It's not just analysts raising their targets when it comes to Disney (NYSE: DIS) these days. The media giant is increasing prices across all of its domestic theme parks. Admissions got more expensive for a day, week, or even a year at Disneyland or Walt Disney World on Sunday.
We're not talking about major increases. They range between 2% and 7% across most of its ticket options, tame by Disney's historical standards. Some multi-day options are going up by as much as 14%, but it's not the kind of boost that's going to cause any more "Disney has gone too far" outrage than usual. The modest upticks set the stage for what should be a much larger increase next year, when Star Wars Land opens on both coasts.
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Folks don't like paying more for things, but Disney fans will keep paying. They may flinch. They may rant on social media. At the end of the day, they'll be strapping on their mouse ears and paying the difference. Let's go over a few of the reasons consumers will go along with Disney's Sunday morning move.
1. It's a rite of passage
This marks 30 years in a row that Disney has increased its ticket prices. It's the fifth year in a row this has happened on a Sunday in February. Disney's getting predictable. It has raised prices even during economic lulls, and there was no reason for it to hold back now.
Attendance at Disney's domestic theme parks rose 6% in its latest quarter, Disney's healthiest gain in years. Guest spending rose 7% per capita, so it's not as if paying more is keeping visitors away from Disney World or Disneyland. The only real shock would be if the media giant didn't test its pricing elasticity.
2. Theme parks are where Disney has leverage
Disney's theme parks and resorts segment was the only business to post gains in revenue or operating profit in fiscal 2017, and Disney's first quarter of fiscal 2018 would've been negative on both fronts if not for the parks. One can argue that Disney shouldn't take chances with the one division that's growing right now, but where else is Disney going to optimize its financial performance?
It can't keep pushing cable network rates higher without losing more subscribers. Advertisers are scaling back their marketing spends on linear television. Folks aren't going to the multiplex the way they used to, and they're also not buying DVDs or loading up on consumer products. If Disney can stretch its theme-parks business, it's going to do exactly that.
3. New rides and attractions are coming
Disney has at least eight new rides coming to Disney World between now and 2021, a far cry from the slow pace of expansion that we typically see in Florida. There will also be investments in new hotels, restaurants, and even a scenic form of transportation. Disney has raised prices even when it's been merely phoning it in on resort enhancements -- do you really think it's going to hold back now that it's actually putting in attendance-boosting attractions?
This summer will be tame compared to the Star Wars-fueled buildout at Disneyland in California and Disney's Hollywood Studios in Florida that will make its debut in 2019. Next year's increase will probably be much higher than it was this time around. Folks will pay up then, just as they're going to pay up now.
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