It's not just the rubber band holding mouse ears in place that's testing the elasticity of Disney (NYSE:DIS) fans. The undisputed champ in family entertainment stunned the theme park industry on Sunday by dramatically hiking the rates of annual passes to its stateside theme parks.
The most expensive annual pass at California's Disneyland resort soared 35% to $1,049. Disney World annual passes are also moving sharply higher, though not as dramatically as we're seeing on the West Coast.
You will also have to pay more for your car to visit the House of Mouse. Parking rates went up by a buck in California and $3 at Florida's four theme parks.
Foodies are also flinching, as Tables In Wonderland -- a plan where members receive discounts at Disney World resort restaurants and access to high-end dining events -- is seeing its subscription climbing 50% to $150 a year.
Disney isn't just raising prices. It's trying to sweeten the pot by offering pass holders free digital downloads of all of the photos taken on rides and by staff photographers throughout the park. However, that's a perk that may seem hollow to annual pass holders since regulars aren't likely to be active buyers of snapshots or souvenirs.
The timing of the move is curious, particularly in Florida where Disney is doing more subtraction than addition. Disney's Hollywood Studios -- its least visited theme park in Florida -- is a shell of what it used to be, and it will be a couple of years before exciting additions go live. Universal Studios -- Disney's closest theme-park rival -- is closing the attendance gap. In a few months, Disney will close DisneyQuest, a five-story arcade that was included in its premium annual passes.
Disney is going to be so much better in a few years than it is now, but why not wait until then to increase the ransom-note demands? Jacking up prices on its most devoted fans now -- as construction cranes toil away at Animal Kingdom's long overdue Avatar expansion while Pixar- and Star Wars-themed lands are still on the drawing board for Disney's Hollywood Studios -- is dangerous.
It's a gamble that will naturally pay off nicely for investors if patrons flinch and renew at the higher rates. With the economy humming along and gas prices low, maybe the promises of eventual improvements will be enough to keep park-goers close. If so, nearly every incremental penny in Sunday's increase will make it all the way down to the pre-tax bottom line. But if that's not the way things pan out and turnstile clicks start going the wrong way, it will be a rare blunder of the Bob Iger era. Greed has a funny way of testing pricing elasticity at the worst possible time.
Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.