Is Disney World Finally Too Expensive?

A stay at Walt Disney's (NYSE: DIS) massive Florida resort -- or Disneyland in California, for that matter -- isn't supposed to be cheap. Customers pay up for premium experiences, and shareholders relish the power of pricing elasticity. However, a Wall Street Journal piece over the weekend is saying the quiet part out loud.

Robbie Whelan's "Even Disney Is Worried About the High Cost of a Disney Vacation" argues that the leading theme park operator's post-pandemic price hikes have resulted in the recent lull in turnstile clicks at its stateside resorts. The article explores the sticker shock of a trip to the House of Mouse, sharing interviews with recent visitors, problematic third-party polling of travel trends, and unnamed former employees offering insight on internal concerns at Disney about its own product's affordability.

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All this said, this doesn't have to end badly for Disney and its investors.

Feed the birds

The critical article on Disney World's pricing situation has proven popular. More than 1,200 reader comments were posted discussing the online piece over the weekend -- and that was before the piece ran in Monday morning's Wall Street Journal print edition. Theme park enthusiasts are discussing the article in other online outposts. It hit a nerve.

But now it's my time to say the quiet part out loud: Disney will be fine.

Whelan's Disney story is on the front page of Monday's paper. It's right below a photo of the Philadelphia Eagles celebrating their victory over the Kansas City Chiefs in Super Bowl LIX on Sunday night.

"I'm going to Disney World," game MVP Jalen Hurts said after the gridiron blowout. He will be leading a parade down the Magic Kingdom's Main Street U.S.A. on Monday afternoon. It's ironic that the star of the most watched televised event in the country is going to the resort that is reportedly pricing itself out of Mainstream America.

I don't buy it, figuratively speaking.

Image source: Getty Images.

A spoonful of sugar

Disney's fiscal first quarter last week was its strongest earnings beat in more than a year. The profitable turn for Disney+ and return to box office dominance helped push adjusted earnings per share 44% higher for the three months ending in December. After having its theme parks carry Disney through the first couple of years out of the pandemic, it's refreshing to see other segments do the heavy lifting.

Revenue for Disney's domestic parks and experiences rose a modest 2% in its latest report. Operating profit took a 5% hit, but that was weighed down by expenses related to the December launch of its latest cruise ships and disruptions caused by a pair of hurricanes early in the fiscal first quarter and at the tail end of the previous quarter.

Hurricane Milton didn't just force the gated attractions in the area to shutter for a day or two. It also led to last-minute trip cancellations, and locals having to focus more on cleaning up after the storm and dealing with the financial impact than pivoting to the escapism that Disney and its peers provide on the regular.

The ho-hum performance for Disney's stateside theme parks wasn't unique. Comcast -- the parent company of rival Universal Studios -- reported a dip in domestic turnstile clicks, as well as a decline in operating profit in the same quarter. SeaWorld owner United Parks is expected to post a decline on both ends of its income statement when it reports financial results later this month.

Disney is easy to single out as the top dog -- or top mouse, if you will -- but it doesn't mean that traffic to the world's most visited theme parks is peaking. Yes, folks are spending more on a visit to Disney World.

The media giant was once bragging about per-capita revenue for its theme park guests clocking in 40% higher at the end of fiscal 2022 than it was before the COVID-19 crisis hit. Regional amusement park operator Six Flags made the same 40% claim last year. The industry has gotten smarter about rolling out premium offerings that deliver enhanced experiences, but there's always room across the country's gated attractions for folks who want to cut corners in order to pay less.

Admission prices have inched higher almost every year since Disney World opened 54 years ago. Its largest competitors have largely followed suit. Disney's shift to tiered demand-based pricing and offering premium tickets to get on rides faster in recent years has been financially rewarding for the company, but it also doesn't price out the masses.

Paying more for a single-day ticket during peak season is a juicy headline number, but the park offers much cheaper admissions during slower times of the year. As a bonus, coming on quieter days when the gate prices are lower and when Disney resort hotels offer promotional discounts typically means a cost-conscious guest doesn't have to spring for access to the faster-moving Lightning Lane queues.

Articles and critics suggesting that a trip to Disney World is out of reach for the masses focus on high-season prices. The attention turns to a Disney World one-day park hopper that can cost as much as $266 if you want to visit over the holidays this year. That's a lot of money, but the parks will still be crowded that time of year.

There's not a lot said about a one-day ticket that can be as low as $119, or promotional multiday tickets that take per-day costs substantially lower. And there's not a lot written about the Disney Pixie Dust annual pass that offers year-round access on slower days for less than $3 per available day.

The clouds aren't as gray or stormy or classist as the naysayers think. Disney and all of its peers are still drawing substantial audiences. It's not just Super Bowl MVP Hurts going to Disney World this afternoon.

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Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Six Flags Entertainment and Walt Disney. The Motley Fool recommends Comcast and United Parks & Resorts. The Motley Fool has a disclosure policy.