I’ll start with my prediction: we will see more significant discounts for 2017 than at any time in the last 7 years. This post takes a look at the economic, political, and other variables that form the bases for my prediction. For those of you hoping the title was just lighthearted clickbait for a junk-reading filled with my dumb jokes, you might be disappointed to find a fairly dense post with statistics and other such nonsense. (But please come back tomorrow when we turn our attention to the 13 best drinking fountains at Walt Disney World!)
Moving along…discounts are a direct reflection of attendance projections. One of my go-to lines on the blog is that Walt Disney World doesn’t offer discounts in the spirit of corporate benevolence, they do it to bolster attendance numbers. It thus follows that discounting is more aggressive when attendance projections are lower, and less aggressive when attendance is anticipated to be higher. That’s a core premise of this post, and I think there’s little dispute as to its tenability.
I believe attendance projections will be down for 2017 for a few reasons. The first driving factor is (another) drop in international tourists. There’s been a lot of speculation that Walt Disney World attendance was down this summer prior to mid-July. Anecdotal observations don’t tell nearly as much as quarterly reports (maybe attendance was down but spending was up enough to offset?), but our recent experience with light-for-summer crowds supports the basic idea that attendance has been down. Much of this speculation revolves around international visitors, who often flock to the parks in the summer months.
Unfortunately, Walt Disney World doesn’t release attendance numbers, let alone demographic breakdowns. We do know that international numbers rose 7% in 2013 because Disney itself reported that. Estimates at that time pegged international tourists as accounting for 18-22% of all guests to Walt Disney World. This is a fairly significant chunk of Disney’s visitation, and I would speculate that international guests account for proportionately more in revenue than they do in attendance (based on length of stay averages and reports on spending patterns).
Florida’s official tourism arm does release visitation numbers, and it’s safe to assume that the state numbers more or less reflect Walt Disney World’s numbers. Per these numbers, the three origin countries that account for the most Florida tourists are Canada, United Kingdom, and Brazil. The most recent sets of data show decreases of 4% and 10% for Canada and Brazil, with the UK up 1%.
In the case of Canada, a slumping currency as compared to the USD and weak forecast is the main explanation. With their purchasing power diminished, Canadians are less inclined to travel to the United States. By contrast, a weak dollar as compared to the pound, in particular, has led to UK guests being Walt Disney World’s “whales” for many years, with 21-day ticket purchases (yes, 21 days), long hotel stays, and more.
However, in the aftermath of the Brexit, a Florida vacation is far more expensive for these UK guests, a reality that will undoubtedly be reflected in bookings next year. While that is likely to ease long-term if/when the pound rallies, it’s unlikely Brits will be as spend-happy in 2017 as they have been for the last several years.
Brazil faces pronounced, multi-factor economic challenges. The country is in deep recession and the real dropping 30% against the USD in 2015, and a similarly grim 2016, thus far. Diminished purchasing power isn’t the only issue, as Brazil is in the midst of a political crisis and further strife following the impeachment of its president. As a Walt Disney World trip has become something of a rite of passage for Brazil’s middle class, these groups will continue to come, but not in the same numbers–or spending as much. A quick bounce-back doesn’t seem plausible.
Of course, dips in visitors from other countries–who Disney will probably try to lure with regionally-targeted offers–doesn’t impact domestic visitors unless there is a corresponding lull in their numbers…
Any decline won’t just be driven by a decrease in international guests, or spending among those guests. In turning back to the above-mentioned numbers compiled by Visit Florida, we can also see a strong recovery in Florida’s travel and tourism sector in the 5 years after the low point of the global economic crisis that started in 2007 and peaked in 2009. Other studies demonstrate the severity of that financial crisis on travel, reporting that prices plummeted twice as much during the economic crisis as they did post 9/11.
Barring another economic catastrophe, it’s unlikely that we will see a slump on par with that (although further bursting of China’s bubble or the housing market suffering a setback–either of which would impact the global economy–are not outside the realm of possibilities). It’s also reasonable to expect we won’t be riding the same wave as the last few years.
For 2017, domestic concerns regarding the economy and terrorism are both reasonable. While there was no immediate fallout from the Orlando nightclub shooting (given that most vacations are pre-planned and cancellation would be a costly proposition), the potential for a long-term decline remains. Although other variables are at play there, France’s tourism sector has been hit hard this year. Paris, also highly reliant on tourism, could present a cautionary tale for Orlando.
In addition to the Pulse shooting, the fatal alligator attack at the Grand Floridian could have an impact. That incident tugged at emotional heartstrings and resonated deeply with Disney’s prime demographic. The long term ramifications of this fairly unprecedented (in terms of public response) are unknown, but could be pronounced.
It’s also possible that the impact of both events will be minimal. Numerous terrorist attacks occurred in the aftermath of Pulse, meaning that the Orlando shooting did not have a prolonged run in the global news cycle. The family of the boy killed by the alligator has indicated that they will not sue Disney, which would have extended the news cycle on that story, as well. By the time people are seriously contemplating their 2017 vacation plans this winter, both tragedies could be distant memories for many people.
Another long-shot possibility is that Florida–slow to act on the virus–will face a local Zika epidemic. The CDC has issued travel alerts, but there has yet to be a confirmed non-travel related instance of Zika in the United States. However, local infections are suspected in two current Florida cases of the virus. If a local outbreak occurs, it could have the same degree of impact on Florida’s tourism as it has in the Caribbean. (In fact, British media has already warned readers to “think twice” before visiting Orlando.)
On the domestic economic front, there’s the highly divisive election this November and the Presidential Election Cycle Theory, both of which will have some consumers skittish when contemplating 2017 bookings come this fall and winter. A recent study by UBS observed markets from 1914 until present and postulated that markets move in 4-year cycles in a pattern that coincides with the presidential election. The UBS study seems to support the existence of such an election phenomenon (although skeptics point to the recent Clinton and Bush (43) Presidencies as disproving it).
These trends show that the first year under a new president is typically the low point in these cycles. This occurs irrespective of the party elected, so if you subscribe to this theory, it will play out again in 2017 regardless of the candidate elected. (In fairness, economic studies can be contorted just like scientific ones, and correlation doesn’t equal causation–which is underscored by the Super Bowl Indicator.)
This isn’t altogether surprising. Markets favor stability and predictability, and with a new president comes potential volatility through new policy that alters the status quo. I’m betting most of you don’t come to Disney blogs for political economy theory and shop talk, so I’ll curtail this before we get too deep or veer off into personal politics (which I’ve been careful to avoid, so please do likewise in the comments).
The takeaway is that there’s a strong probability 2017 will bring with it a bear market, which potentially could be exacerbated depending upon the perceived unpredictability of whomever is elected.
Assuming all of this–or even some of it–unfolds as expected, there will be a decent level of reluctance and uncertainty among consumers that businesses will need to overcome. They will have to work harder to entice customers, and this extends to Disney. This could come in a couple of forms: new attractions and entertainment offerings that lure in guests and/or aggressive discounting.
We already know Pandora: World of Avatar opens in 2017. As the largest scale addition since New Fantasyland (and let’s be honest, well before that), this will draw a lot of Disney fans to the parks. This, plus a serious summer push (akin to how Summer Nightastic brought guests in droves for Summer 2010) will certainly help. However, if consumer confidence is weak, I doubt this will be sufficient alone for casual tourists, who represent a far larger segment of Disney guests.
I don’t envision many scenarios in which people will say, “I’m really worried about the economy, but who cares about that because I can’t wait to step foot in Pandora!” I suspect the new Avatar-based land will move the needle, but not with potential guests who have monetary apprehension. The concerns of those people will need to be overcome by monetary incentives to woo them down to Walt Disney World.
In this regard, it will be interesting to see the approach Disney favors: lower prices on bare bones packages to get guests in the door, or all-inclusive (e.g. Free Dining) packages that guarantee a certain amount of per guest spending. While there will undoubtedly be a mix of both (as there always is), my prediction is for several particularly enticing all-inclusive packages as the main push.
As consumer confidence has trended upwards since bottoming out after the economic crisis, consumers have been less price sensitive. This has benefited Disney, which has been able to raise prices without seeing dips in per guest spending. If consumer confidence falls it’s likely that consumers will be more price sensitive. At that point, it will be interesting to see whether guests start balking at merchandise and dining prices, and Disney again sees a decrease in per guest spending. That $16 burger at Pecos Bill will be a tougher sell for guests paying a la carte.
Higher levels of price sensitivity is what leads me to believe Disney will focus on packages, even if those feature a larger, up-front price tag. (I wouldn’t be surprised to see some of the hybrid room/dining discounts previously reserved for international visitors.) These packages will be able to tout deep discounts, and also offer guests the illusion of predictability, which they crave.
From Disney’s perspective, packages like this lock-in a level of spending on the front-end, which is also favored. It’s easier to sell consumers on a high fixed price in advance–once people start scrutinizing per item prices that they can contextualize, they find those individual purchases more difficult to justify.
This is what I think is most likely to occur, and why I suspect 2017 will see massive package discounts for Walt Disney World.
Just like theorizing about which attraction rumors will come to fruition, all of this is speculation. Like even the most bona fide rumors, none of this could end up happening. International markets–those mentioned or other ones–could rally, bringing an influx of new guests. American consumer confidence could soar after the election leading to increased bookings and skyrocketing prices. While I think those things (or anything else that will preclude the need for aggressive discounting in 2017) are highly unlikely to occur, I don’t have a crystal ball. I’m just looking at available information, speculating, and drawing my own conclusions. Whether you find it fun food for thought or pointless conjecture is a matter of personal opinion.
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So…what do you think? Is all of this pointless conjecture, or do you think these are the bases for a legitimate prediction that Walt Disney World’s numbers will be down in 2017, necessitating significant discounts? Any other factors you think should be considered? Other thoughts or questions–please share in the comments!