Changes at Disney World: The Inevitable Result of Progress?
There’s a new Wall Street Journal article, Disney’s New Pricing Magic: More Profit From Fewer Park Visitors, that has garnered a lot of buzz and backlash from Walt Disney World and Disneyland fans. I’m not entirely sure why, as there’s been approximately one of these per quarter for the last year, and it can best be described as a puff piece aimed at investors.
Most of what’s covered in the article has been discussed during recent corporate earnings calls and Chapek interviews on CNBC. Moreover, these same issues have come up countless times in our commentary on various posts–and via reader comments to everything from Genie+ to Park Pass to Annual Passes.
With that said, there are a few interesting points the article brings up that we haven’t done proper justice here, so it does serve as a good conversation piece from that perspective. Just don’t expect any real news or revelations from the WSJ article (or this ‘article analysis’) as it’s entirely non-news.
First, there’s discussion about how Walt Disney World’s record sales and profits “reflect a major strategic shift on Disney’s part, where the company is focused less on maximizing the quantity of visitors and more on increasing how much money each visitor spends, an approach the company refers to as yield management.”
This is accurate, but also spin. The correct portion is that the parks division’s financials are looking very, very strong. Per guest spending is through the roof, with that number up over 40% since 2019. During the most recent earnings call, Disney also reported significant prior-quarter increases in 2022 as compared to last year.
The spin portion, or at least the TBD aspect is whether this reflects a “major strategic shift” on Disney’s part, or is simply a byproduct of the current environment. Aside from cruise lines, the travel industry is having a banner year. If you listen to corporate earnings calls for major hoteliers, booking engines, and even other theme parks, they all sound similar to Disney’s. Strong numbers resulting from pent-up demand is a common theme.
Another common theme is challenges and constraints caused by staffing shortages. This is something Disney had been addressing on its earnings calls for a while, and the company conceded that it has been an impediment to increasing capacity.
The problem with this is that there’s not an inexhaustible supply of higher spending guests. That’s one reason why Star Wars: Galactic Starcruiser has 100 rooms instead of 1,000–it has a more limited audience. As much as some fans would like to believe it, there’s no universe in which Walt Disney World is a viable enterprise targeting the top 1% or even 5%. For the core products of theme parks and Value and Moderate Resorts, Disney needs the middle class.
As hotel and park capacity numbers increase, per guest spending drops. 200 people buying a product at $30 each amounts to more than 100 people spending $40 each. Per guest spending is not the end all, be all of financial results. It’s just the metric Disney is emphasizing at the moment on earnings calls because it’s the most impressive in a capacity-constrained environment.
This very well might end up being Disney’s strategy going forward, but it has been an approach borne of necessity (due to staffing) in the last year-plus. Disney has made similar comments to justify price increases in the past, and they have never once been true. We’ll see if this is different. I would bet against it, but there’s a first time for everything.
While we’re on the topic of per guest spending, now is as good of a time as any to address the “unfavorable attendance mix” at Disneyland mentioned in the earnings call earlier this month. Diehard fans immediately pounced on this, taking both personal offense and brandishing the term as a rallying cry.
Disney’s response to the WSJ: “‘unfavorable mix’ is financial parlance meant for investors, and ‘not a consumer term.'”
Here’s one where I tend to agree with Disney. Fans are not the target or even intended audience for these corporate earnings calls. Don’t listen if you’re averse to this type of straightforward language; if you want communications that are sugar-coated with magical terms, read the Parks Blog. No shortage of that there.
For at least the last year, they’ve used the term “favorable attendance mix” to describe the demo visiting Walt Disney World right now. That has very obviously referred to more regular ticket holders and resort guests. If there’s such a thing as a favorable mix, it should follow that there’s an unfavorable one.
It’s also really odd to me that so many fans view objective per guest spending stats as some kind of personal affront. This is something we see via reader comments here whenever pointing out that, statistically, Annual Passholders spend less per visit than tourists and other demos. Without fail, people mention how much they personally spend at WDW each visit or over their lifetimes.
I truly don’t get why anyone cares. I’m part of the “unfavorable” demo, and this doesn’t bother me in the least. If anything, you should wear the title as a badge of honor–you’re more frugal than the average tourist and more discerning about how much money you give to Disney. Since when is that a bad thing?
Moreover, it’s odd to me that this has been a “wake up call” for some fans now realizing they are not of the utmost importance to the company. That should’ve happened, at the very latest, when Disney laid off tens of thousands of Cast Members in 2020. To be sure, that was a tough time and every company had to make difficult decisions–but I don’t think anyone can claim Disney approached that any differently than any other major corporation.
Multinational media conglomerates are not your friends or family and should be treated as such. Your relationship with them as a consumer is entirely transactional from their perspective, and also should be from yours. This isn’t to say that there aren’t people working at Walt Disney World who care and are passionate about the product, making magic for guests, and so forth. There absolutely are! It’s just healthier when viewing the entity as a whole as a cold and calculating business. (Easier said than done sometimes, I know.)
With all of that said, I do think Disney needs to do better with this type of communications. Even though the intended audience is investors, they very well know that fans are listening. Some of the gaffes made on recent calls would’ve never happened under Iger (that ‘guest waistlines’ comment, oof!); he was a smooth operator who ran a tight ship with meticulously scripted messaging. Even if the substance of what he said was often very similar to Chapek, he had a manner of speaking that simultaneously reassured investors and fans.
I’d stop slightly short of calling Iger a charismatic leader, but he definitely approached that, and grew into an ‘elder statesman’ sort of persona. Aside from Walt himself, the best leader the company has had in that regard was Eisner. For most companies, this wouldn’t matter; as a creative company with so much emotional investment from so many people, it’s immensely important. Chapek just doesn’t have any of that and seems wholly uninterested in growing into the role.
Speaking of charismatic leaders, much of the WSJ piece focuses on Josh D’Amaro, head of the parks division. The article notes that D’Amaro has a “high profile with fans and employees, making frequent appearances at the parks outside of major events and posting about his visits on social media.”
It also mentions that during a recent hour-long visit to the parks, “D’Amaro was stopped more than 20 times by visitors and cast members…who asked to take selfies with him and thanked him for his work.”
We’ve previously discussed the disparate treatment of D’Amaro and Chapek, with the latter viewed as a villain and the former as a savior. Doing this requires a blatant disregard for the purview and authority of each. Without question, D’Amaro is responsible for some unpopular decisions that are below Chapek’s pay grade.
Personally, I think looking at the world in such simplistic and reductionist terms is foolish and naive. The same applies to vilifying and deifying people. There’s a corrosive culture around celebrities–whether they be influencers, executives, or actual movie stars. These are all real people, and there’s more complexity and nuance to motivations and human behavior than a simple good v. evil dichotomy.
Nevertheless, I still want to believe that D’Amaro is a good leader and could bring about positive changes for the parks division–despite recent evidence to the contrary. I’ve heard enough from people who have worked with or for him at Disneyland, and seen enough myself to continue giving him the benefit of the doubt.
In my view, the next two years will be much more telling than the last 2, when he was backed into a corner. I will readily concede if this ends up being a bad take–the easier route would definitely be lumping him together with Chapek. Despite that, D’Amaro has my confidence for now. (Same goes for Jeff Vahle, the president of Walt Disney World.)
D’Amaro is also the source of the most widely-shared quote from the WSJ article on social media: “Mr. D’Amaro said he’s aware of the tension caused by rising prices and other changes, especially for annual passholders, but describes it as the inevitable result of progress, and insists that every change Disney has implemented at the parks is in service of improving visitors’ trips.”
The “inevitable result of progress” line gave me a chuckle. This is where D’Amaro’s skills as a smooth talker get him into trouble, as he thinks he can get away with such blatant BS. You’d be hard-pressed to find anyone who has visited the parks recently who actually believes this.
At least Chapek has been brutally honest on this point, bluntly calling it a matter of supply and demand and indicating that prices will increase until met with resistance by consumers. The idea that this is anything but that is hogwash. The guest experience hasn’t gotten better, it has gotten worse. This has nothing to do with progress and everything to do with charging what the market will bear.
Speaking of hogwash, the WSJ article included this little gem: “Each park has an operation center with a ‘heat map’ that tracks where Genie+ users are in the parks using GPS technology. Park operators can direct traffic using the app by notifying visitors where the shortest lines are and offering food and merchandise promotions to cajole them to other areas.”
“If I’m seeing too much activity on the west side, I’m able to spread where I direct people to the east side,” Mr. D’Amaro said. “Our attractions will be load-balanced better, and lines will be shorter, and what that means is the experience will be better.”
This is hardly the first time puff pieces about Disney have touted in-park ‘command centers’ and how they’re used to redistribute crowds. These places do exist and theoretically could do that. Past leaders (Phil Holmes, Jay Rasulo, and Tom Staggs, if memory serves me correctly) made similarly suspect claims about deploying characters and impromptu parades to help address crowding.
I assume this persists as a talking point because Disney really wants to be viewed as a tech-savvy company with the means and acumen of controlling congestion and optimizing the guest experience. Again, anyone who has visited the parks recently likely knows this isn’t actually a thing on any meaningful scale. That is, unless you followed the free Genie’s advice to rope drop the carrousel. What park operators can do, in theory, is not the same as what is happening in practice.
Ultimately, that covers just about everything I found interesting about the Wall Street Journal piece. As a general matter, Disney’s approach to these articles has been fascinating. The company was an active participant in this, and offered quotes and statements that they had to know would rile up some fans.
As noted above, it’s best characterized as a puff piece aimed at investors…but that’s not the only demo that reads the Wall Street Journal. Much like the earnings calls, this will also be read by consumers, and it felt like there was little effort made to assuage that audience. It doesn’t have quite the same “deal with it” vibe as recent CNBC interviews, some of which border on hostile to fans, but it’s more blunt than this type of article would’ve been in 2019 or earlier. As an increasing number of articles like this are published in mainstream outlets, it’s hard not to wonder whether the ordinary consumer perception of Disney is changing for the worse.
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What do you think of this article in the Wall Street Journal? Thoughts on our assessment of the various elements? Any questions? We love hearing from readers, so please share any other thoughts or questions you have in the comments below!
Operational crowd optimization, a.k.a may the odds be ever in your favor!
Just a sidebar about Annual Passes:
I swear Paul Pressler was saying the same things about AP vs non-AP spending habits in the 20th century, so that part isn’t new, just the circumstances. Part of the difference is that there’s a lot more people listening, part of it is that it’s not just the president of Disneyland who’s saying this (Ken Potrock who?), and part of it is everything else that’s going on in WDW and DL that it feels like a knife in the back.
As for heat maps, they didn’t use that information in WDW when it cost ONE BILLION DOLLARS to build up the MyMagic backbone; there’s so much random stuff at DL that it may be happening there.
(Most of this pandering to Wall Street because “Disney needs to Stream/OH NO Streaming is Awful” took less than two years to spike the stock, then bury it. It took longer for go.com to turn into fools gold, let me tell you!)
Thank you for the thoughtful article! What makes matters worse for Disney is other “news” sites that offer incorrect summaries. I ran into two articles yesterday that said Disney was now charging for Genie+ which used to be free. I’m sure they meant charging for skip the line access, but still not everyone reading would know that.
They have paved paradise and are putting a parking lot as the Joni Mitchell song Big Yellow Taxi would say.
Poor Walt. He built an image with quality. Can u imagine the Wilderness Lodge done with the people running it now? Would they pay for the detail ? Expect more bigger buildings. They have ruined the style of the place. Do they still have that steel monstrosity in the middle of Epcot showcase lagoon?
I love Disney and it makes me sad and angry. They waste so much money and then have the audacity to say they dont make enough.
“there’s no universe in which Walt Disney World is a viable enterprise targeting the top 1% or even 5%. They need the middle class.”
I think we often have a misperception of what the top 5% represents in the United States. Often it feels like many people who are in the top 5% don’t even realize they are.
Most people in the top 5% think of themselves as middle class.
And WDW definitely does primarily draw from the top 10-20%.
Household income of $240,000 puts your family in the top 5% nationally. In Florida, about $225,000 puts you in the top 5% of the state.
Here is the thing — WDW is a limited commodity. The park capacity hasn’t really increased in the last 20 years. But wealth has increased — Both in the United States and we have become more global. So you have far more wealthy people competing for the limited capacity of Disney parks.
In 1990, there were 90 million households in the United States. Today, there are about 130 million. And WDW also can attract wealthy guests from all over the world, more now than in 1990.
Put another way… in 1990, you had 90 million Americans and maybe a small number of global visitors competing for trips to WDW… Today, it’s 130 million Americans plus hundreds of millions of global visitors as global wealth has increased.
No WDW can’t get by solely targeting the top 5%. But where 30 years ago, they may have needed to target the top 50%, today they can probably get by targeting the top 20-30%.
A household income of $125,000 puts a family in the top 25%. With even a fairly cheap WDW vacation costing $3k-$5k, clearly WDW is targeting this top quartile. In the top quartile “middle class”? I suspect most such people think of themselves as middle class.
I don’t understand this part: “The problem with this is that there’s not an inexhaustible supply of higher spending guests. (As much as some fans would like to believe it, there’s no universe in which Walt Disney World is a viable enterprise targeting the top 1% or even 5%. They need the middle class.) That’s one reason why Star Wars: Galactic Starcruiser has 100 rooms instead of 1,000”.
Isn’t that the case of Disney Destinations signature products? How is WDW different from those? If they are targeting the middle class (or should do it), shouldn’t the Galactic Starcruiser have 1000 rooms instead of just 100?
I mean that Starcruiser is not aimed at a mainstream audience and thus has a smaller pool of intended guests. (Sorry, that was definitely unclear!)
“As an increasing number of articles like this are published in mainstream outlets, it’s hard not to wonder whether the ordinary consumer perception of Disney is changing for the worse.”
I would find it hard to believe if anyone tried to tell me that this has not undoubtedly happened since 2019. You can call it anecdotal, but I know (family and friends) a lot of people that are Disney fans. And not one of them that I can think of has not had their opinioned soured on the company in the past few years.
I’ve always liked to say that Uncle Walt, like a magical pick pocket, has his hand on your wallet from the moment you enter the park until we’ll after you leave… and you don’t mind because he’s nice about stealing your money. Totally agree that there’s been a shift where the nice part is gone and now Uncle Walt’s minions want your wallet and first born. I’ve been going to Disney parks since the 70’s when I grew up in SoCal and there were coupon books for rides. Disney never seemed like a huge corporation even though they were. Fast forward to the past five years and interactions are increasingly impersonal and corporate. Verbiage like “unfavorable mix” rolls off their tongues in a way that makes one wonder if they even care if kids and families have a magical experience these days as much as whether they feed the corporate giant with a “favorable mix” of their spending while there. They really need to get back to the most magical place on earth view of what they are doing.
Well said. As someone who grew up hoarding E-tickets, to working for Disney during the Eisner years (I miss the days when the only outrage was over whether the castle would be painted green after the acquisition of the Muppets), I think Disney would make more money if they focused on winning back the hearts and minds of its fan-families with the magic that brought everyone there in the first place: the attention to detail in the parks and relentless training of the cast members onstage. People having an amazing time at the parks spend more money while they’re there; they come back sooner; and they buy your auxiliary products when they can’t visit the parks.
We had a nice time when we went at the end of March. Saw some great shows at HS and MK, had a couple wonderful (though distanced) character interactions, rode some incredible rides at HS, enjoyed the wilderness club stamp collection at AK. Loved the Epcot fireworks. Bought G+ on certain days and it worked acceptably.
During the pandemic we had to “branch out” to other types of vacations that we ended up loving a lot more.
Would we like to go back to Disney? Definitely. Is it worth the price when for the same amount of money we could do other great things? There’s the rub. We stayed off-property and brought drinks and food with us for snacks but somehow it was still much more than our last trip. And our last trip was amazing. This one was – nice.
I find it rather funny how the “massive increase in revenue” from the previous year has been. You could put a teddy bear at the helm and get the same result. The parks were still extremely limit in crowds, people had pent up money/spending from zero travel the previous year+. There is no magic to that recipe, but somehow the idiot that currently in charge is using smoke and mirrors on stakeholders to make them believe he is any good? What’s worse is that the mirage will continue as international travels start making their trips as well which will further aid in “inflated number”. ♂️
My family has the IncrediPass to WDW, but we spend thousands less (and not 40% more) at Disney now than we did pre-COVID. The product just isn’t what it used to be, and we refuse to reward Disney for the reduced consumer experience. We no longer attend the Disney special events, purchase hoards of Disney merchandise, go on Disney Cruises, and we will never subscribe to Disney+. We patronize Disney’s competitors now. We are proud to be part of the Disney parks’ “unfavorable mix.” We make a good living, but we are frugal and save for our future. Once the money is gone, it is gone.
Same here. Spending less is a fun challenge at WDW. We stay at Disney Springs hotels, buy NO merchandise, eliminate a park day to resort-hop & intentionally order a little less food (which has other benefits). Our days and nights are full of fun – pretending that after hour parties and ridiculous up-charges don’t exist is so easy at such a magical place!
Buying into DVC recently, I find myself very conflicted. As a visitor many times over (not nearly as much as you) I find myself kind of agreeing with many people about the feeling changing in the parks. I agree that it is. But I also love it, whether its now of 25 years about. But I always thought it was when WDW made a point in the late 90’s to start being an annual destination from visitors from far. Its always had AP members. But growing up, Disney was at best a every third of forth year. I grew up in a middle class family, but we traveled many places. In the late 90’s when DVC started, they wanted to be the place people came annually. More and more people started doing it. They added the 3rd and then 4th gate. but them stopped expanding that segment and just kept adding resorts. Now they are stuck with an identity issue. Is continual growth that they were getting sustainable. Do the parks have limits. So we can all vilify Chapek. But hes not totally wrong. Its supply and demand. There are a finite amount of spaces people can get into. Thats why they started teired pricing. And have multiple use years with DVC, or put runs when they do. Disney really is at a cross roads, to add more visitors annually they will have to find places to put them. Even with the newest lands they really aren’t adding ground, just retheming existing areas. So will disney just raise rates to get to the point where they are happy. Will they find somewhere to add a 5th gate (wishful thinking) or will they keep the course and try to thread the needle, its to early to know exactly what they are thinking. Walt has been gone a long time, I tend to think he would expand and double down, but he was a very smart business man, maybe they are happy where they are. Only a select few would know. I can tell you, it didn’t seem like they were crying when they lost some youth sporting contracts. And they are putting a lot of emphasis on supply and demand. So I don’t think they are hiding much.
I do wonder about the focus on the one-and-done whales. I’m used to Disneyland, so perhaps this doesn’t apply to WDW, but my family spent way, way more in the parks when we were annual pass holders than when we weren’t. Anecdotally, that seems true for a lot of the other reasonably well-off northern CA families I know.
Isn’t TDR more of an AP/locals park, and that’s why they do all that limited edition merch and events? I wonder if the US parks need to take a page from them.
Very well written summery on the WSJ piece. And it serves in some paragraphs to be a cold splash of water in the face of those of us WDW fans who are still a little entranced by the so called “magic”. You remind us its best to try and remember how it really is. We are consumers with wallets under a magical fairy dust illusion chasing fantasies and that is all we are. And especially right now just having been let out of cages of pandemic rules and imprisonment. But Disney better enjoy it while they can because this is all like that big housing bubble back in 07. Housing market kept getting fatter and fatter and fatter then one day POP! So let the mouse laugh his big ears off all the way to the bank. No empire lasts forever. And especially ones that are built on dreams and fantasies. If you really look hard at it… Disney parks are all just giant extremely beautiful wrapped gift boxes. But what’s inside the boxes…. mostly just fake pixie dust that we paid an arm and a leg for and some of us even borrowed and got into debt for. All the while the mouse and his big ears….. skipping and laughing all the way to the bank.
Love this analogy – we just got back and I felt like that beautiful gift box just housed a million gift shops!
Exactly Jax! Its like you pay Disney to let you shop! I remember back in the 90s when what is today called “Disney Springs” was still just called “Pleasure Island”. And the name fit it so well because it really was back then a much more fun place. They had an every night event that was called “every night is new years eve” with live rock’n bands and singers on the street and all the drinks had news years even sparkly shinny decorations in them. Every one dancing all over the streets to the out door live bands and there was a nightly small fire works display there too. And my very favorite place was “The Adventurers Club”. OMG I loved it so much. Had a animatronic moose head on the wall and every so often it would turn and look at every one sitting at the bar and say something funny. And sometimes for no reason at all someone’s bar stool would suddenly just starting sinking downward. It was soooo funny to see the person’s face who was sitting on it and this place had several rooms to visit with all kinds of off the wall crazy things going on in them. It was very entertaining and it did not cost any thing but the price of a drink. You could spend as much time in it as you liked. There was a lot of fun things to do on Pleasure Island. It was much better than now in what they call “Disney Springs”. No street party with all the guests dancing and laughing. No places like the AC. Just a bunch of expensive retail stores and the full service eating places are expensive too. I miss how WDW was back in those days. It was just better.