Walt Disney Co: Theme Park Price Hike Won’t Kill DIS Stock

It’s official: If you’re part of a middle class family that wants to vacation at one of the Walt Disney Co (DIS) theme parks, you may need to take out a loan or sell an organ to finance the trip.

Walt Disney Co: Theme Park Price Hike Won't Kill DIS StockDisney recently overhauled its park-ticket pricing plans in response to peak and off-peak crowds, which was little more than a veiled attempt to raise ticket prices, at least to the extent it could do so.

Owners of Disney stock don’t mind, of course. After all, every extra penny of profit Walt Disney can squeeze out of its business, the more value DIS stock justifies.

If Disney just priced itself out of the market, however, the new pricing scheme may end up doing more damage than good to Disney’s equity.

Disney’s New and Improved Park Price Plans

The announcement was made this past weekend. Moving forward, the cost of a one-day entry into a Disney park will be determined based on whether the day in question is at so-called Value, Regular and Peak times.

The cost of a “Value” day at its flagship Florida park will remain at the current, untiered cost of $105 per person. The number of value days, however, is apt to be minimal. Regular days will cost $110, while peak days will cost $124 per entry.

Disney’s website explained (somewhat ambiguously):

“Here’s an example, if guests plan their visit for September, they’ll have a variety of options, including many days in the value period, which will give them the opportunity to pay less for a 1-Day ticket. If they plan to visit during a peak period, like the winter holidays, they will pay more. Purchasing a 1-Day ticket in a non-peak period, or choosing multi-day tickets and annual passes, will provide additional flexibility and value.”

The higher prices follow a comparable price hike for season passed put into place in October, which drove the cost for one year’s worth of access to the company’s Florida parks from $529 to $649 per person.

The Pushback Begins

Analysts, observers and consumers have voiced mixed responses to the news, some of which should worry owners of Disney stock.

The President of International Theme Park Services Dennis Speigal, opined: “Disney and Universal, they can say, ‘It’s $100? We’re going to make it $120. Those people are still going to come, still going to pay it, but we can raise the pricing because we know they’re coming.'”

Not everyone is as willing to look past the price hike, however. Consumers have already expressed plans to look elsewhere for family entertainment.

Take California resident Chris Redrich’s response to the October price increase for season passes as an example. Redrich plainly said, “We won’t be able to afford it. We understand the need to manage park capacity, but it’s disheartening to have prices increase so drastically.”

Even so, while nobody likes to pay more for anything, most would-be buyers who have chimed in on the matter have grumbled, but still acknowledged the higher prices wouldn’t keep them out of the parks.

One commentor to the news posted at DisneyTouristBlog.com articulated her ambivilence exceptionally:

“The truth is, we’ve all come to expect a lot from Disney. Bigger, Better, more technology. All of that costs money. We all know that Disney makes tons of money off of the parks but, we all also want the parks to keep improving and wowing us. If you consider your other entertainment options, Disney is really not that expensive. Seeing an IMAX 3D movie costs $20 and usually lasts around two hours. Disney is at least that entertaining and we are frequently there for about 10 hours in a day so, yeah, around $100 is what we should expect to pay. Compared to movies, concerts, broadway shows, and other forms of entertainment, Disney is actually a pretty good deal for the amount of time you get and quality of entertainment per dollar. Do I like paying more? No. But I still feel like I’m getting my money’s worth.”

She had a valid point.

Bottom Line for Disney Stock

The complaints thus far have been more bark than bite. And knowing that Walt Disney has successfully implemented meaningful higher prices for 28 straight years and has yet to hit a wall doing so, it’s not as if this one is statistically likely to be the one that “goes too far.”

There are, after all, $7 billion people on the planet. Enough of them can absorb the extra cost to keep the parks full.

Then again, owners of Disney stock may want to at least keeps close tabs on the situation, just on the off-chance this latest price increase is the straw that breaks the proverbial camel’s back.

Theme parks and resorts generated $16.1 billion worth of last year’s total revenue of $52 billion, and there’s little doubt its theme parks were the big driver of that figure.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/03/disney-stock-dis-world-land-price/.

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