Disney's Problem with Annual Passes

May 6, 2020, 5:07 PM · When Disney announced yesterday the reopening of the Shanghai Disneyland Resort, executives made clear that they are planning a "go slow" approach for all of their park reopenings around the world, whenever they might be. Reopenings at resorts such as Disneyland, Disneyland Paris, and Walt Disney World will come in phases, with limited guest capacities.

That's great and should help keep the public safe, but what happens when thousands of annual passholders want to come back as soon as the parks reopen? How will they react if limited availability keeps them from being able to use their passes?

For years, Disney and other theme parks have been pushing annual passes as a hedge against the variance of daily ticket sales, which can suffer with bad weather, rising gas prices, and competing events in the area. Annual and seasonal pass sales allow parks to get their money upfront while giving passholders an incentive to keep visiting throughout the season, since they've already paid for their ticket.

With monthly payment plans, theme parks have taken their annual and seasonal pass sales to a new level. Now you don't need to pay the full cost of a pass upfront, just the cost of a daily ticket and then relatively low pro-rated monthly payments after that. Six Flags even has extended the monthly payment concept to an open-ended membership plan, giving its theme parks a similar business model to your local gym.

Cheap monthly payments have driven record attendance throughout the industry, as many fans who feel priced out of daily tickets end up (somewhat ironically) finding annual passes a more affordable deal. That's especially true at Disneyland, where reportedly more than a million Southern Californians have bought Disneyland Resort annual passes.

The crush of annual passholders led Disneyland last year to introduce its new Disney Flex Pass, which required its passholders to make advance reservations online to come to the park on most days instead of simply showing up whenever the pass was valid. Disney likely will use that reservation technology for all of its annual passholders as it looks control park attendance in the first phases of its reopenings.

But what happens when all those other passholders who bought their passes with the understanding that they would be able to use them whenever they are valid have to make reservations - and possibly find them unavailable - instead? It's one thing to restrict the sale of date-specific tickets when you're trying to hold down attendance. It's something else entirely to effectively rescind admissions that you've already sold.

If you read the fine print when you buy any Disney annual pass, you'll see that it notes that admission is subject to park capacity. So, legally, Disney's in the clear telling annual passholders who don't make the capacity cut in an advance reservation that they can't use their pass that day. But, as Disney found out in the furor over collecting monthly AP payments during its parks' closures, being right legally doesn't earn you a win in the court of public opinion.

Cedar Fair, SeaWorld, and Six Flags have avoided this issue by extending their passes through the entire 2021 season, upgrading people's pass and membership levels, or even both. For passholders to those parks, anything they get in 2020 is a bonus, so I'd bet that those passholders are likely not to take a denied advance reservation that badly.

Disney's taking a different approach. Essentially, Disney is trying, quietly, to dump as much of its annual pass base as it can.

Disney has stopped collecting monthly payments on its passes, but unless passholders tell Disney otherwise, it's not extending those passes. That gives those passholders what amounts to a pro-rated discount on their passes. And it also means that many passes are expiring each month that the parks remain closed, reducing the Disney's annual pass base if those passhodlers do not renew, which many cash-strapped passholders are not.

Fewer annual passholders means less pressure on Disney's advance reservation system when the parks reopen. That's not that big of a deal in Florida, where a smaller local population and annual pass base can have the parks to themselves when they reopen, as international and even interstate travel looks to remain pretty much nonexistent this summer and into the fall... and maybe even beyond that.

But in California - where attendance at Disneyland typically soars when travel goes south, as the resort becomes the vacation getaway for millions of locals - advance reservations to get into the parks are going to become the hottest ticket in town as soon as they become available. With all the headaches that Disney is facing in preparing its theme parks for the social-distancing era, the last thing the company wants is PR blowback or even a lawsuit from frustrated annual passholders who can't get in.

So that's Disney's annual pass problem. Being in charge of Disney's AP program right now must feel like being a passenger on one of those theme park ride where it's all gone terribly wrong. But with a reopening in California months away, according to the state's governor, Disney has plenty of time to find a way out.

Perhaps Disney offers to straight-up cancel passes, offering struggling passholders the "flexibility" to avoid having to make any remaining payments when the parks reopen or to get a cash refund on paid-in-full passes. Perhaps it decides to continue not collecting monthly payments during a capacity-controlled reopening, declaring that APs won't be valid until the park is open to all. Or perhaps it decides to allow passholders to take their chances on getting reservations, but doesn't collect a payment or start the clock on those passes until the passholder gets a reservation.

Lots of options here. As we approach the parks' eventual return, annual passholders will be eager to hear how their passes will, or will not, figure into Disney's reopening plans.

Replies (10)

May 6, 2020 at 6:38 PM

Good analysis. I was wondering the same thing.

May 6, 2020 at 6:49 PM

I dunno, I think this is putting the cart before the horse here. Realistically on opening day its only going to be locals who can get to the park, the logistics involved in travelling/getting accomodation etc is going to put off all but the most eager of travellers. I think by the time this could become a problem we'll be in a different opening phase.

I think the bigger problem is that with AP's periods being extended, even if demand returned to normal on opening day, earnings will be suppressed from park earnings for some time as a result.

May 6, 2020 at 6:59 PM

But there are 13 million "locals" in Disneyland's metro area.

May 6, 2020 at 10:58 PM

Based on what I've been hearing rumored for Florida (California may be different), the last option is sounding the most likely. I'm thinking it will be a deal where the number of days from reopening is the number of days left before passes expire, but they won't start counting down until the first use. I also highly suspect there will be controls in place to ensure as many passholders as possible get an opportunity to visit. I could easily see a one visit per month restriction for the first couple months after reopening so that most would be able to go if they wanted to. If we assume around a million passholders and a capacity restriction of around 20,000 per day, most would be able to go in about eight weeks or so.

I also think Disney may use this opportunity to finally phase out the Southern California passes. There was a plan that if the Flex Pass proved a success it would replace the So Cal pass (and possibly Deluxe and/or So Cal Select as well), and this could be the perfect opportunity to do so. If all passes require reservations, any benefit from the other non-Signature tiers is virtually neutralized, so I could see a lot of people switching at renewal time. Besides, although the capacity will increase as the virus lessens in threat, I wouldn't be surprised if reservations for all visitors (except perhaps day of sales) become a permanent change at destination theme parks.

May 7, 2020 at 9:33 AM

I think what eventually happens to season passes (not just Disney, but virtually every theme park in the country) is that they eventually become "memberships". The subscription model has infiltrated virtually every corner of our lives from streaming entertainment to newspapers to food delivery to clothes and on and on. Whether you like it or not, Six Flags was actually on to something when they adapted the subscription concept to theme parks, and I think that's ultimately the path forward for the industry as season passes are slowly phased out of existence, particularly as more and more parks move to year-round schedules and guests are no longer paying for a "season" of access to the parks. Season passes may have the advantage of banking that revenue up front, but as more and more people spread those costs across payment plans and what are essentially year-long no-interest loans extended by the parks, those advantages are not as great as they were a decade ago. From the guest perspective, there's very little difference so long as prices stay the same as current passes, and cannot be changed over a term (whether that be a year or longer, with perhaps parks giving discounts and price locks for guests that commit to multi-year subscriptions).

May 7, 2020 at 12:49 PM

actually. universal orlando let me pay month to month after the first year of the annual pass. However, in order to get the renewal discount you have to pay in full at the start of the year. I think disney will do that. Give people 2 options. As far as disneyland, they should do only annual passholders for the 1st month or however long until almost all of the normal attractions are operating. Although, that is an interesting question an article for tomarrow. Is it possible all attractions will be operating in the first month under the limited capacity? There is solid scientific evidence that the virus does not spread as easily in the outdoors. especially hotter. So. If reasonable social distancing is obeyed (and for outdoors is it prob 3 or 4 ft, instead of 6), there is little reason why there would be no fireworks or fantasmic? The test of that will be once they try it. If the vast majority of people cooperate and stay 4 ft apart.

Now with the magic bands @wdw (it is hooked up to GPS extremely accurately right?), this is actually a great scientific sociological clinical trial as to how much people will abide by the instructed social distancing in recreation areas. Disney knows who lives in the same household (mostly. People can tell Disney any address they want, but so far I will bet very few people have lied). Disney will be doing advance reservations. So disney knows who is allowed to be closer to each other by the magic band and who is not. NO. I would absolutely not allow the gov't or google to have this kind of data for people in their regular lives. But. For purposes of tracking people disney is not the omnipresent always there presence that google, apple,facebook the phone carriers are. It's a huge difference from a civil liberties, freedom standpoint.

May 7, 2020 at 12:52 PM

What they should do is complicated but would work. Once opened up for a reservation (everyone would need one including single-day ticket holders) Passes would be changed to a specific number of days left till expiration.

Once the reservation is made it would remove say 1 week off the renewal date on the day of the reservation. Only one reservation would be available at a time. Whether you go or not on that day still removes the week from your pass. Everything reverts to normal when things go back to normal, new dates apply.

If you can't get a reservation... well when things go back to normal you have that much more time to enjoy the parks. If you REALLY want to go a lot and can get reservations you can pay for a new pass earlier.

Of course changing terms would mean that the parks would need to provide prorated refunds to people who want them, they are doing that now anyway.

May 7, 2020 at 1:43 PM

@davedisney - MagicBands do not provide GPS location data. They are just RFID chips that can respond to active RFID signals. The only way Disney can use MagicBands to tell where specific individuals are is when they tap onto a Mickey Head or in areas with high-density RFID transmitters (like rides with on-ride photos with automatic PhotoPass allocation like 7DMT and Frozen Ever After). There just aren't enough RFID transmitters throughout the parks to give GPS-level accuracy (within a couple of feet) as to precisely where guests are. Disney can track guest movement through the parks, but it's all lagging data as they scan their MagicBand and move on.

The only GPS-level tracking in the parks would be through MDE, and that's only if guests have the location services turned on and the app open on their mobile devices. Even then, the level of accuracy provided with GPS tracking is at best a few feet, which is too much potential error to confirm that guests are conforming to social distancing (i.e. you can't confirm that people are 6 feet apart if they're represented by circles that are 4-6 feet in diameter on a map). Also, every single guest would need to have mobile devices (including all the kids) and have the MDE always open to provide the data needed to verify social distancing is being maintained.

@tanthus - There is absolutely no way a company is going to market a "season/annual pass" that has a specific number of days or shortens the term based on the number of visits. They whole point of a pass is that it grants unlimited visits for a given term, not a specific number that counts down every time you walk through the gate. What's more likely to happen is that companies will create different tiers that provide earlier access to reservations. If you pay say $1,000/year, you get to make a reservation 2 months in advance, pay $800/year, 1 month in advance, $500/year, 1 week in advance. Those prices conform to the current Signature, Deluxe, and state resident tiers currently available in both Florida and California.

May 9, 2020 at 10:04 AM

The pre-paid annual pass problem is a huge problem. I think a larger financial elephant in the “room” are the DVC Member’s Resort reservations. Two months of cancelled reservations so far, international & interstate travel will surely be limited beyond phased openings. There was difficulty making reservations prior to covid-19. Every Member is losing money daily. I’m not sure that it will be recoverable. At all.
I would love to see some in-depth research into this dilemma.
Great, insightful article, btw!

May 9, 2020 at 6:00 PM

Jackie. I think Disney will (at some point) tell you they are either going to refund a good portion of your yearly maintenance fee (or whatever it's called). maybe the entire 2020 payment. Or. give you some extra bonus points. Bonus points prob don't work. there are lots of people who will not be able to use their points for an extra 12 to 24 months from when they would have used them. Disney is going to have to do some refunds. they are probably just waiting to see how long the parks are closed before committing to a formula for it.

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