There's a lot of speculation about Walt Disney's (DIS 0.82%) most popular theme park resort these days. I may as well do my part to stir the pot.
Disney World seems to be caught in the crosshairs of Florida politics, regulars upset about recent revenue-enhancing moves, and concerns about delayed attractions. If you'll humor me as I channel my inner Madame Leota -- that's the spell-casting spirit inside The Haunted Mansion's crystal ball -- I'd like to make three predictions. You probably won't agree with all or any of them.
Image source: Disney.
1. Disney's park reservations system will go away next year -- at a cost
If there's one thing everyone can agree on -- and that's no easy feat in these politically divisive times -- it's that the park pass reservations system in place at Disney World (and Disneyland) stinks. Each theme park allocates a certain number of daily admissions, and without them you're stuck on the sad side of the turnstile.
The reservations are split between resort hotel guests, single-day ticket buyers, and pass holders, prioritizing the first two groups as they are more lucrative on a per-day basis than annual pass holders paying between $1 to $4 a day for theoretical year-round access. The system is frustrating for impulsive pass holders, and that's understandable. However, there are times when the other two buckets run dry. There's no shortage of horror stories where families and friends weren't able to enjoy a day at Disney World together because they couldn't all snag reservations for the same park on the same day.
Disney insists that advance reservations are here to stay. I doubt that will be the case. Demand won't exceed supply forever. Capacity continues to increase as more attractions and experiences come back online. The global economy can topple. Again. Disney can stretch its pricing elasticity to the point where it snaps. This 18-month celebration of the resort turning 50 ends in 10 months, so by the end of spring break 2023 -- mid-April, let's say -- it'll be time to pull a new Oswald the Rabbit out of the sorcerer hat.
There will be a price to pay for the end of the dreaded reservations system, and regular visitors aren't going to like it. I feel the end of the requirement will accompany the end of most annual passes. Disney World is already only selling the cheapest annual plan -- the $399 Pixie Dust Pass -- that includes only weekday visits during non-peak travel periods. However, it continues to let all of the other pass holders renew their existing plans. Disney will have to cancel those passes by either providing prorated refunds, as it did in California in 2020, or just cut folks off at their next annual renewal.
Disney may introduce a less restrictive year-round access pass, but at a much higher price point than existing plans to keep that segment limited and more profitable. You won't need to square away park reservations a year from now, but if you've been spoiled by the annual pass buffet you'll be limited to paying $399 for slow season weekdays, four to five times that much for year-round access, or do what Disney prefers you do and score deals on discounted multi-day tickets during seasonal lulls.
2. Fiscal 2022 will be a record year for Disney's domestic theme parks
Disney surprised the market earlier this year with financial results for its fiscal first quarter ending in December. It posted record revenue and operating profits for its domestic theme parks. Despite the surge of the omicron variant of the coronavirus and international travel restrictions, Disney's shift to premium-priced expedited queues and a park reservation system that favors visitors with heartier per-capita revenue is paying off.
Yes, you hate Lightning Lanes and Genie+ just as much as you do the park reservation system. The premium platforms will stay. You'll learn to pay, or you'll accept your role in the standby line that encourages others to pay for faster access to signature attractions. Either way, if you think Disney was hitting it out of the theme park with premium products that rolled out during the quarter in the middle of a pandemic surge, just wait two weeks for an even bigger fiscal second quarter. Fiscal 2022 will be the year Disney's theme parks bailed out the slowdown at Disney+ and other segments.
3. Disney will survive the woke wake
If I were to ask you how Disney's fight with Florida Gov. Ron DeSantis will play out you would probably respond along political lines. Can we set aside the partisan perspective for the sake of objective game theory?
What did Disney lose by speaking out over a controversial Florida bill and promising more inclusion in its content? The common argument is that it potentially alienated nearly half of its audience, but is that really the case -- or a death knell if so? Fewer than 60 million people visit Disney World every year. We're talking about less than 1% of the global population. It's actually a lot less than 1% since we're not talking about 60 million unique visitors. This is the number of people going through a turnstile at one of the resort's four gated attractions during a single year. Most people will visit more than one park or come back again later in the same year.
Companies don't perish for siding with political causes. Do you think that Chick-fil-A on the right or Ben & Jerry's on the left would be even more popular if they remained publicly indifferent? Ben & Jerry's sells nearly 195 million pints of ice cream a year in this country. Chick-fil-A is the highest grossing major fast food chain per location. Spoiler alert: Conservatives still enjoy spoonfuls of Cherry Garcia, and liberals still wake up to Chick-n-Minis.
It's safer to stay platform-agnostic and on the sidelines, but there's also something to be said about galvanizing an audience by taking a stand. You think MSNBC on the left or Hobby Lobby on the right regret their decisions?
Even last week's move, in which Florida legislators chose to dissolve the special district that Disney World has enjoyed for 55 years, isn't a death sentence. One camp claims Central Florida taxpayers will have to take more than $1 billion in debt off of Disney's hands in the move. The other camp counters that Disney will have to pay more in taxes and have less freedom to evolve. The truth likely lies somewhere in the middle, and even then there's no shortage of experts arguing that dissolving Disney's Reed Creek Improvement District may not happen as expected next year.
There are a lot of things that can hurt Disney. A global recession can gnaw at theme park visits and Disney+ subscriptions. Box office receipts can continue to erode. Cord cutters may chip away at ESPN viewership. Disney taking a stand -- one that other media moguls and theme park operators will likely also now be pressured to follow by their employees, if not their boardrooms -- won't be the end of the leading entertainment stock.
