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Disney's New Price Policies Inclusive, or Greedy?

By Parkev Tatevosian, CFA – Aug 24, 2021 at 9:45AM

Key Points

  • Genie+ will cost $15 per day at Walt Disney World and $20 at Disneyland.
  • The feature highlights Disney's pricing power at theme parks.
  • Still, Disney runs the risk of alienating lower-income visitors.

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The House of Mouse lost $7 billion at theme parks in fiscal 2020 due to the coronavirus pandemic.

At the pandemic onset, The Walt Disney Company (DIS -2.51%) was forced to lock the turnstiles at its theme parks. The closures lasted much longer than expected. 

The extended time allowed management to rethink its pricing and policies of popular attractions. As parks are reopening, The House of Mouse is announcing new programs that are pleasing some and irking others, depending on if you think Disney is making parks accommodate guests at a wider range income levels or if you think it is trying to extract more money from visitors. 

Adults and children moving through turnstiles.

Image source: Getty Images.

Experience Disney magic at your price point

One change it made was to cancel the previous annual pass program at Disney parks in California. Popular among local residents, the pass allowed guests to visit several times per year for a monthly or annual membership fee. Prices ranged from a few hundred dollars per year all the way up to $1,449 per year.

A few months after reopening its California theme parks, Disney introduced the Magic Key program with similar features. The Magic Key gives guests benefits similar to those of the annual pass, but with more days blocked out and more inconvenience.

Additionally, Disney introduced Genie+ for $15 per day at Walt Disney World in Florida, and $20 per day at Disneyland in California, giving you access to the lightning lane. In other words, it allows you to skip the long lines to experience attractions. This is yet another way Disney is making premium tiers available for differing guest income levels. Yet families with more money to spend will have a better experience than the rest. Folks who have been waiting in line for 45 minutes won't be thrilled to watch another family walk right up and get on the ride before them.

These were just the latest innovations in Disney's attempt to maximize its theme parks. A few years ago, it implemented dynamic ticket pricing, which tiered ticket prices based on demand. For instance, during the most popular Christmas holiday time, ticket prices would be the highest. They would be lower for mid-week school days when fewer folks want to visit. 

What this could mean for investors 

It should be no surprise that Disney is coming out of park shutdowns with the intent to recoup some money. The company lost $6.9 billion due to park closures in fiscal 2020. And with all the pent-up demand from people who have been cooped up indoors for the better part of a year, Disney is confident it can get consumers to pay.

Whether fans like it or not, Disney is in business to make profits. Management's task is to maximize shareholder value. These new pricing policies could increase profits by extracting more value from higher-income guests. And if negative publicity from the changes outweigh the benefits of added value, Disney could always cancel the program. 

Regardless, it's a demonstration of the popularity of Disney's assets. The company is charging premium prices for admission to its theme parks, which draw so much interest from customers that demand is creating long lines. Disney is then offering people the option to buy the privilege to skip those long lines. Investors should want to own stock in a company with that kind of pricing power.

Parkev Tatevosian owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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