Are Price Increases Coming to Disney Parks Soon?
Bob Chapek appeared on CNBC the day after the third quarter fiscal earnings report, and it went about how you’d expect.
Chapek has earned an online drubbing during his tenure as CEO of The Walt Disney Company.
Image: The Walt Disney Company
However, Disney’s most recent earnings report proved satisfying to even his most diehard critics.
So, a more upbeat Chapek held an interview wherein he came across as loose and comfortable for a change.
Photo: Disney
Along the way, Chapek dropped a couple of park tidbits that raised eyebrows. Are price increases coming soon to Disney parks? Well…
The Appearance
You can watch the whole four-minute interview here:
The first thing you’ll notice is how much happier he looks. That’s a face filled with relief. Chapek knows that his company has survived the worst.
Now, Disney is preparing for its next phase, which will apparently include increased capital expenditures at the parks. So that’s the good news we’ve awaited.
Source: CNBC.com
For his part, Chapek may have found himself over the past few months. After the rockiest possible start, he has definitely rebounded.
Recently, Disney provided Chapek with a three-year contract extension that all but ensures he’ll run the company into 2025.
Photo: Wikipedia
This newfound confidence fundamentally altered Chapek’s behavior during this interview. Perhaps it helped that the conversation took place on his home turf.
Whatever the explanation, Chapek proved almost too forthcoming with details about future plans.
Source: Variety.com
First, Chapek bragged about the staggering increase in Disney+ subscribers at a time when the competition remained stagnant.
The reporter pivoted the conversation to Disney’s decision to pass on cricket rights. I know that’s an arcane topic to many readers.
Photo: India.com
What’s important is that Disney just chose not to pay billions more for IPL cricket streaming rights. That decision apparently cost Disney significantly.
Financially, the company saves money. But unfortunately, Disney+ subscriber projections fall in tandem with the decision.
Disney lowered its 2024 subscriber estimates by 15 million. The new projection is 215-245 million rather than the previous 230-260 million.
So, that’s the cost of financial frugality for Chapek, who had bet part of his reputation on meeting those lofty goals.
Photo: Matt Stroshane/Courtesy Disney Parks
Disney’s pandemic-caused economic struggles forced him to pick the lesser of two evils. And that’s not all. Chapek also teased another bombshell.
Disney Parks Try to Maximize Profit
We live in a time of economic uncertainty. Due to this odd series of circumstances, Disney strategists must plan for many contingencies.
For example, a dip in the economy followed by a prolonged recession would hurt theme park attendance.
Disney has planned for this already. During the fiscal earnings call, the company’s CFO indicated that Disney would reduce blockout dates on annual passes.
Let’s say we enter a recession, causing the tourism industry to take a downturn. In that scenario, annual passholders would discover more favorable terms.
Let’s say that you currently face 50 blockout dates a year. Disney would reduce that number to 25. These are just example numbers not based in fact.
The vital aspect is that Disney has already established a procedure for such instances. At the moment, Disney discourages annual passholders.
The company views them as unfavorable customers. It’s not an offensive term or anything. Instead, it’s an acknowledgment that passholders spend less money per visit.
Photo: skillastics.com
Someone spending a week at Disney for the only time for several years will splash around the cash.
Conversely, a park guest coming back next week won’t feel compelled to buy everything in sight. Again, there’s a historical basis for this park behavior.
Photo: CNtraveler.com
Disneyland works best as proof-positive that the most frequent guests spend the least money.
Conversely, international travelers are among Disney’s most lucrative customers.
Chapek and his team wince at the fact that international guests have yet to return to American Disney parks.
Photo: Rutgers
Before the pandemic, roughly one out of every five guests came from overseas. Unfortunately, the international visits are now way down, hurting the bottom line.
I’m mentioning this because Disney officials obsess on maximizing revenue. It’s a laser focus right now.
The Fear of Price Hikes at the Parks
What’s the best way to increase revenue? Sadly, the answer is often to raise prices. And that’s what Chapek stated during his interview.
The other scenario Disney must consider is overcrowded theme parks. Let’s say that the economy doesn’t head south.
Lately, the American economy has trended the opposite of what forecasters had projected. Gas prices are down, and the federal interest rate hikes may be working.
In that eventuality, Disney faces an unexpected but welcome problem. Soon, international travel will ramp up again.
Photo: Fortune
Simultaneously, even more North Americans will flock to Disneyland and Walt Disney World.
Currently, theme park attendance remains below 2019 levels…by design. Disney has utilized Park Passes to control visitor numbers.
Past a certain point, that strategy loses effectiveness. When that happens, Disney has a Plan B.
Frankly, Chapek probably shouldn’t have said it on camera, but his PR skills remain a work in progress.
Photo: Disney
The CEO indicated that theme park price hikes are on the horizon.
While he bragged about all Disney’s successes, he indicated that his company is leaving money on the table.
Photo: Getty
Presuming a robust tourism industry for the foreseeable future, Disney can and should raise prices. It’s the same strategy as concert tickets and sporting events.
When demand outweighs supply on disposable income-based purchases, people will pay more for the experience.
Here Are Chapek’s Comments about Price Hikes
Chapek strongly hinted that price increases are coming to the parks soon. Here’s the CNBC quote:
““We read demand. We have no plans right now in terms of what we’re going to do, but we operate with a surgical knife here,” Chapek said.
“It’s all up to the consumer. If consumer demand keeps up, we’ll act accordingly.
If we see a softening, which we don’t think we’re going to see, then we can act accordingly as well.””
Photo: Disney
You can interpret that as you see fit. But, to me, this statement reads like Chapek doesn’t think the economy is in trouble.
Also, presuming he’s correct, Disney is ready to make the cost of theme park attendance even higher.
I note from his tone that he’s barely even saying, “If….” To many analysts, this price hike sounds like a done deal. The only mystery involves when Disney announces specifics.
However, a sudden setback in the economy could delay or possibly even upend those plans.
Photo:NYpost.com
We’ve still got nonsense happening in Eastern Europe and a strange political climate in the United States.
So, I take Chapek’s comments as him being too loose-lipped with a reporter. He’s happy and feeling good and wants Wall Street to love him.
Source: “Once Upon A Disney Wish”
His satisfaction caused him to say, “But wait, there’s more!” A more seasoned CEO probably would have left well enough alone there.
Then again, I wouldn’t be the least bit surprised if price hikes occurred within the month. Chapek’s pretty meat-and-potatoes about this stuff.
Photo: Disney
When he says, “This might happen…,” he usually means, “This is happening.”
Are price increases happening soon at Disney parks? I think so, but I don’t believe it’s a foregone conclusion.
