the magic! Also, with few new attractions being added lately, the need to go every year is not as important anyway.

CoasterKing :king:

agreed. They better have something to entice people to go every year.

 

[CRO-Magnum]

Bob can think what he wants...

...but he's obviously out of touch with basic economics. Disney isn't discounting because of the economy. They're discounting because they're too expensive to begin with. As prices rise at some point demand will fall (supply, demand economics), and when that happens companies discount. In reality Disney should be reducing their prices just as many car models are now less expensive than a year or two ago, 529 college plan admin fees are cheaper, housing, food, etc.

As a family we have decided to reduce our trips from 2-3 to 1 per year and use the savings for additional alternate vacations. The net result is a 50% reduction in revenue for Disney from our family. In addition as hotel costs rose we would pre or post-append days at off-site hotels. On our visit earlier this year my children fell in love with an off-site hotel at less than half the cost. Thus our spending profile, sacrosanct to Disney since we are true Disneyholics, is reduced by another 50% because at six people we had to get two rooms everywhere on-site.

Why has our behavior changed?

We found the value for the dollar decreased every visit. Simply put Disney does not reinvest enough in WDW. Each trip provides diminishing returns as the adventures become repetitive if the time span between repeats is too short (pretty obvious, right?). Going once a year we found balances our desire to go and relive old adventures with our disappointment in finding few or no new adventures. The high and rising costs have forced us to analyze and optimize.

Walt Disney understood economics. He knew if he made the parks accessible it would attract families, his target demographic, and people would never be forced to scrutinize the expense. He knew going to Disneyland repeatedly was an emotional decision which would not surive scrutiny.

My daughters have already agreed they'd like to save all of our vacation money for two years and go to Europe. They are interested in going to Disneyland Paris for "a day or two", all but elminating Disney's footprint in my wallet.

Too bad Bob but my 12, 10, and 9 year old are on to your game. Time for you to go back and take Econ 101 and fire those idiot Ivy League MBA's you have in your strategy group!

 

[misterID]

Yup. The last couple posts from CoasterKing and CRO-Magnum pretty much sums it up perfectly. The World can't depend on locals going constantly because of the steep pricing and not really catering to them. If they end the discounts they'll lose the families who save up and go every year and stay on site, which is a big source of their income.

They'll try to solve the problem by cutting their budgets even further.

...or at least try. I still feel new blood is coming to The World soon.

 

[Christi22222]

...but he's obviously out of touch with basic economics. Disney isn't discounting because of the economy. They're discounting because they're too expensive to begin with. As prices rise at some point demand will fall (supply, demand economics), and when that happens companies discount. In reality Disney should be reducing their prices just as many car models are now less expensive than a year or two ago, 529 college plan admin fees are cheaper, housing, food, etc.

As a family we have decided to reduce our trips from 2-3 to 1 per year and use the savings for additional alternate vacations. The net result is a 50% reduction in revenue for Disney from our family. In addition as hotel costs rose we would pre or post-append days at off-site hotels. On our visit earlier this year my children fell in love with an off-site hotel at less than half the cost. Thus our spending profile, sacrosanct to Disney since we are true Disneyholics, is reduced by another 50% because at six people we had to get two rooms everywhere on-site.

Why has our behavior changed?

We found the value for the dollar decreased every visit. Simply put Disney does not reinvest enough in WDW. Each trip provides diminishing returns as the adventures become repetitive if the time span between repeats is too short (pretty obvious, right?). Going once a year we found balances our desire to go and relive old adventures with our disappointment in finding few or no new adventures. The high and rising costs have forced us to analyze and optimize.

Walt Disney understood economics. He knew if he made the parks accessible it would attract families, his target demographic, and people would never be forced to scrutinize the expense. He knew going to Disneyland repeatedly was an emotional decision which would not surive scrutiny.

My daughters have already agreed they'd like to save all of our vacation money for two years and go to Europe. They are interested in going to Disneyland Paris for "a day or two", all but elminating Disney's footprint in my wallet.

Too bad Bob but my 12, 10, and 9 year old are on to your game. Time for you to go back and take Econ 101 and fire those idiot Ivy League MBA's you have in your strategy group!

LOVE this post! So well said. True, true, true. I agree with the kids "getting it" even. They (and many other visitors) may not be able to verbalize and conceptualize what is "wrong," but on some level they feel the cut-backs and lack of Disney quality and lose the magic. Folks go from "WOW!" to "meh-" without even knowing why!! But who saves their precious pennies for "meh?"

 

[Brian Noble]

This was just pandering to analysts and (indirectly) instutional investors. Those guys *hate* it when a premium brand resorts to wide-scale discounting.

The fire-sale discounts will end when consumer confidence improves. Not a minute before. Not a minute later. Bob knows it. The analysts know it. But, he has to say that because that's what CEOs are expected to tell analysts.

They're discounting because they're too expensive to begin with.

I disagree. The package discounts during Peak season '08 (when the economy was booming)? Free park hopping, water parks (in February! woo!), and a modest (as in maybe 10%) discount on the room rate. In '09, when room/ticket prices were essentially the same but the economy had crashed? Buy-4-get-3.

The price was not the difference between those two years. The economy was.

 

[mgf]

Whether you want to bash Disney or not, the simple fact is discounts have more to do with psychology than "not being so greedy." The hotels are (mostly) paid off by now. The only expense Disney faces is upkeep and operating. An empty room equals no income, so they mail you a flier. Disney expects three responses:

1) No, I am still not going.
2) Hey, look at this sweet deal Disney is offering "us!" Let's book. (Cheap room but add tickets + food + shopping. Also, those people will likely spend their "savings" on food and merch which has higher margins.)
3) We are already booked for a value/moderate, but it won't cost more to upgrade. Let's do it! (You spent more money on lodging than expected and you opened a cheaper room they can more easily sell.)

They are using the rooms as loss-leaders. (The same reason they give free dining with normal room rates.) While you could argue better rides would be the loss leaders, the fact is the economy is sour. You have to pick a more high profile item. They want/need more money flowing inside the park. A captive audience, with a little extra money in pocket, will pay higher prices. This is pretty basic marketing practice. You see it everywhere from free shipping on Amazon to the grocery's sale on soft drinks before a holiday.

Disney is losing money but not as much as they could be. People like to gripe about penny pinching, but some of these things are necessary in a recession especially. If Disney's profits tanked because they cut/gave nothing, it would send huge, damaging waves through the world travel/entertainment market. Looking at this situation objectively, if giving discounts or waiting an extra two to three weeks to put up a Christmas tree is a simple way to counteract big losses, Disney should do it.

Disney is essentially no different than any company (financially). The only difference is we trust them with our dreams, our wishes, and our childhoods (whether our child's or our own). It does hurt to see cuts that impact these parts of our lives. But, for me personally, I would rather have a fiscally strong Disney emerging from the recession ready to use its resources to bring back the magic. Before I light my torch and join the mob threatening the the castle, I want to see what happens when the economy starts to improve. If nothing changes, then we'll talk.

 

[PhantomX]

Enjoying that jungle cruise down de Nile, Bob?

Wow you hit it right on the money! This thread can be closed now :lol:

 

[DisneyMusician2]

...but he's obviously out of touch with basic economics. Disney isn't discounting because of the economy. They're discounting because they're too expensive to begin with. As prices rise at some point demand will fall (supply, demand economics), and when that happens companies discount. In reality Disney should be reducing their prices just as many car models are now less expensive than a year or two ago, 529 college plan admin fees are cheaper, housing, food, etc.

As a family we have decided to reduce our trips from 2-3 to 1 per year and use the savings for additional alternate vacations. The net result is a 50% reduction in revenue for Disney from our family. In addition as hotel costs rose we would pre or post-append days at off-site hotels. On our visit earlier this year my children fell in love with an off-site hotel at less than half the cost. Thus our spending profile, sacrosanct to Disney since we are true Disneyholics, is reduced by another 50% because at six people we had to get two rooms everywhere on-site.

Why has our behavior changed?

We found the value for the dollar decreased every visit. Simply put Disney does not reinvest enough in WDW. Each trip provides diminishing returns as the adventures become repetitive if the time span between repeats is too short (pretty obvious, right?). Going once a year we found balances our desire to go and relive old adventures with our disappointment in finding few or no new adventures. The high and rising costs have forced us to analyze and optimize.

Walt Disney understood economics. He knew if he made the parks accessible it would attract families, his target demographic, and people would never be forced to scrutinize the expense. He knew going to Disneyland repeatedly was an emotional decision which would not surive scrutiny.

My daughters have already agreed they'd like to save all of our vacation money for two years and go to Europe. They are interested in going to Disneyland Paris for "a day or two", all but elminating Disney's footprint in my wallet.

Too bad Bob but my 12, 10, and 9 year old are on to your game. Time for you to go back and take Econ 101 and fire those idiot Ivy League MBA's you have in your strategy group!

I love the legend of Walt, but throughout his life, Walt loved quality and knew almost nothing of good economics. Roy Disney knew business and economics, and the company should be cherishing him just as much as Walt or we might not even have this board today.

I agree 100% with everything else you said, however!