If you look at the consolidated balance sheets the 'growth' in both their Cable Properties and P&R is entirely price increase driven.
There are growing signs that the latest round of theme park price hikes have run their course, becoming increasingly ineffective.
After three consecutive years of 7% or higher across-the-board price increases at the theme parks, tickets are up 4% this year, while the Disney Dining Plan is up 4.6%, increases that still are well above household income but at least a bit more sane. What gives?
Disney reports “Supplemental revenue data” in its 10K. For Parks & Resorts, this data contains “Merchandise, food and beverage” revenue and “Admissions” revenue.
Prior to 2010, merchandise, food and beverage revenue was higher than admission revenue, typically 1% to 5% higher. In other words, for every $1 in ticket sales, Disney sold $1.01 to $1.05 in merchandise, food, and beverage.
In recent years, Disney has aggressively increased all prices at the theme parks. As a result, merchandise, food, and beverage revenue was down to 89% of admissions revenue in 2013 (i.e. 89 cents on the dollar).
Merchandise, food, and beverage can be thought of as discretionary spending. If I want to visit a Disney theme park, I
have to purchase a ticket. However, once inside the gate, I don’t have to purchase anything.
By raising prices faster than what people can afford, Disney has forced guests to cut back elsewhere. Instead of spending at WDW, they eat, drink, and shop offsite, where prices are significantly less.
In 2013, admissions revenue was up 11% while merchandise, food, and beverage revenue was up only 6%. The gap between the two has never been wider.
Last year, domestic attendance was up 4% while prices were up more than that. Yet Disney managed only 6% growth on merchandise, food, and beverage revenue. That’s just bad.
People still want to visit Disney theme parks, still need to eat, still need to drink, still want to buy souvenirs, but by squeezing tighter, Disney has lost a growing chunk of their vacation dollars.
Rather than drive guests offsite with higher prices, Disney needs to adopt a strategy that causes guests to spend all their vacation dollars onsite.
Disney needs to bundle hotel, ticket, food, and perhaps even merchandise into vacation packages that provide
genuine savings to those willing to spend all their vacation dollars at WDW, not the disingenuous “raise prices 40% and then offer 30% discounts” strategy that they employ today.
Raising prices even more ain’t gonna cut it.
