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The Price of Happiness

2/17/2017

18 Comments

 
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by David Hagenbuch, founder of Mindful Marketing & author of Honorable Influence

If Disneyland is “The Happiest Place on Earth,” the price of happiness has just gone up. The Walt Disney Company recently announced that it would increase the cost of admission to its theme parks.  Price hikes are rarely popular, but this latest round of increases seemed to elicit an especially grumpy reaction as some have wondered if the family entertainment icon has gotten too caught up in its own magic.

About two weeks ago, Disney enacted the increases, which averaged around $5 for each one-day adult ticket.  In Orlando that means a peak-time time ticket for either Animal Kingdom, Epcot, or Hollywood Studios now costs $114 per day.  That price is low, however, compared to tickets for the Magic Kingdom and Disneyland in California, which now set a park-goer back $124 each.

It’s important to note that these rates represent the upper end of the price range.  Because the company utilizes variable pricing, off-peak midweek tickets run about $17 less in Orlando and $27 less in California.  Also, tickets for children between the ages of three and nine cost a few dollars less.

In addition, Disney offers a variety of deals that provide discounts for multiday passes and hotel-park packages.  For instance, a five-day pass to Walt Disney World can come in as low as $74 dollars per day.  Similarly, one specific vacation package promises the following:
 
“Enjoy a wide range of must-do experiences at all 4 Walt Disney World theme parks with a 4-Park Magic Ticket and 4-night accommodations nearby at select Walt Disney World Good Neighbor Hotels, packages starting at $1,675 for a family of four.”

Granted, Disney is promoting the entry-level package, but still, that breaks down to about $105 dollars per day, per person, for park admission and overnight accommodations.
 
So, there are some options that are cheaper than paying $124 for a one-day park pass, yet there’s no getting around the fact that a Disney park experience demands a considerable chunk of change, which leads to the question:  Should Disney be charging so much for family-friendly entertainment?
 
The first consideration in answering this question is supply and demand.  When organizations produce goods or provide services that are very unique and very desirable, people will really want to purchase them, which puts upward pressure on prices, especially when supply is very limited.  Shouldn’t, then, Disney increase supply in order to help itself and consumers?
 
Actually, Disney has done that.  Over several decades in Orlando, the company has added three major theme parks (Epcot, Hollywood Studios, and Animal Kingdom) as well as Downtown Disney and a variety of smaller attractions.  All the while, demand for Disney entertainment has continued to grow.  Price increases, then, are another way of keeping demand in check:  Some people will not want to pay the higher prices, leading them to opt out, which makes waiting times, etc. more manageable for those still visiting the parks.
 
Certainly, Disney’s Parks and Resorts bring in a boatload of money: $16.97 billion in revenue, according to the company’s 2016 annual report.  Providing so much magic, however, comes at considerable cost, including expenses for things like employee wages, property maintenance, energy, and insurance.  Those costs and others totaled about $13.68 billion for the same fiscal year.

“But, wait a minute,” some may be thinking.  “That leaves operating income of around $3.29 billion.  Why do Disney Parks and Resorts need to make that much money?”  Well, exactly how much this business unit needs to make is debatable.  The thing, though, is that the Walt Disney Company as a whole has 1.58 billion shares of stock outstanding, with a market cap of over $175 billion.  As a publicly-traded company, Disney must provide an adequate return on investment for its shareholders, which means being more than marginally profitable.
 
It also can be helpful to look at Disney park prices in comparison to other entertainment costs.  The price of a one-day adult ticket to Universal Studios in Orlando is $105, while a children’s ticket costs just $5 less.  If one is more interested in sports, tickets for section 106 of the Amway Center, home of the Orlando Magic, range from $129.50 to $337.25 each.  Or, tickets for a concert by Frankie Valli & The Four Seasons at the Dr. Phillips Center for the Performing Arts in Orlando start at $59.
 
Of course, there are many other types of entertainment that cost considerably less.  Catching a movie or playing mini golf might come in under $10.  Ultimately, the question becomes one of costs versus benefits.  Although a Disney park ticket might cost 10 times the price of mini golf or a movie, it could easily produce more than 10 times the benefits because of the very unique things one can see and do at Disney, not just for a couple of hours, but for an entire day.
 
It’s also important to remember that paid-for entertainment is not a necessity.  People can survive without any entertainment, although it does make life much more enjoyable.  Moreover, there are plenty of recreational things that can be done for free, e.g., a stroll through a park or a conversation with friends.  So, Disney can’t be accused of price gouging.
 
Speaking of free, I know from personal experience that it’s possible to enjoy Disney parks without paying anything.  A few years ago our family visited Disney World in Orlando for several days and experienced all four of the major parks at no cost.  We got all of our tickets for free thanks to a Disney cobranded credit card we used to save Disney reward points for several years before redeeming them on the park passes.  Enjoying Disney and paying nothing is truly magical.
 
Price increases are something that consumers almost never want, but we should realize that companies need to cover rising costs, provide adequate returns to investors, and manage demand, especially for very unique goods and services that are in limited supply.  Yes, a visit to the Magic Kingdom, etc. can be expensive, but the fact that so many people are eager to pay those prices suggests that Disney parks continue to be a great value.  Creating happiness at a relatively high price is still “Mindful Marketing.”


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18 Comments
Connor
3/1/2017 04:57:16 pm

This article is very interesting. I don't believe that Disney is wrong to raise their prices. The whole concept of supply and demand is interesting here. Clearly, Disney realized that the demand at the former price was great enough that the price could be raised without forgoing a large amount of park-goers. Since people are not forced to go to Disney and it is completely optional, only people who are willing to pay go to the park. In markets today, everyone has a willingness to pay for a particular item. When prices are set, those who have a willingness to pay at or above the set price are the ones who buy the product. So, even with price increases, only people who are willing to pay for the Disney experience are paying. Thus there is a mutually beneficial transaction occurring between park-goers and Disney. As long as Disney provides the proper services and fulfills park-goers' expectations, I believe Disney is justified at pricing entry to the parks at whatever they want.

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Dylan Gillisse
3/1/2017 08:50:11 pm

There is certainly nothing morally wrong with Disney parks raising their prices. It may deter future park goers from purchasing tickets to the park but seeing as price increases have not had that effect in the past it does not seem likely. To the question of whether or not Disney should set lower prices because they can (they have significant profits), they shouldn't. If people continue to buy tickets to Disney World/Land as they have for a long time it is a credit to Disney for creating an innovative product that they can charge such high prices and still get customers.

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Chalmers
3/1/2017 09:47:49 pm

Having been to Disney World, I can attest to the truly magical and unique experience that it provides. However, I was only lucky enough to be able to go because my grandparents generously purchased the tickets for my sisters and myself. From the information presented in this article, it seems as though Disney has kept almost everything in mind when raising prices for their parks. If the parks were ridiculously crowded all the time and wait times were increased too much, the "magic" of the experience would probably have much less of an impact. So, I suppose it is good business practice to keep the prices high enough to dissuade families from frequenting the parks. Personally, I believe that the prices are not quite to the point where they would be considered unethically high.

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Gabby
3/2/2017 12:44:42 am

I was intrigued to see an article about Disney's rising prices was featured on the blog because I was actually just discussing this with a group of people in a Bible Study I attend this week. Many of the people in the group were voicing that they didn't feel that Disney was worth the extremely outrageous prices they charge and that they would much rather save up and take their children to a trip out of the country or something else. I was one of the few to disagree. To me, there is nothing more magical than seeing a 4-year-old little girl carrying a tiny Elsa doll up to the "real" Elsa, bursting with unspeakable joy and smiling bigger than ever! For a parent, I think this Disney experience is so special and contributes greatly to the reason why so many families are willing to save up for years to grant their children this unbelievable experience. In raising the prices, Disney seems to have been thinking about their customers in the decision. They have analyzed the benefits brought about by the increased costs and how the experience of families can be improved through this price increase. Disney is an experience like no other and because of that, so many families from all over the world prioritize attending the parks at least once in a lifetime to take in all the attractions, princesses, and fireworks they can. Despite the cost increase, I believe families will continue to include a Disney vacation on their wish lists and the magic often associated with Disney will keep amazing and exciting the families who pay this extravagant cost.

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Nate Rettberg
3/23/2017 08:14:59 pm

I found this discussion to be extremely interesting and relevant. I have found myself wondering why the prices needed to be so high for Disneyland as well as becoming angry at their supposed "greed". The points made about substitute goods put the entire discussion into perspective. Other parks and other venues of entertainment are at the same or higher prices for similar entertainment. This allowed me to see how the price of the tickets for Disney aren't greedy grabs for more cash but in reality actually fair prices compared to the market surrounding Disney. Although the prices have been raised to deter some consumers, from my experience, Disneyland is still crowded as ever. So I am not sure how effective the price raise has been in this case, but everywhere else it seems to be a sound business decision.

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Kelsey Robertson
3/24/2017 06:23:23 pm

I have personally experienced Disney’s price increases. I recognize the fact that Disney can raise their prices because demand is so high. People are willing to pay the higher prices, so Disney keeps raising them every year. I understand how this is mindful in creating stakeholder value through their profit margins. However, I am curious how this is mindful on upholding societal values? Upholding societal values for entertainment I understand, but I know a lot of people in various communities who are inhibited from experiencing Disney because of the high prices. For example, many teachers that I know do not make enough income to afford to taking their own kids on a Disney vacation. In addition, a lot of college students do not have enough income to afford going to Disney. I understand how there is still demand for Disney with the price hikes, however it would make more sense to me for Disney to offer a discount program for low-income groups like teachers and college students to be able to afford to go to Disney. This would enable me to vote for mindfulness in terms of upholding equitable societal values.

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Kyle McAbee
3/24/2017 11:29:46 pm

I haven't been to Disneyland in a few years, and I know the prices have significantly increased since then. Even though the Disney resorts keep jacking up their prices, people will still go there to experience "happiness." It's very interesting to see how people are still willing to pay these new higher prices. They do complain about it, but they still go. Many people think that Disney is spiking the prices out of greed, but they don't see the behind-the-scenes expenses. I know Disneyland is going through many remodels, so they are trying to pay off these renovations. The prices are also pretty reasonable when compared to the other things in the market.

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Timothy Dong(Tianhao Dong)
3/26/2017 01:34:57 am

Your post is really interesting because you lead readers to think about question from the perspective of the Disney instead of consumers. I totally agree with your argument that there is no entertainment place like Disney could offer the unique experience to the family and individuals. Therefore, the demand is shorter than the supply in the market. In addition, the cost of running those advanced equipments in Disney is definitely high. As a big company, the Disney also need to be profitable to reward its stockholders in regular payment periods. The increasing price of visiting Disney is reasonable in terms of Disney itself.

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Igor Puglia
3/26/2017 01:41:08 pm

I believe that Disney is right about rising the prices of admissions. It really is a costly entertainment. However, Disney offers several package deals that help the customer to find better prices, whether it is only for the admissions or for the resorts. In addition, as it is stated at the end of the article, demand is high enough, so that even though price is high, demand will still be high. I have been to Disney in Orlando twice with my family and it was an amazing experience. Despite the fact it was costly we are planning on going back again, especially because coming from Brazil, going to Disney World Orland is something we will remember forever. Disney is always innovating their theme parks making the experience different each time, which explain to me the pricy cost of admission.

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Sean McCarrell link
3/26/2017 07:57:54 pm

This was a very interesting blog post. Before reading it, I was on the other side of this argument. I believed that Disney was wrongfully increasing their prices, as I was personally hurt when the prices surged in 2014. However, after reading this article it makes sense economically for them to raise prices. With demand increasing, they have to weed out part of their customer base in order to keep the parks from becoming too crowded for anyone to enjoy. Furthermore, Disney is an entertainment industry -- something that is not essential for a life to function. I appreciate the post and different perspective from the average angry consumer.

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Allyson C.
3/27/2017 02:15:24 am

I really enjoyed this post. I, too, agree that increasing the cost of admission, although inconvenient for consumers, can increase the overall enjoyment of the experience. With Disney's increasing popularity, they are forced to either dilute the experience and the safety of guests by allowing everyone in, or increasing the price of their tickets. This also creates a more meaningful experience, as it is not an everyday trip to Disney, but a more thought out and planned trip. Yes the prices are quite high, but like you said, you're not just paying for an hour or two of entertainment, getting a ticket to Disney can lead to an entire day of fun! It becomes more inconvenient with the cost of the food, souvenirs, etc. once inside the park. One can go from spending a little over $100 on one ticket, to spending close to $200 by the end of the day. If another way of increasing supply or decreasing the demand for Disney, which is not really the best choice for the company, consumers could find a more affordable price. However, with a decrease in the demand due to reasons other than cost alone, obviously does not bode well for the company and their future profits. Overall, the pricing is increasingly inconvenient, yet leads to a more meaningful and enjoyable time.

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Sierra McCoy
3/27/2017 06:56:57 pm

Reading through this article, it gave me a completely different perspective on the “price of happiness” because I have heard a lot of different reasons for the price increase of Disney tickets. The other reason I heard about the change was because there was way too many in the park that individuals were never able to fully enjoy the intended experience. Something the writer explains is there are “free” and budget worthy experiences but they do require prior commitment and customer loyalty. The questions he asks, is “should a family friendly” experience be at such a high cost? In my opinion, I would say no. My family struggles with our personal financial status because of the amount of people we need to cater to. Disney may lose their foundations of a “bring your whole family” place and then end up losing the prime group of people who stay loyal.

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Noah Strenn
3/27/2017 10:18:47 pm

When I read this article, it made me truly realize how much it costs to have family time at disneyland. I always knew it was expensive, but not this bad. Even though Disney needs a lot of revenue for costs and paying stockholders, I still think that they are getting too confident in themselves and raising the prices way too high. The common person in America would not be able to go to Disneyland or disney World as often as they would like because of the prices.

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Garrison Thompson
3/27/2017 11:43:51 pm

I have always thought that Disneyland prices were WAY overpriced. This article breaks down the logistics of it. Disneyland makes roughly $16 billion in revenue a year with $13 billion in expenses and costs, leaving them with roughly $3 billion in profit. Even though some people may question whether or not Disneyland deserves to make this much, these people have no jurisdiction in saying whether or not it is moral. Disney provides a unique service and product and they provide an entertainment, not a necessity. Therefore Disneyland can set their prices as high as they like. I think Disney is doing the right thing considering their profit margin, however I must say that they are not doing a good job at appealing to the casual Disney fan such as me.

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Christian Y.
3/28/2017 12:47:04 am

I do think Disney has been known to be mindful in their marketing strategies, however the continual raising of prices for tickets is going to eventually hurt them. In doing so they are enhancing the perception of a more quality experience at Disneyland over other parks, but their prices are far too high and only really targeting a higher class.

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Jake Battaglia
3/28/2017 01:08:38 am

This article was one that i found very interesting. I never really did understand why disneyland was so expensive to go to everyday, and continued only to rise. After reading this it gave me a different view to why the pricing has increased. With more demand and more visitors attending, the experience is being taken away at the same time. Raising these prices eliminate this and will provide a more pleasant time because it will not be so crowded. This was very unique to think about and i enjoyed it.

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Kamuela Makue
3/28/2017 01:51:07 am

The many times I have been to Disneyland, I've never had to pay for the ticket myself. I understand that people feel hurt because of the price spike because it seems a bit more unreasonable. I, believe, that the price increase will help Disney in the long run. The increase helps alleviate some of the congested traffic it may have during the busy times of the year. With less people in lines, more people will have a better experience. This, in turn, will result in people having a more pleasurable experience and wanting to come to Disney Parks again. Disney may make the trade of people deferring to buy the ticket, but could be outweighed by others' choices to purchase a ticket for themselves to revisit. Increasing the price could also raise the marginal profit so that Disney could make a higher gross profit.

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Matt
3/28/2017 02:34:25 am

My wife loves Disneyland, but I was indifferent until I took our one year old to see Minnie Mouse for the first time. As we walked into her house, her eyes became wide and excited, all she wanted in that moment was to touch and experience the character she had grown to love. I love my daughter and that moment just melted my heart, so I’m not as bothered by the price increase. It does however limit the frequency of which we can go. Instead of twice a year, we may only be able to visit the park once and that is ok. When we visited Minnie Mouse we stood in line for around 30 minutes. I understand what happens when the price goes down on the demand curve, the number of visitors will increase. I’m perfectly content to spend a few extra dollars for a little extra room in line.

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