Disney shows that discounts move attendance in a down economy
We've got a discussion going about Disney's latest financial results
. If you haven't seen the news: movies tanked, and theme park revenue is down. But theme park attendance is down just 1 percent in Orlando, and up
2 percent in Anaheim.
How did attendance hold and revenue decline? Discounts. Massive discounts and less overall visitor spending.
So that's the question: Would you rather discount and hold on to visitors, taking a loss in revenue from those who might have come anyway... or not discount and take a hit on attendance (which might lead to just as large, or even larger, revenue loss as well)?
Personally, I've talked with many people in many industries who'd argue in favor of holding on to your customers and market share... at whatever cost. It's far easier, they say, to get existing customers to pay more to you, during a recovery, than to acquire new customers, especially ones that you lost.
Of course, discounts alone don't get the job done. Theme parks need to promote and advertise their discounts, and Disney's done that with a vengeance.
Universal's got some sweet discounts, too, but after the Super Bowl, I've seen few ads from them. I seen a few more from Busch/SeaWorld, but not nearly as many as from Disney. And I've seen zilch from Six Flags.
If you offer a discount, and no one hears about it, does it really exist?
Let's spread a little perspective on this thing, shall we?
Disney did not make it to #1 by being lucky. For the most part the company has been shrewdly and efficiently managed, and will continue to be successful long after I have shaken off this mortal coil.
This conversation was started in another thread. I'm hearing all this love for Disney, and I can appreciate Disney being able to keep attendance flat in the face of a recession, but is everyone lost on the fact that their profit is down 50 percent? That's a lot of money....a lot of money. They've cut their profit in half in order to keep their attendance the same. What good is a lot of people in your park if they don't spend money inside of it? If they continue this trend through the summer, they will lose even more profit. Sure there will be more people this summer and attendance will go up...right along with operating costs, and believe me...Disney has some serious operating costs. Even with all the layoffs, they are bleeding. The size of Disney is a disadvantage in this fight. They rely on lots of guests...but they also rely on those guests forking over loads of money during their stay. That's what pays for those 100 million dollar attractions and all the detail and Disney magic that people so dearly love.
As has been discussed on many different boards, if some other prices were lower (more reasonable), then maybe guests would spend more on those things. The discounted admissions seem to prove that point, yet, food prices and souvenir prices are still too high. Therefore, it would seem to follow that: if more people come when the admission price is lower, they would probably spend more while they are there if the other prices were lower, too. This would include existing customers that return regularly as well as those added guests that wouldn't have normally come, but did for the discounted admission.
"Loss leaders" are common practice in business. That is to say : selling your product at a loss to maintain the customer base and with an eye to getting more revenue through other areas from those customers.
Disneyland is way too crowded these days and it's impacting customer experience. If everyone is waiting on long lines to get in all the rides they want in a day, then they're not eating at the restaurants (they're packing sandwiches into the backpack), and they're not buying merchandise (not enough time, the priority will always be getting in the rides). Less crowds means shorter lines, and then more time to eat and buy stuff in the park. Way too cheap APs are hurting the DL experience for guests and Disney's bottom line. They should double the price of all APs now.
Where exactly is Disney gaining money by using admission and hotel as a loss leader. I seriously doubt that spending in the park is up. The only thing that they are accomplishing with their current method is maintaining attendance. Even though they are still profitable, they are making significantly less per guest. I now see that they are offering a free dining plan on top of all the other discounts. While I'm sure that many Disney fans are loving the low prices, the truth is that I don't think they can maintain their standards with these financial numbers for long...without doing some damage to that long term vision and delaying future attractions.
I would suggest that Disney will derive even less profit if people stop visiting altogether.
I have to admit, I kind of wish Disney had kept prices high and allowed attendance to decline, just so that Disneyland would be less crowded. But I think they made the right decision, for two reasons:
You may be MOSTLY anonymous but you are TOTALLY correct !
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