It was the price hike heard around the world -- or at least the Mickey Mouse universe. Walt Disney (NYSE: DIS) jacked up its Disney World annual pass prices on Monday night. The world's leading theme park operator increases its ticket prices every year, but this wasn't a run-of-the-mill boost. Disney World annual passes now cost as much as 25% more than they did earlier this week. Throw in a more modest increase eight months ago, and annual passes have risen by as much as 28% over the past year.
Social media is in an uproar. Longtime Disney World buffs are voicing their outrage online, threatening to take their theme park business elsewhere. It's likely just bluster. Most of the people venting now will bite the bullet when renewal notices come along. However, if they do stray, there's no denying that SeaWorld Entertainment (NYSE: SEAS) and Universal Studios parent Comcast (NASDAQ: CMCSA) will be the greatest beneficiaries -- and that is if they don't take advantage of the window that Disney has opened by raising prices themselves.
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SeaWorld Entertainment will be the biggest winner if locals with Disney World passes find themselves priced out of the House of Mouse. Five of its dozen gated attractions are in Central Florida, including its two most popular theme parks and its most visited water park. A SeaWorld Orlando annual pass without any blackout dates costs less than a fifth of Disney World's comparable pass, and even an annual pass that includes all but one of SeaWorld's dozen parks nationwide costs less than a third of Disney World's premium offering.
The influx of budget-conscious families priced out of their Disney World passes -- and for a family of four, the $900 increase for the priciest plan is not an insignificant amount -- would come at an ideal time. SeaWorld stock hit five-year highs earlier this month, keeping the momentum going after a breakout 2018. Attendance at SeaWorld's parks soared 8.6% last year, a surprising turnaround after four consecutive years of declining revenue. The growth was starting to slow this year. Revenue rose just 1.6% in the first quarter, but a migration of more free-spending former Disney World passholders can do wonders to get growth accelerating at SeaWorld again.
Comcast's Universal Orlando will probably be an easier sell for disgruntled Disney World regulars. The resort's theme parks have far more rides than SeaWorld's attractions, and Comcast will open its seventh on-site resort hotel this summer for the ultimate staycation experience. Universal Orlando's annual passes are a lot more expensive than SeaWorld's, but still quite a bit cheaper than Disney's.
Comcast is more in need of rolling out the welcome mat than SeaWorld. Theme park revenue actually declined slightly in its latest quarter, and Universal Orlando's new Harry Potter-themed coaster has been marred by downtime since last week's grand opening. The reason SeaWorld Entertainment stock is likely to benefit more than Comcast is that theme parks accounted for just 6% of Comcast's revenue in 2018. It will take a lot to move the needle, unlike at SeaWorld, where leisure attractions are the business.
SeaWorld Entertainment and Comcast will have a lot of potentially lucrative decisions to make. Do they hike admissions in response to Disney? If they do increase pass prices, the boosts will be minor, as neither company has the ammo of new attractions to match what Disney World has in the pipeline for at least another year. Universal's best shot opened last week, and the initial wave of positive reviews has been overtaken by complaints of mechanical and weather delays. Unreliability trumps marketing.
Still, it's a win-win scenario for SeaWorld and Comcast. If Disney World's competition inches prices higher, most of the increase will trickle down to the operating profit line. That's a win. If the competition decides to hold their ground on pricing, they're going to be collecting new passholders tossing out their mouse ears in the trash cans on the way in. That's also a win.
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