How Disney Parks Will Make More Money
You may recall that The Walt Disney Company has a new Chief Financial Officer.
This individual, Hugh Johnston, is somewhat of a better public speaker than Disney’s last CFO.
Photo: Disney
I say this because Johnston has been on the job for more than a year now, and he hasn’t called me fat yet.
That somehow puts him ahead of the previous holder of the position, who felt that it helped Disney vacationers to feed us less.
Photo: CNBC
Perhaps Johnston isn’t as much of a fitness buff as his predecessor, but it’s more likely he’s just a savvier public speaker.
Well, Disney’s CFO recently appeared at the UBS Global Media & Communications Conference, which Justin Hermes discussed here.
Photo: PepsiCo
There’s one area of that conversation we haven’t detailed yet, and it’s probably the one that matters most to you.
Here’s how Disney parks will make money in the coming years.
Photo: Disney
We’ve actually got some specific guidance on the topic for a change.
Disney Experiences Sees the Big Picture
MickeyBlog has talked quite a bit about Disney Cruise Line’s (DCL) current expansion.
Disney thoughtfully invited MickeyTravels on an early sailing of the Disney Treasure before its maiden voyage.
Disney Treasure
So, we’ve already detailed all the marvelous amenities onboard, including my favorite, the Haunted Mansion Parlor.
Johnston briefly discussed his company’s plan for DCL, which isn’t the point of this conversation. It matters a bit, though.
Haunted Mansion Parlor
Disney wants to squeeze as much profit as possible from every business opportunity in the Experiences division.
The cruise ships factor heavily into those plans, and Johnston explains why.
Disney Treasure
“Cruises is a wonderful business…because it’s got high margins, it’s got good returns.
“Consumers absolutely love the product. It’s the highest-reviewed product of any of the products that we have.”
Disney Treasure
Yes, according to Disney’s CFO, cruises provide the highest level of guest satisfaction among guest experiences.
These vacations also prove highly profitable for Disney, which makes them win/win for everybody.
Disney Treasure
Disney would like the same blanket statement to apply at the parks.
Achieving that goal requires a bit more alchemy, some of which the average guest will never understand.
Disney Introduces First Class
I used this analogy the other day in a recent Lightning Lane article, and I’m going to roll with it again today.
After evaluating Disney’s current plan for several weeks, I’ve decided that this is the best description for what’s happening.
Lightning Lane
Let’s say that you were an airplane customer in the days before a business invented First Class seating.
Now, consider how you would have felt during your next flight when you realized that someone gained better amenities by paying more.
Photo: United Airlines
TWA introduced that concept to the airline industry in 1955, and while the company no longer exists, First Class remains.
For Disney, introducing First Class has proven much more challenging.
Photo: Frontier Airlines
For starters, the airline industry was still quite new in 1955 and years away from its glory days in the 1960s.
Also, social media didn’t exist back then. Disney definitely doesn’t have either of those benefits.
Photo: Yahoo!
Disneyland Park will celebrate its 70th anniversary in a few months, and tens of millions of guests have followed the business closely since that day.
Disney cannot sneak something in a press release and hope that nobody notices.
Photo: Disney
It’s the job of people like MickeyBlog to catch them and tell you what’s happening.
For this reason, Disney has suffered quite the social media drubbing since the fall of 2021.
Cinderella Castle
That’s when Walt Disney World introduced a paid FastPass system, the first of its kind.
At that moment, Disney unofficially introduced First Class to its customers, although some of you know that’s not really the case.
Photo: Yesterland
Cast Members have hosted VIP Tours for many years now. They’re the real start of this program.
Another popular form of the premise are the after-hours ticketed events like Disneyland After Dark.
Photo: Disney
Guests pay more for unique access. That’s the new business model.
Disney Targets the Whales
Johnston proved unusually transparent in communicating Disney’s new strategy. Here are a few quotes.
“The Parks business is basically an asset of one. It doesn’t really have any material competition.
Magic Kingdom
“Obviously, there’s Universal and (others), but a Disney theme park is pretty unique.”
“The amount of IP in it, the scale of the Parks, and the service again is a fairly unique asset.
All four Disney World park maps
“And you all see the financials on that. They’re quite attractive, right? The return profile is terrific. The growth profile is terrific.
“We have to be smart about pricing, particularly being sensitive to the consumer and the consumer who is, sort of, more focused on the value end of the offering.
TRON Lightcycle/Run
“We want to be able to tap into those families and build the habit of coming to Disneyland or Disney World not one time, but multiple times.”
Johnston then details how Disney creates more money by increasing its per capita guest spending.
Disney’s Riviera Resort
That’s an industry term indicating how much the average tourist spends on a visit.
If Disney can convince someone to pay $50 more for something that formerly cost $1,000, that’s a five percent increase per capita.
Spaceship Earth in EPCOT
The CFO adds that the people paying more are the ones on the “premium end.”
They’re the ones who don’t mind stretching their vacation budget.
Disney’s Wilderness Lodge
That’s the First Class model I referenced. Disney is being transparent that it’s targeting some wealthier customers now.
Yes, Disney has always done that, but recent optional amenities like the Lightning Lane Premier Pass significantly increase per capita guest spending.
Photo: Disney
The premise works the same as charging guests more for First Class or bottle service at a club.
A small percentage of customers will pay extra. This group, often known as whales, can make a huge impact on the bottom line.
Disney Targets the Whales but Remembers the Little Fish
Johnston provides more context regarding Disney’s recent evolution.
“The value-added services that we have like Lightning Lane and those types of things…where we’re delivering more value, we feel comfortable [charging more].”
Lightning Lane
Meanwhile, for all the criticisms Disney receives about losing customers on the low end, the CFO’s words indicate otherwise.
According to him, in a point he stresses multiple times, Disney always considers the price-sensitive customers when it addresses pricing.
Lightning Lane
We witnessed this when Disneyland had its most recent wave of price increases.
The least expensive admission ticket remained the same price, which got drowned out a bit in all the headlines about the increases.
Satu’li Canteen
Before you cynically dismiss this statement, I’ll remind you of the setting.
Disney was talking at a conference catering to investors. He had no reason to lie about this point.
Mr. Kamal’s Menu
If anything, Johnston would have been hailed as a hero if he’d said that Disney wasn’t worried about price-sensitive customers.
Instead, the CFO defiantly stated his belief that Disney wants those guests to visit the parks multiple times as well.
Mickey’s Very Merry Christmas Party crowds
This new strategy rewards those willing to pay more with better amenities.
Thus far, the new enhancements do nothing to diminish the park experience for other guests, though.
Magic Kingdom
As I said the other day, in my experience, it’s proven precisely the opposite. Wait times are down even though attendance is flat.
So far, Disney’s new money-making strategy appears successful and unexpectedly considerate.
Hollywood Studios crowds
Will that trend continue in future years? That’s what we’re all wondering, but I’m currently quite optimistic.
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