This Is Why Disney Raised Ticket Prices

Disney's Magic Kingdom got a bit more expensive this year. Source: Disney.

The news wasn't announced with a Disney (NYSE: DIS  ) press release. But it did turn a few heads when the company boosted theme park ticket prices back in February. The fee for admission into the Magic Kingdom crept up to $99 from $96, and other parks saw a similar bump.

That move was odd for at least two reasons. First, the House of Mouse often raises prices closer to the summer months, right before the crush of tourists hits. Second, the talk at the time was all about just how weak the outlook was for consumer spending in the year ahead. It seemed like a tricky time to be asking for more cash from your customers.

Now we know why Disney decided to increase those theme park prices anyway: Because it could. 

Magical earnings
The company announced blockbuster quarterly earnings results this week, with most of the press attention going to the Frozen-fueled spike in studio profits. That's understandable. The theater business unit leapt up three spots to become Disney's second most profitable division behind only its media business, which is the home of ESPN. 

Profit in millions. Source: Disney financial filings.

But the parks and resorts arm is still worth almost a third of Disney's total revenue, and its numbers were just as impressive. Profit leapt higher by 19% on an 8% boost in sales, the company said. However, those figures actually understate the division's earning power, courtesy of a calendar shift that cut out one week of the Easter holiday from this year's results. Account for that shift, and parks and resorts income would have been up a massive 31% last quarter.

Here's how Disney explained the improvement in its earnings announcement:

Higher operating income was due to growth at our domestic parks and resorts driven by increased guest spending at Walt Disney World Resort, higher attendance at Disneyland Resort and increased occupied room nights at both resorts. Higher guest spending was due to higher average ticket prices and food, beverage and merchandise spending. 

In other words, Disney exercised its pricing power modestly in the quarter and customers responded -- by purchasing more of what the House of Mouse was selling.

What it all means
Investors have to be happy about that result, as it means Disney's prices are nowhere near the level where they'd start to hurt customer demand at the parks. And that business is much more reliable than movies, anyway, where one flop can offset a whole year's profits.

The bottom line for shareholders is that while Disney's movie business can sometimes book great quarters like the one that just ended, theme parks are a much more consistent contributor, with a lot of growth left to kick in over the years ahead.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 10, 2014, at 6:40 PM, Begotnot wrote:

    It is a horrid place to visit , I would not go back if it was free.

  • Report this Comment On May 10, 2014, at 7:36 PM, daylilydiva wrote:

    Not for me. I won't pay that much to wait in line forever, and eat over priced food and drink. Just not worth it anymore.

  • Report this Comment On May 10, 2014, at 8:35 PM, frcontrone wrote:

    Disney a couple of years ago raised the rate for passes in the winter months. Also the increase was from $89 to $92. Need to check facts before you write the article. Then lets look at what is happening at the parks to justify the increase. Upkeep! Increase in insurance costs which Disney has not pushed off onto it's employees, and new attractions being built. It all adds up. The costs of operations are not factored into this article that also went up. I notice that few words were devoted other than to say "and other parks as well" covered what is happening in the industry. Yep Universal, Sea World, LegoLand and others around here in Orlando have also gone up, but Disney is singled out as the villian. Spread the villification across the board. Considering how Disney treats it's employees (yes they care) giving advancements, and raises, insurance, and other benefits that most companies today have eliminated, I think that weighs in on the cost of park prices.

  • Report this Comment On May 10, 2014, at 8:45 PM, rowlandw123 wrote:

    One visit was enough for me to see what it was all about, but I don't need to go back (at any price).

  • Report this Comment On May 10, 2014, at 11:25 PM, AcmeFool wrote:

    frcontrone -- I believe you are the one that needs to check facts.

    1) The price did, in fact, go from $96 to $99 for the Magic Kingdom.

    2) Disney does, in fact, typically raise prices in the summer.

    3) The comment about other parks refers to EPCOT, Hollywood Studios, and Animal Kingdom, NOT Universal, Sea World, etc. Prices for single-day tickets at the other Disney parks are lower than at the Magic Kingdom, but the price increases were similar.

    4) Nobody is being called a villain in the article. It states that Disney had pricing power and they exercised some of it.

  • Report this Comment On May 11, 2014, at 12:51 AM, fractaling wrote:

    "...it means Disney's prices are nowhere near the level where they'd start to hurt customer demand at the parks."

    Really? Spending $400 for a DAY (just for admission; not including parking, food, gas, souvenirs, etc.) won't hurt customer demand? It did for us! We live about 60 miles from Disneyland, and would love to go back, but NOT at these prices! I am guessing most of Disney's business comes from locals, but I also guess Knott's Berry Farm is the new family destination for us!

    People get upset when prices go up because they HAVE to, but when they are raised because 'they can' is pure B.S.! This is not a good time to raise prices, ie in an Obama economy; we have been 'running on one leg' for almost a year now, without unemployment benefits!

    Again, we love Disneyland, but the mouse has turned into a rat!

  • Report this Comment On May 11, 2014, at 1:06 AM, prophotoman wrote:

    The last time I went to Dizzylland was about 12 years ago and the entry was around $70 I believe.

  • Report this Comment On May 11, 2014, at 1:39 AM, irishreign wrote:

    You might want to rethink your statement on how Disney treats it's employees. You'd be right if you are referring to Upper Mgmt...but that does not hold true for those below that level. Their pay is below par, and so are their benefits. Tell me that an employee in a supervisory capacity who put in 26 years there, and now receives less than $350 a month retirement pension...and no medical, is being treated well. Disney, in my opinion is the epitome of corporate greed.

  • Report this Comment On May 11, 2014, at 4:17 AM, btc909 wrote:

    What a bunch of BS. Disney was screwed until they offered monthly payment plans on annual passes. At least at Disneyland in 2012 & 2013 they had to stop people at the gates due to over crowding during the summer months. How to keep people out, charge the ticket payers more money.

    This joke of an article doesn't mention the parking price increase as well.

    I see day reductions on non-Premium annual passes in the future.

    Disney needs a 3rd park. The Vegas area would be ideal if a somewhat high speed rail system would finally be built from SoCal to Vegas.

    Disney isn't happy about the Great Wolf Lodge going up in Garbage Grove, CA and I bet they had there fail share of getting the project delayed.

  • Report this Comment On May 11, 2014, at 4:19 AM, usc1801 wrote:

    We're Disney shareholders, Annual Pass Holders, and Vacation Club members. Disney has gotten so far from what Walt intended. It's becoming ridiculously expensive. We finally gave up our annual passes. Luckily the rooms at the Vacation Club resorts have microwaves and refrigerators so we eat most our meals in the room, bring our own alcohol, buy groceries before we get there, and don't buy any merchandise. We do enjoy the free bus rides to different parts of the property, free boats rides, monorail rides, we watch the fireworks from the Grand Floridian. We find this a lot cheaper and relaxing. From a shareholder standpoint Disney could certainly raise their dividend. They have a pathetic paltry dividend.

  • Report this Comment On May 11, 2014, at 5:46 AM, eyeforeye42 wrote:

    I had a good time there when the kids were little. Mind you prices go up a little everywhere. Ever go on a cruise? Some will never go again either. Not sure I will make it back to Disney but won't rule it out.

    Off season is best!

  • Report this Comment On May 11, 2014, at 10:47 AM, djdekok wrote:

    "Happiest place on earth"? No sir. "Most indoor space devoted to standing in interminable lines" place on earth is more like it. You didn't give the real reason that Disney raised their prices: Because they can, and the great unwashed masses will still flock there like lambs to the slaughter. I enjoyed driving I-95 there and back more than the Magic Kingdom.

  • Report this Comment On May 11, 2014, at 11:30 AM, Howdie wrote:

    If the parks are over full, raise prices until the crowds go down slightly and the revenue stays the same or goes up. Free enterprise, supply and demand. I see nothing wrong with that. Charge for your product what the market will bare.

    We've done Disney World a couple times and did two days at Disneyland / California Adventure a couple years ago, three people $517 for two days. Money well spent in my opinion. We had a great time.

  • Report this Comment On May 11, 2014, at 1:01 PM, RalphinFL wrote:

    What this means to me is that I will not be revisiting any of the Disney parks in the near future. Or the far future. Or ever.

  • Report this Comment On May 11, 2014, at 1:20 PM, Rocketjaytoo wrote:

    The only time i went to Disney World in Orlando was for a work-related convention in 2001 when the park was closed to the general public at 6:00 pm and open only to our convention attendees.No admission fee, no lines for rides and exhibits and the only cost was for food and refreshments. Nice time but most of us agreed we had a better time at Universal Studios on the other days of the trip. Considering the current cost of Disney World, will probably never go back.

  • Report this Comment On May 11, 2014, at 1:27 PM, DebiS wrote:

    We HAD been passport holders for over 15 years but no more! This place has become nothing but a money grabbing hell hole. Walt built this for families to enjoy..not at $400 plus a day for a family of four. Standing in line for 2 or more hours for a single ride, shoulder to shoulder crowds...No Thank You.

    I will always have fond memories of the E-ticket rides and the fun I had taking my son there as a child. (I was a single parent so not a lot of excess money.) Its a shame future generations will not have the same memories many of us have.

  • Report this Comment On May 11, 2014, at 1:35 PM, keeter1967 wrote:

    I was a first generation Disney kid when the WDW opened in 1971 and went at least annually until two years ago when we had a terrible experience at the Magic Kingdom. I wrote to let them know what happened with our disabled family member and received such a pitiful reply we won't ever go back. How sad that low to middle income families can no longer afford to go. We have money but we will be spending it elsewhere.

  • Report this Comment On May 11, 2014, at 1:50 PM, donkeymix33 wrote:

    You are all right! Its a terrible place to visit. Commericals lie and the cruise ships suck also.

    They expect you to bring children to stand in long lines for hours to ride a 5 min or less ride. Kids will not stand around that long you idiots at Disney. Take a cue for Lego's parks. I think all of these parks should be boycotted as they allow way to many people in each day all in the name of GREED!!!!! Of course if you don't want to wait you can always pay out your ass for a speed pass or even drag handicap person along to go to the front of each line.

  • Report this Comment On May 11, 2014, at 3:02 PM, Whaddajoke wrote:

    I would actually prefer they raise the price to $150. All I hear is "who wants to pay $99 to wait in lines for hours?" Well, even at $99 they don't reach any max capacity. So let's lower prices, bring more people in and have even longer lines...while at the same time losing revenue and losing customers because they paid $50 to wait in line all day for 3 rides.

    I'd much rather save a little longer, pay an extra $500 for my weeklong Disney vacation and deal with 30% fewer visitors.

    You can't beat Disney. There will always be kids that love the magic of the mouse, and who wants to disappoint the kids...

  • Report this Comment On May 11, 2014, at 4:19 PM, duhaus wrote:

    @fractaling

    " This is not a good time to raise prices, ie not in an Obama economy; we have been 'running on one leg' for almost a year now, without unemployment benefits! " Last I checked the economy has been recovering pretty well given the catastrophe the economy was thrown into by the prior admin (i.e. NOT Obama's admin.) So this is a proper time for Disney to make their rate hikes. As far as no unemployment benefits you don't have to look any farther than a certain party in Congress to blame for that (i.e. NOT Obama's party) you couldn't have missed it it's been in all the papers. Then again from your remarks it's apparent you don't get any information beyond Faux news . . good luck with that.

  • Report this Comment On May 11, 2014, at 4:58 PM, SageAdvisor wrote:

    I am so glad I outgrew Disney. No more Fantasyland for me. I have seasons passes for other theme parks in SoCal. The combine prices for season passes and parking passes at Knott's, Universal, and Six Flags is cheaper than the price of the lowest level season pass and parking pass at Disney. Economically, I can go to three theme parks for a cheaper price than one theme park with two entrances.

    Disney justify their profit by increasing park prices to the point of excluding hard working middle and lower class people but allow foreigners with more money to come into an American theme park so the executives can line their pockets. Way to go Disney for fleecing America. Thanks for showing us to get more money by any means necessary.

  • Report this Comment On May 11, 2014, at 5:00 PM, molebuster wrote:

    GREED!

  • Report this Comment On May 11, 2014, at 5:08 PM, jeff1985 wrote:

    This isn't a forum for you to complain how it's too expensive for you, this is a financial website. The fact of the matter is Disney has been raising prices steadily for years and attendance has been doing nothing but going UP.

    This is high school economics, supply and demand, sorry that you are angry and can't afford to go anymore but the fact of the matter is that even if you don't people are still going by the millions so it doesnt matter. I like BMWs but can't afford one, doesn't mean they should lower their prices.

  • Report this Comment On May 11, 2014, at 5:56 PM, glocker62p wrote:

    If you like shoddy facades, a dirty, smelly and unmaintained monorail system, threadbare costumes, high prices for low quality items and very long walks with little to no places to sit and rest then Walt Disney World is the place for you.

    We went in December, 2013 and since our expectations were exactly as stated above, we were not disappointed. Yeah right. Word to the wise, the phrase "mouse trap" has profound meaning here.

    For what we paid, we should have bought home entertainment system we've been wanting. At least it would have entertained us for years to come.

  • Report this Comment On May 11, 2014, at 9:48 PM, petaud wrote:

    Disney is catering to the Far Eastern crowd since they are the only people fascinated with Disney and price is not an object.It is not worth it.

  • Report this Comment On May 11, 2014, at 11:34 PM, rickinphil wrote:

    I am so surprised. Aren't you? It is called greed, simple. If they were a sports franchise, few families could afford to attend. Only way to slow them down is a boycott.

  • Report this Comment On May 12, 2014, at 12:25 AM, Theinsultedelf wrote:

    No way is Disney worth $100/ person. I have been there 3 times in my life but never again unless I win the lottery and have grandchildren I actually like. The first time I went was with my parents and siblings when I was 12 or 13. The second time was with my high school graduating class during Seniors Night finally about 11 years back with my kids were in elementary school.

  • Report this Comment On May 12, 2014, at 3:18 AM, tanker wrote:

    Disneyland has lost it's appeal. I remember when you could go there and the lines were not too long. But now the lines are all the way into the walkways. It is too crowded, too expensive and the food is horrible. At least Knotts Berry Farm lets Ve ts and Fireman and cops in for free with family in Nov and Dec. But Disneyland no way

  • Report this Comment On May 12, 2014, at 5:09 AM, goofydisneylover wrote:

    I just went to the magic kingdom at disney world this past sunday and spent $122.44 just for parking and my admission and that is a 1 day park pass for a FL resident. Yes if I wanted to I could have spent a similar price for a 3 day park pass but theres a MAJOR catch on that. you can't go for the whole months of Jun July or most of Aug. What is the point in buying a 3 day pass when i can't use it for 3 months? Yes i could spend close to $600 for an anual pass but even the monthly payments I can't really afford and if I only go about 3 times a year it doesn't end up paying off for me. Granted I'd love to go more often and if i lived in Orlando maybe I would. But i live 2 hrs away and the costs of gas is quite pricey. I love Disney World I do not want to stop going but I as a person who only makes minnimum wage can no longer afford Disney world. It cost me most of my paycheck just to get into the park and that is not including the the necessities I need like food I need to eat to stay strong enough to walk the park and ride the rides.In the summer i need an endless amount of water to stay hydrated to walk the park. I know w/ all their advanced technology they are releasing lately they need the money but it is not fair to expect such high prices for just a day of fun at disney world. A typical day guest is not using the magic bands, most are not getting the advanced fast passes, & they certainly aren't getting discounted prices on the dining. Disney needs to reconsider all the people who would love to come to their parks but simply can't afford that kind of money to go. there are children who will never get to see Disney because their families simply can't afford to pay the price for the family to go to disney even for 1 single day.

  • Report this Comment On May 12, 2014, at 4:13 PM, Whaddajoke wrote:

    I'm still missing the point of the most of the comments here. Disney is a business. They have mastered the art of creating something the public desires, not requires.

    Theme parks are a luxury not a necessity. Would it be nice if everyone could afford to go, yes. Wouldn't it also be nice if everyone could afford a new Bentley, new BMW, or even a new Hyundai for that matter, yes. If it's too expensive or not what you want to do then don't go.

    But I also have to wonder how many of these posts were made with an iphone or similar smartphone. Also a luxury, not a necessity.

    Disney is a business, and as such, their first priority is to be profitable. If that's a problem for you then I'd suggest turning off your smartphones as well because they are making somebody billions.

  • Report this Comment On May 21, 2014, at 1:44 AM, darren7 wrote:

    According to the ocregister.com "the $4 boost at Disneyland is about the same as previous hikes, which usually happen about once a year. Single-day ticket prices have more than doubled since 2003. Disney suspended new sales of its popular Southern California annual passport because of the crowds." The point of the MF article seems to be reduced to the timing of the price increase. The headline should read "Why does Goofy lick himself".

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