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.
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!