Disney’s New Price Model: Why You May Have to Pay More
The Uber model of doing business is clearly catching on. The ‘surge pricing’ model, which has traditionally been used by hotel and rental car companies, is now being utilized by businesses that probably never dreamed of it before, but are now seeing just how effective it can be. And we’re not just talking about disruptive startups, either — even vanguards of old school business tactics are giving Uber’s ideas a serious look.
Most notably, Disney.
The L.A. Times reports that Disney has been giving “demand pricing” some real consideration, especially when it comes to peak visitor times like weekends and holidays. After sending out an online survey to annual pass holders, Disney dipped its proverbial toes into the water to gauge customer reactions to the surge pricing model. The model the survey asked about would involve a three-tier pricing structure, in which certain passes would only be valid on certain days. For example, the lowest-tier annual pass would only be valid on off-peak weekends, whereas the top-tier pass would be good any day of the year, regardless of crowds.
According to some of the reactions the L.A. Times was able to dig up on certain message boards around the web, it seemed that people weren’t too stoked about the idea. But it may be the perfect solution for Disney, which owns some of the most famous and crowded theme parks in the world. By adapting its pricing strategy, and building in an incentive for visitors to space out their planned visits with higher prices, the company could effectively bolster ticket revenue and thin out the crowds.
Park capacity is estimated to be around 82,000 people. As of right now, Disney charges $99 for a one-day ticket, not including admission to the adjacent California Adventure theme park, also run by Disney. According to Forbes, Disney’s 11 theme parks account for a third of the company’s overall revenue, and attracted more than 132 million guests in 2013. These are massive numbers, and if using a different pricing strategy to make things more manageable at its parks is deemed effective without scaring away too many customers, it’ll be hard not to take the idea seriously.
It’s easy to see why Uber saw such merit in the demand pricing system, even though it has taken heat for what many thought were outrageous charges. The system plays on simple elastic pricing. When supply, or available drivers, is in short supply or high demand, the price goes shooting up, and vice versa.
For Disney, adopting the Uber-style pricing model would do the same thing. On days that a lot of people want to visit their parks (demand is up), the price for a ticket goes up with it.
But again, the risk Disney runs is pissing off its customer base, which mostly consists of families who are cost-conscious. Given that tickets to Disneyland can run up to $100 per person, a family of four planning a vacation to the park can easily and quickly add up to a price-tag of several thousand dollars. In an economy in which a great deal of the middle and lower class are still struggling to find their feet, it may not be in Disney’s interests to adopt a pricing model that would charge more for tickets during the only times the working class can make it to the park: weekends and holidays.
Remember, most of the working class doesn’t have much in terms of schedule flexibility. With that in mind, adopting Uber’s pricing model may do more harm than good.
Disneyland has, for generations now, been seen as one of the premiere family vacation destinations in America, and given its already steep ticket pricing, adopting a surge-pricing model may create more problems than solve them. If Disney’s parks become even more out of reach for middle class families, in terms of affordability, Disney could alienate its core customer group — something the company’s leadership would probably want to avoid at all costs.
Still, it’s easy to see why surge pricing would appeal to a company like Disney. Thinning the herd, while also making more money, is definitely an appealing prospect. But it seems that customers don’t like the idea, and there’s the possibility it could backfire. It’s working for Uber, but in Disney’s case, surge pricing may not be the tightest strategy.
Follow Sam on Twitter @Sliceofginger