Check out the latest Disney earnings call transcript.
In what has become something of an annual tradition, Disney (NYSE:DIS) is making it more expensive to visit its Disneyland theme park in California. The company announced that it will be raising the average ticket price by about 7%, though the increase will vary with the type of ticket. This follows similar price hikes at the Walt Disney World resort in Florida that went into effect in October.
It was just a year ago that the House of Mouse increased prices to its theme parks by up to 18%, while parking fees jumped by about 10%.
Let's take a look at the latest round of increases and what's behind them to see if Disney is going too far.
The magic's gonna cost you
Disney announced that it will be increasing prices on its single-day, multiday, and annual passes for Disneyland and the neighboring California Adventure Park in 2019. The prices, which took effect on Sunday, Jan. 6, will vary. The cost for a one-day value ticket is climbing to over $100 for the first time, an increase of about 7%, while a peak-admission, single-day entrance ticket jumped 10% to $149. The cost for annual pass holders is also going up, as the price of the most expensive annual pass will jump 23% to nearly $2,000. Parking is getting more expensive as well, jumping from $20 to $25 per day, an increase of 25%.
While it might seem counterintuitive, increasing the price of admission is about more than just lining Disney's pockets.
In recent years, visits to the company's popular theme parks have surged, and show no signs of slowing. The ticket-price increases are partly aimed at crowd control, as evidenced by Disney's move early last year to date-specific, variable ticket pricing, charging different amounts depending on the day of the week and even the month of the year. Those looking to visit on weekends and holidays pay a premium, while midweek visitors typically pay less.
Disney saw increased demand last year, partly the result of the recently opened Pixar Pier attraction at Disneyland and Toy Story Land in Walt Disney World, which both debuted in June 2018.
A Disney spokeswoman confirmed the strategy. "We continue to provide our guests with a variety of ticket offerings to meet their needs, while helping us to spread visitation, better manage demand and deliver a great experience," said Disneyland Resort representative Liz Jaeger.
Demand will continue to soar
The crowds will only increase in the coming months, as Disney unveils its long-awaited new attraction -- Star Wars: Galaxy's Edge -- later this year. The 14-acre, state-of-the-art area will debut at Disneyland in mid-2019, and at Disney's Hollywood Studios in Florida later this year. The centerpiece of each attraction will be a ride based on the storied Millennium Falcon, the spaceship that was piloted by fan favorite Han Solo in the Star Wars movies.
Disney CEO Bob Iger has called the launch the biggest "single-themed land expansion" ever for the company. The cost to build the new attraction is estimated to be in the neighborhood of $1 billion for the California development alone, with a similar price tag for Disney's Florida park. It will be money well spent, as park visits will likely surge, particularly among the Star Wars faithful.
With an estimated $2 billion being spent in upgrades, the rising prices will help fund these latest renovations, but will also boost Disney's profits. The surging demand and price hikes over the past year resulted in parks and resorts revenue that jumped 10% in fiscal 2018, and will likely make similar gains this year.
While an endless series of price hikes can backfire, Disney has proven to be immune thus far, as fans flock to the company's latest attractions. Even in the face of rising ticket prices, attendance has continued to soar, as Disney continues to add new attractions, providing even more reasons for its denizens to keep coming. As long as that trend continues, investors have a lot to look forward to.