Disney’s New Annual Pass Structure: Studying Supply and Demand

Disney Parks, over the weekend, announced another price increase to their annual passes and a new annual pass structure.  The weekend’s increase was the second increase since May 2014 and structure change and the introduction of blackout dates to the Walt Disney World calendar for some “lower tier” annual passes.  This is a lot of change for people to digest in a short period of time.  In general, people do not like change and protest that change.  “I’m never buying annual passes again…..Disney has priced me out of the annual pass market.”

This article is just going to focus on the annual passes at Walt Disney World not the annual pass fee increases and structure changes at Disneyland.

The fine people at Main Street Mouse did an excellent job breaking down the price increases and structure changes in the following chart.

annualpass  pricing

The old structure is on the left with the newly announced structure on the right.  The easiest question to ask is why would Disney announce a second price increase in 18 months and why would they change the structure that has been in place for so long?  The best answer is basic supply and demand.  Demand has been out-pacing supply (which is unlimited) for a long time.  Disney is trying to rein in this demand by increasing the price.

The number of annual passholders has increased 250% since 2000.  That is a lot of annual passholders and, from Disney’s perspective, a lot of people not buying the more expensive (per day) daily tickets.  My family falls into this category.  We have bought two years worth of annual passes and used them over the last four years.  Typically, we will activate our annual passes in November use them for that trip and then use them again in October the following year.  The cycle starts in again with a new annual pass purchased in “year 3.”  I’m sure there are lots of people who do the same thing we do.  We don’t use the annual passes for passholder room discounts or discounted parking since we are DVC members and don’t need a room and we fly so we don’t need a car.

From Disney’s perspective, they are losing money on me and those annual pass families.  The only way to make up some of this “lost” revenue is to increase the cost of the tickets/passes that we pay for in the hopes that we will return to purchasing standard daily tickets which don’t qualify us for passholder room discounts saving us while “losing” Disney more money.

But Disney makes a profit a $15 billion.  Yes, Disney as a corporation made a $15 billion in 2014 but the theme park “only” made up $2.2 billion of that total profit.  Still a very healthy chunk of change.  However, the same price increases that we face in our daily lives also affect Disney and on a grander scale.  In an ideal world, our personal salaries would increase but the goods and services costs would never increase.  But we don’t live in an ideal world so the costs of goods and services will increase along with salaries and in some cases out-pace the increase, if any, to our personal salary which is disappointing to some people.

Let’s look at the second part of the equation.  Disney is also in the business trying to minimize the dips in crowd traffic and flatten out the peaks in crowd traffic.  One of the best ways to do that is to make it more expensive to go during the peak times and less expensive at the off-peak times.  The pricing of the annual passes helps achieve that goal.  If you want an annual pass that doesn’t have blackout dates, it is going to cost you more money.  Disney surveyed this theory out during the summer.

image

Most people thought this survey was asking about daily tickets but it turns out Disney was using this survey to figure out a new annual pass structure.  We see this survey play out in the new gold and silver level of annual passes.  These passes have blackout dates with the gold tier having fewer blackout dates than the less expensive silver tier of annual passes.

Disney hopes that this will bring people into the parks on the less crowded days and fewer people in the parks on the more crowded days which correspond to the black out days.   Disney wants to help even out crowd traffic and predict crowd traffic especially during off-peak times.  It helps determine what, if any, additional characters need to be wandering around the parks to entertain guests instead of having those guests in a long queue for an attractions.  It helps determine which “seasonal” counter-service restaurant need to be open to help absorb the crowd at meal time.  Plus, a fuller park can make for a better park experience in some cases.  Imagine going to Monsters Inc. Laugh Floor and you are the only guests in the attraction.  Now imagine that attraction filled to capacity.  More guests, more laughter, and more fun.

Lost in the price increase of the platinum level annual passes which now have no blackout dates is the addition of Photopass downloads added to the value of the annual passes.  This is a nice addition especially if you enjoy the thrill attractions like Space Mountain or Tower of Terror or character meals.  This can help those passholders save some money.

There are two sides to change and instead of making a quick reaction….take some time and look at both sides of the decision.

Thanks for reading!

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