It might be self-evident that Walt Disney World is making all of these improvements–particular those at the resort hotels–to justify higher prices, but it’s still worthy of some brief discussion. Walt Disney World is not improving the quality of rooms at Pop Century, adding fine dining and luxury-caliber amenities at Caribbean Beach, or gondola transportation to any of these resorts simply as a nice gesture to guests. The goal of these upgraded features is an ‘upgraded’ price.
All of these upgrades, on their own, would help Disney in justifying higher nightly rates at the resorts in question. That’s before you even account for the fact that there will be significantly higher demand for these hotels come 2020 thanks to Star Wars: Galaxy’s Edge.
While it’s impossible to prognostic exactly how high room rates will surge (exact numbers at least in part depend upon what type of special on-site perks on-site guests receive for Star Wars: Galaxy’s Edge), it’s easy to envision a scenario with a 25% across the board increase, and even more significant bumps at the Disney Skyliner resorts. Given the staggering financial investments being made at Walt Disney World, it’s unlikely that Disney itself is targeting bumps of less than 25%…
The thing is, Walt Disney World prices do not exist in a vacuum. There are also scenarios where such price increases are not sustainably in light of larger economic circumstances. You might recall our post last year that proclaimed that this year would be the ‘Year of the Discount at Walt Disney World.‘ By and large, our predictions were wrong.
While several of the specific factors to which we pointed in that post were accurate, one big prediction–upon which everything else was predicated–did not. The U.S. economy did not see a post-election slump, and instead has seen significant gains in consumer confidence as the markets have skyrocketed.
About the only ‘unprecedented’ discounts this year have occurred at restaurants. We have not tracked all of these, but did focus on a few in our Fall Walt Disney World Dining Deals post.
While it’s unclear what will happen with Annual Passholder and Disney Vacation Club dining discounts in 2019 (our expectation is that they will be expanded), Cast Member discounts might be instructive. A couple of weeks ago, Walt Disney World quietly released new 40% off dining discounts for Cast Members.
Such 40% off discounts, themselves, are not uncommon. Locations like Olivia’s and Sanaa have offered this discount for as long as we can remember. However, this new discount includes Flying Fish, Artist Point, Hollywood Brown Derby, and Jiko, among other restaurants that do not regularly receive such generous discounting.
In a couple of important regards, dining is unique, and not necessarily representative of other spending trends at Walt Disney World. There are several reasons why Disney might ‘need’ to offer heavy discounts, including but not limited to a growing number of Disney Springs restaurants and ever-rising menu prices that occur to improve the ‘perceived value’ of the Disney Dining Plan. (Such a strategy is savvy for encouraging sales of the Disney Dining Plan–a high-margin add-on–while simultaneously discounting menu prices for other demographics keep them spending.)
However, it’s also worth noting that Cast Member discounts have also been extended at Mickey’s Not So Scary Halloween Party (which also saw lower attendance across the board this year) and are being offered weekdays at Food & Wine Festival booths. To us, this suggests there’s not much price elasticity in some of Walt Disney World’s mass market, non-core products. And this is in a healthy economy.
We will once again make a pessimistic prediction about the U.S. economy: current market levels are unsustainable and high levels of consumer confidence is not based upon reality. All of this has become, to at least a degree, a self-fulfilling prophecy with things getting better because people feel better about the economy, and have optimism about future prospects.
Without delving too deeply into this all, it’s questionable whether this can continue for two more years. The market is (over)due for a ‘correction’ and as soon as people stop seeing double-digit percentage increases in their 401(k) statements, they’ll have less of a rosy view of the economy. Once they lose some of their optimism, they will cut their discretionary spending. People won’t stop vacationing (because history has proven that’s not how they cut spending), but they will spend less on said vacations.
The question–and one that’s impossible to answer today–is when such a market correction occurs. If the economy continues its current trajectory for 2 more years (a distinct possibility), and that’s coupled with all of the improvements at Walt Disney World hotels plus the addition of Star Wars: Galaxy’s Edge, the sky is the limit on prices. We could see $250/night regular season room rates at Pop Century with scant discounts available. It seems doubtful that economic trajectory can continue through the 50th Anniversary of Walt Disney World in 2021.
Some people might look at the above and see it as further indication that Walt Disney World is aiming to price out the middle class. I disagree. The middle class is, and will always be, Disney’s primary demographic. While Disney would like to capture more of the luxury travel segment (and will undoubtedly find some very successful and lucrative niche ways to do this with Star Wars: Galaxy’s Edge), the scale and nature of their business necessarily requires the middle class.
(In other words, Walt Disney World might be able to price out the middle class in non-core/limited supply products like the Star Wars Hotel or even fireworks parties, but they cannot do the same with park tickets. The example of MNSSHP tickets above shows how raising the cost of a non-core but moderate supply product plays out with price sensitive consumers.)
In recent years, Disney has expected the middle class to spend a greater percentage of household income on vacations. Disney has not been the only business to adopt such a strategy, and it has definitely been viable–at least in the short term. Such an approach has worked because of consumer confidence, and a willingness of Americans to take on debt. However, with U.S. consumer credit card debt at an all-time high above $1 trillion, it seems unlikely that this cycle can continue unabated indefinitely.
If there’s a market downturn or economic recession in the next couple of years, it’s quite possible prices will remain close to static (or more likely, prices will increase as discounting gets more aggressive and targeted) even as these improvements occur. Of course, in such a recession scenario, many people reading this will have bigger things about which to worry than hotel room prices at Walt Disney World. Again, it’s impossible to predict the future. Our expectation is somewhere in between, with a mild economic ‘correction’ in store, but also a steady increase (of less than 25%) in Disney’s prices between 2019 and 2022. There are enough improvements being made around Walt Disney World and there will be enough new demand among Star Wars fans that Disney will be able to justify some degree of price increase. Then again, what do we know? We were already wrong once on all of this.
Do you agree or disagree with our recommendations for visiting Walt Disney World in the next several years? Are you concerned about pricing trends once Star Wars: Galaxy’s Edge opens? Any thoughts or predictions of your own to add? Any questions we can help you answer? Hearing feedback about your experiences is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!