Thursday's national inflation data came in hot. Walt Disney's (DIS 1.45%) flagship Florida resort is coming in even hotter. It's been a week of price hikes at Disney World. The big news on Tuesday was the shift of the Genie+ premium queue reservations platform from a flat fee to a more expensive demand-based pricing strategy. It wasn't the only price board tweaked higher.
- Prices for many character dining experiences shot up dramatically this week.
- Refillable mugs sold at resorts increased in cost by 10%.
- Soft drink prices inched higher.
The transition of Genie+ from a flat rate also coincided with individual Lightning Lane purchases shifting to variable pricing, raising the ceiling on what expedited queues for the top attractions will set a guest back.
No one expects Disney to freeze prices. Demand is high. Operating costs are growing. However, no entertainment company has a blank check when it comes to pricing elasticity. There will come a point when Disney goes too far. We might be getting close.
Image source: Disney.
Tapped out
Guests don't go through old-school turnstiles at Disney World anymore. Park entrances and Lightning Lane queues have points where guests can literally tap in with their tickets, MagicBand bracelets, or mobile devices. They're literally tapping in. Are they also getting figuratively tapped out?
NYSE: DIS
Key Data Points
A trip to Disney World was never cheap, but it's now a lot more expensive. Disney revealed earlier this year that average revenue per daily visitor is up 40% from pre-pandemic levels. And that was before the last few waves of pricing increase. As high as general inflationary pressures have been across the country, that figure hasn't spiked 40% over the past three years.
Investors generally cheer price increases from aspirational brands that can pull them off, and it's undeniable that next month's quarterly report out of Disney will be robust for its theme parks segment. The fiscal first quarter of 2023 that kicked off two weeks ago could be even stronger. Folks keep coming. There were some anecdotal reports of crowds tapering off when area schools restarted after their summer breaks and initially after Hurricane Ian carved through the state, but many Disney World enthusiast groups online have been filled with reports of guests storming back to the House of Mouse this week.
Success now doesn't mean success later. Mouse ear–donning guests at Disney World didn't plan for the higher prices that rolled out this week or the unpredictable nature of demand-based pricing for Genie+ and individual Lightning Lane purchases. The real test will come later as the public takes in the new pricing and decides if a trek to the world's most visited theme park resort is finally out of reach.
The timing is also not ideal, as rising interest rates on consumer debt make it riskier to finance an upcoming Disney vacation on plastic. Whiffs of a recession also make things dicier as we plan our upcoming expenditures. Do you really think it's a coincidence that major retailers and e-tailers just had Black Friday sales events in early October? Businesses are trying to lock up sales from customers who may not be spending as freely as we get closer to the holiday season.
This doesn't mean that Disney is doomed. It may not come to regret this week's moves. If the global economy takes a hit, it will hurt all travel and tourism stocks, not just the ones that were boosting prices as they blasted through the economy's yield signs. If the Disney bubble pops, things will get ugly, given the high fixed costs of the resort, but no one's going to get sudsy as long as the parks are crowded.
