A possible recession or economic downturn could impact Walt Disney World, especially as pent-up demand fizzles out, travel slows, and consumer confidence dips. This post tries to answer the titular question based on history, past precedent, and our expectations. (Updated November 19, 2023.)
We’ve been saying for months that there’s likely to be a spending slowdown in the not too distant future. Pent-up demand among domestic visitors could exhaust itself, inflation on necessities might result in reductions to discretionary spending, and the same could also happen due to depleted household savings and rising debt levels. Inflationary pressures and the rising cost of travel due to oil prices could bring the party to an end, too.
When some or all of that happens, consumers will return to being more cost-conscious and price sensitive, and things will normalize or more if the United States enters a recession. Our short and sweet answer as to what that means in this context is that Walt Disney World will end up offering better discounts, bringing back familiar fan favorites. If you want to be notified immediately when these deals are released, sign up here for our FREE Disney newsletter here. What follows is the why of that, with insight into the present and past.
As of Late 2023, this is a topic we’ve been discussing for over a year…and so has Disney. It first came up on earnings calls around this time last year, when executives indicated that they’d pull “levers” for incentivizing visits once revenge travel exhausted itself or the economy dipped into recession. It has since played out more or less as expected and predicted by this post.
Several quarters ago, former CFO Christine McCarthy warned investors of a slowdown as Walt Disney World “lapped” the 50th Anniversary. Still-current Disney Parks Chairman Josh D’Amaro reiterated this, indicating there would be a drop in demand at the Florida parks even as Disneyland attendance stays strong.
In the last two quarters, we’ve seen exactly this happen. Parks & Resorts as a division is still up, but Walt Disney World is down year-over-year in attendance, hotel occupancy, and key financial metrics. Disney has attributed the drop-off at Walt Disney World largely to pent-up demand exhausting itself for the Florida parks first since the state reopened earlier. Disneyland and Disney Cruise Line didn’t see a rebound in earnest until roughly a full year later, so they are still benefiting from lagging pent-up demand.
This has also been evident in our Walt Disney World crowd reports, with every week since Easter having lower wait times year-over-year. In response, Walt Disney World has done things like V.I.Passholder Days and taken steps to improve guest satisfaction. Most significantly, they’ve released over a dozen different discounts through June 30, 2024. These deals have been released earlier than last year and been better on average, sometimes significantly so.
The answer to the titular question is, essentially, “what they’ve been doing–except more.” Unless there’s a deep recession, it’s highly unlikely that Walt Disney World will actually lower sticker prices. That violates a key tenet of their “Kohl’s Pricing Model.” In any case, here are more predictions we made previously about how Walt Disney World would deal with a recession, including a look back at the last time that happened and how the company responded…
With regard to sustaining growth and demand during a recession, one of Walt Disney World’s “levers” that executives have called “quite obvious” is discounting. However, they’ve also indicated that they will not use discounting “to the extent to which we used it during the last recession.”
As discussed in Disney Doesn’t Want Lower Crowds, the company’s executives stated for several years after the last recession that they’d scale back discounting…but never did. They talk a good game for Wall Street, but when push comes to shove, they’ll discount as much as necessary to hit occupancy targets.
If or when a recession hits, Walt Disney World will react accordingly. The company is not somehow magically immune to economic conditions. We’ve addressed this countless times in the past, but to reiterate: Disney charges what the market will bear. They don’t hold off on price increases as a nice gesture to guests. Conversely, the company cannot simply choose to charge more to “recoup” money lost in the past or by its streaming services.
When Disney increases prices, the company does so not at the rate of inflation or because its costs are increasing at a commensurate level, but because they can. When they offer discounts, it’s out of necessity, not corporate benevolence. Walt Disney World is an extremely savvy and sophisticated business—they maximize profits to the greatest degree economically feasible.
Not to go off on too much of a tangent, but this is actually observable in recent food price increases at Walt Disney World—and not in the way you might think. Snack prices have shot up and the company has played other games with portion sizes, product quality, and suppliers.
However, table service entrees–even meats and other dishes that have seen their input costs go up–have not increased in tandem with inflation. We’ve speculated that this is because Disney already pushed those prices up so much in the last several years, and there’s trepidation that going even higher would cause consumers to balk.
Similarly, it’s not as if Walt Disney World has ever dropped prices when attendance was high and increased prices when attendance was low as a result of its per guest costs decreasing. To the contrary, Disney charges the highest prices when demand is up (e.g. Christmas and New Year’s) and drops them when attendance is low (e.g. September).
Simply put, if the company could have freely increased prices without seeing a corresponding lack of demand, they already would have.
With a few brief exceptions, Walt Disney World’s prices have only gone up during the post-Great Recession recovery. There has been a decade-plus run of costs consistently going up like clockwork as Disney has benefited from economic expansion and favorable demographics (e.g. nostalgic millennials having kids, more international tourists, etc).
Diehard fans also have a fundamentally different view of the parks than the vast majority of guests. For many of us, vacation means visiting Walt Disney World. There is no “substitute good” for what Disney offers. To be sure, a large swath of the general public views the parks the same way. There’s an emotional component to the calculation for that “rite of passage” vacation, but most people are not willing to pay any amount that Disney tells them is the cost. They do have a balking point or price ceiling.
This is the fundamental fallacy with the common refrain that the company will always keep raising prices because fans will never stop visiting. Fans alone are not enough to sustain Walt Disney World. (Even then, fans are not a monolithic group–some think Disney can do no wrong; others have decades of experience visiting and hold the company to higher standards than does the general public.)
If middle class Americans considering a first-time trip–far and away Walt Disney World’s single largest demographic–go to price out a vacation on DisneyWorld.com and the package price is beyond their budget, that’s it. They’re out. They move on to the next-best alternative, whether that’s the local Six Flags or a road trip to see America’s National Parks.
With that said, there is a longstanding view of the parks as recession-proof. (In part, this led to the new lands and rides that have opened in the last ~5 years–Parks & Resorts was viewed as a stable and reliable business unit.) During the global financial crisis, attendance at Walt Disney World held relatively flat.
This was an impressive feat, but that doesn’t really tell the full story. Walt Disney World got incredibly aggressive and creative with discounts, promotions, and celebrations. The success of Disney’s theme parks during the downturn doesn’t prove their inherently recession-proof. Instead, it should be construed as a testament to leadership at the time.
For starters, the celebrations were spectacular. Anyone remember Limited Time Magic, Year of a Million Dreams, Summer Nightastic, What Will You Celebrate, or One More Disney Day? All of those year-long (or multi-year, in the case of Year of a Million Dreams) festivities put the World’s Most Magical Celebration to shame.
Just think, the blockbuster bash for 50 years of Walt Disney World was outdone by the celebration held in some meaningless (milestone-wise) year back in the late aughts. The point is that those events were a ton of fun, well-marketed, and had strong word of mouth as a result. None of that was by accident–people at Disney made that happen and that’s a big reason why the parks weathered that economic downturn so well.
Another big reason–probably the big reason why Walt Disney World outperformed during the Great Recession was discounts. The deals during and coming out of the financial crisis were crazy. We did several inexpensive stays at Pop Century and Saratoga Springs thanks to deep-discounts and stacking deals. Many newer fans probably wouldn’t believe the bargains. Suffice to say, we were able to visit Walt Disney World more than once per year with wages from our jobs in college.
It was a great time for Free Dining, along with other more novel discounts. We were also big fans of the “Buy 4, Get 3 Free” deal, which provided 3 free hotel nights and ticket days–plus a $200 gift card–when you booked 4 nights. That was without a doubt the best discount we’ve ever gotten at Walt Disney World, blowing away even the legacy version of Free Dining.
Speaking of the Free Disney Dining Plan Deal, that was the golden age of that particular promotion. Back in those good ole days, Free Dining meant the free regular Disney Dining Plan even at Value Resorts, and it included appetizers and tips back then.
To be sure, Free Dining can still be a great discount for some, but it was a sure thing back then. No doing the math or comparing to room-only discounts was necessary. It was unquestionably the superior discount.
Going back a bit further to the previous economic downturn, there were also some exceptionally good discounts post-9/11. People paid <$200 per night for Deluxe Resorts, Wilderness Lodge in the low $100s, with Value and Moderate Resorts in the $40-80 per night range.
I don’t think it’s worth fixating on that too much. For one thing, we’re two decades removed from 9/11, and both the world and Walt Disney World are fundamentally different. For another, Americans were collectively apprehensive of air travel back in late 2001 and 2002. By contrast, Americans want to continue traveling now, but finances might preclude that from happening.
We’d caution against salivating about the prospect of unprecedented or aggressive discounts given that generalized desire to travel and the evolution of Walt Disney World in the last 15 years. Personally, I’d be shocked if Walt Disney World offers anything like the 4/3 deal or anything on par with that.
Disney has also learned a lot about marketing in the years since. It’s more likely that they start small, and try offering more illusory discounts at first. It wouldn’t surprise me if they start with“Free Dining Lite” or “Half-Free Dining” and other gimmicks that trade on the name recognition of the Free Dining offer and tries to capture anxious guests who are eager for that to return. Disney dumping unsold room inventory onto blind-booking sites is another likely scenario.
As for timing of discounts, that largely depends upon internal projections of hotel occupancy and attendance. If they’re still seeing a slowdown in bookings for 2024 or are behind trend, the deals are likely to get more aggressive going forward.
In that scenario, one possibility is that Walt Disney World jumps right to actual Free Dining, with a release in early January 2024 for travel dates starting in the summer. That’s a bold bet, especially given that the regular (paid) Disney Dining Plan returns on January 8, 2024. More likely is a late spring release–but either are possible.
My concern is that people within the company will initially overestimate the strength and resilience of the parks & resorts. Walt Disney World has enjoyed an era of unprecedented prosperity–a time during which it felt like the business segment’s leaders could do no wrong. Even unpopular decisions were begrudgingly accepted, and Disney reaped incredible financial results. A decade like the last one can give rise to delusions of invincibility, and a lack of appreciation for the fickleness of consumers.
In that scenario, it’s possible that crowds fall rather than prices. It’s possible that attendance decreases regardless (or holds flat but appears to fall based on improved capacity and efficiency), but that’s more difficult to predict. That really depends on how Disney reacts, to what extent consumers pull back on travel, and the duration and degree of economic downturn.
During other recent economic downturns, Walt Disney World also made operational changes. Some venues were mothballed and costs were cut to the greatest extent possible. With Disney already pretty lean as it’s been unable to fully recover from the closure, it doesn’t seem like much of that would need to occur. To the contrary, it could become easier to reopen more and staff up certain venues if the labor market isn’t as tight.
One potential operational change is shorter hours. Probably nothing on par with the post-reopening period when the parks were closing at around 7 pm nightly, but Magic Kingdom closing at 9 or 10 pm and later opening times for the other parks wouldn’t be a surprise.
Even if there is a recession or economic downturn, there’s uncertainty about its depths and duration. Many economists believe it’ll be a short and shallow recession due to underlying fundamentals. If there’s only a brief downturn followed by another sustained period of growth, Walt Disney World may feel minimal impact and implement few changes. In that case, we may never see any aggressive discounts–it could be more like a normalization bringing the parks back in alignment with pre-closure discount trends and demand.
Ultimately, it’ll be interesting to see how things play out and whether shifting sentiment and macroeconomic conditions impact Walt Disney World. To be sure, we are not “rooting” for a recession. Quite the contrary, as the negative human consequences far outweigh whatever benefits might exist with discounting, lower crowds, or whatever else.
Our best case scenario is that the United States avoids entering a recession, but pent-up demand naturally exhausts itself and weakening sentiment alone causes consumers to become more cost-conscious and price sensitive. That in turn should result in better deals and an improved environment without all of the downsides.
Regardless, hopefully you found this speculation interesting or illuminating. It’s something I find fascinating, and have touched upon it briefly in other recent posts about discounts, resorts, etc. None of those really did full justice to the topic, so I decided to dive deeper here. Admittedly, this might’ve been too deep and rambling, but on the upside, I can start linking to this post rather than wading back into this in future posts. So even if you feel like your time was “wasted” with this, you’ll still come out ahead in the long run! 😉
Do you think Walt Disney World’s prices will rise or fall in the coming year? Are you anticipating discounts on hotels, tickets, or dining if the United States enters a recession? Think they’ll do anything else–like another big celebration (that’s actually good) or limited time entertainment? Will you be ready to pounce on deals–or will you wait for a full economic bounceback? Do you agree or disagree with our commentary? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!