Walt Disney World's introduction of the Magic Your Way ticket system in 2005 paved the way for a decade in consistent attendance gains at the Walt Disney World Resort, allowing Disney to take visitors from its Orlando rivals while protecting the resort from one of the biggest economic downturns in recent history.
Although attendance finally dipped in early 2016, according to company reports, Magic Your Way has allowed the Walt Disney World theme parks to succeed as a single unit, where improvements in one park can help drive attendance across all four, even as other parks languish with relatively few additions.
How did Disney do it? Let's look at the math.
Under Magic Your Way the price of visiting a Walt Disney World theme park for the day decreases significantly with the more days you buy on a multi-day ticket to the resort. Disney's one-day theme park tickets grab the headlines — it's easy to incite outrage over a $124 one-day price — but the overwhelming majority of visitors to Disney World are entering the parks with multi-day tickets. And with those multi-day tickets, the price of going to Disney World can drop to as low as $40 per day.
How does this affect other Orlando-area theme parks?
Most visitors to Central Florida come to Orlando to visit Disney. If they do anything else in the area, they will plan those additional visits — to the beach, other parks, shopping malls, or other local attractions — around their days at the Disney theme parks. So the first thing that people will commit to buying is their Disney ticket.
That's where Magic Your Way comes into play. Let's say you start simple — There are four theme parks at the Walt Disney World Resort, so you plan on four days at Disney, one for each park. But you'll be in Orlando for a week. What will you do on those other days?
You could go to Universal. You could go to SeaWorld. You could go to the beach, the Kennedy Space Center, or dozens of other local attractions. But you'll probably start pricing those options to see which is the best deal for you and your family.
Under Magic Your Way, though, the difference between a four-day ticket to Disney and a five-day is just... 15 bucks. That means it costs a visitor who's already committed to spending four days at Walt Disney World just $15 to go to a Disney theme park for another day. No other Orlando-area attraction can match, much less beat, Disney on price for that.
Even going to the beach for a day doesn't seem like much of a deal in comparison, once you figure in the cost of gas to drive there and back. Heck, if you fly to Orlando to stay at a Disney resort hotel and use the free Disney's Magical Express bus from the airport, you probably won't even be renting a car anyway.
For as much as some Disney fans complain about the current state of Disney's Hollywood Studios, with closed attractions and ongoing construction projects, it's hard to make an argument that the park - even in its current state - isn't worth visiting for 15 bucks. (Or even $39, if you look at the upcharge for extending a three-day ticket to visit the other three parks to a four-day to visit all.)
When Walt Disney World introduced Magic Your Way in 2005, it absolutely murdered Universal Orlando. Disney's theme parks showed strong attendance gains that year, while Universal Orlando's theme parks each suffered a brutal 8.5 percent drop in attendance, according to the AECOM report for that year. SeaWorld held serve with a tiny 0.2 percent increase, but things were about to turn for that park.
When the Great Recession hit in 2008, the Disney World theme parks continued to stay positive on attendance, while Universal and SeaWorld Orlando saw their attendance drop. Universal only recovered in 2010, when The Wizarding World of Harry Potter opened at Islands of Adventure, and attendance surged at both Universal parks. SeaWorld, however, was left further behind, suffering a 12.1 percent drop in attendance that year and being passed in overall attendance by both Universal Orlando, from which it has yet to recover, despite holding the line on its top-line ticket prices and offering abundant discounts in the market.
The lesson? With Magic Your Way, Walt Disney World has made it impossible for other Orlando-area parks to compete successfully with Disney on price. The only way to beat Magic Your Way is with high-quality attractions that make people want to give up a deeply discounted extra day at Disney. So long as Disney remains the dominant motivation for people to visit Central Florida, Magic Your Way will allow Disney to undercut any discount strategy by its competitors trying to lure Disney's visitors away from the resort for their "extra" vacation days.
What can a competitor do? At this point, SeaWorld's best friend is Universal Orlando. With Potter, Universal now is enticing visitors to come to Orlando to see Universal instead of Disney, rather than in addition to it. Since Universal has just two theme parks, that helps put a visit to SeaWorld back in play for vacationers spending a full week in Orlando. Once people have spent their two, three, or four days at Universal Orlando, SeaWorld now competes with Disney's more-expensive one- and two-day ticket prices rather than its dirt-cheap fifth-day-and-beyond upcharges for people who already bought Disney tickets. And with Universal selling Orlando FlexTickets that include SeaWorld admission, the incremental cost for adding a day at SeaWorld to a Universal Orlando vacation becomes as cheap as adding an extra day at Disney to a Disney World vacation. It's a "Magic Your Way"-type pricing strategy that helps SeaWorld, instead of crippling it.
That said, the FlexTicket and Universal's emerging role in driving visits to Orlando only helps SeaWorld as long as Universal doesn't get as big as Disney. With Universal moving forward with plans for a third theme park on International Drive, SeaWorld might face another squeeze as Universal visitors choose to spend more of their Orlando vacation days at that resort.
Magic Your Way has allowed Walt Disney World to exercise its market power to cripple its competition. But Universal's success with Harry Potter shows the limits of using price as a weapon in the marketplace. If you create a premium experience, people will be willing to pay a premium price for it, even if the competition is offering deep discounts for loading up on its product instead.
Ultimately, that's the real lesson for SeaWorld or any other potential competitor thinking about getting into the Orlando market. If you want to compete with Disney and Universal, you can't undercut them on price. If you want to compete successfully, you have to outperform Disney and Universal on quality.
If you understand that, then what's happening in these annual theme park attendance reports makes a great deal more sense.Tweet
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