After all the changes that Disney's theme parks have announced this month, I think we can excuse fans for asking... "What on Earth is Disney thinking?"
First the company announced that it was parking the Disney Magical Express shuttle bus between the Walt Disney World Resort and Orlando International Airport. Then it replaced the paused Extra Magic Hours program with 30-minute early entry across all WDW theme parks. (That might seem like a plus for hotel guests, but it's a huge loss for other visitors, who no longer will be able to enter any "empty" WDW parks at opening.) Finally, Disney announced that it is terminating its annual pass program entirely at Disneyland, canceling and refunding passes for potentially hundreds of thousands of Disney's most loyal fans.
The obvious answer is the 'rona ruins everything. Disneyland's theme parks have been closed for more than 10 months now, and Walt Disney World continues to operate at sharply reduced capacity. Everyone's trying to stay afloat right now and making whatever changes are necessary to do that.
But the economics of Disney visits were evolving even before the pandemic hit. The steps that Disney took this month to alter its theme park operations might have happened anyway, even if "Covid-19" had turned out to be nothing more than the name of a teenage EDM DJ on a side stage at Coachella.
Let's start with Disney's Magical Express. Disney contracted with Mears transportation to provide a "free" airport bus shuttle for its hotel guests in order to keep them from having to rent cars to get to the Walt Disney World Resort. Without rental cars, those guests would be dependent upon WDW transportation during their stays. And WDW transportation do not serve off property destinations. That meant no side trips to restaurants on 192, to shops on I-Drive... and especially not to theme parks at the Universal Orlando Resort.
The service worked well for years and fans loved it. Magical Express strengthened fans' loyalty to Disney, just as the service was designed to do. But when Uber provided another means for Disney's hotel guests to leave Disney property, the economics of Disney's Magical Express changed. With more and more DME users leaving WDW property anyway, the value to the company of paying for the shuttle service was diminishing.
Disney tried to head off Uber by offering its own "ride sharing" service, the Minnie Vans. But while Minnie Vans provided generally superior service on property - including properly installed car seats - they still would not take people off property (except, at one point, to the airport). And the price often cost more than a regular Lyft or Uber ride to the same destination.
Under normal economic conditions, maybe Disney could have justified the diminishing returns on DME in order to hold on to some number of guests who would not be using Uber or Lyft. But not with Covid crippling resort income. Still, the rise of app-based taxi services (which is what Uber and Lyft ultimately are) meant the eventual end of Disney's Magical Express as a free perk for hotel guests. The service now ends with 2021, on December 31.
But without that perk, what else could Disney offer to entice more guests to stay on site? That brings us to our second issue - the official end of Disney's Extra Magic Hours. EMH gave Disney's hotel guests an extra hour of access to select theme parks on give days, either before or after the park's official closing time. Starting later this year, Disney's hotel guests will get 30 minutes of early entry to all four Disney World theme parks every day.
That gives Disney's hotel guests extra flexibility, as they can choose where to start their day, and it distributes the load of early risers across the four parks, rather than concentrating it on one. But it leaves guests not staying in a Disney hotel no options for even footing with hotel guests when the parks open. Hotel guests will have a head start everywhere, making it harder for offsite guests to walk on popular attractions at the beginning of the day.
With capacity limited at the park, Disney wants to make up resulting revenue losses by maximizing the income it earns from each guest who does visit. The best way to do that is to ensure that as many of those visitors as possible are staying on-site. A new perk that provides extra incentive to on-site hotel guests while penalizing off-site guests does double duty in encouraging Disney visitors to book a Disney hotel.
Disney always wants to maximize income from its guests. But until the pandemic, its hotel capacity never came close to matching its theme park capacity. Now that ratio is much higher, changing the math that influences how Disney structures its incentives. Yet without the pandemic, Disney was committed to expanding its hotel stock, putting more and more pressure on the EMH park each morning. Eventually, Disney was going to have to relieve that pressure by extending early entry to all parks, in order to keep its lucrative on-site hotel guests happy. Like with Disney's Magical Express, the pandemic just brought that eventual decision forward.
And so it is, too, with the end of Disneyland's annual pass program. One thing to keep in mind here is that Disney is not abandoning annual passes. It's just canceling its existing program - hitting a reset button that allows it to develop a new program. Disneyland officials do not yet know exactly what that program will look like, but they knew they had to make changes.
As I explained in my Orange County Register column this week, Disneyland's AP program was broken, and "Disney needed more control over the flood of annual passholders that was inundating the parks and washing away too much of the magic."
Covid made the prospect on reopening Disneyland with reduced capacity impossible without creating conflict with hundreds of thousands of Disneyland passholders. Yes, Disney had introduced a Flex Pass system that required advance reservations to use., but thousands of fans had bought higher-priced passes that had promised on-demand access without reservations. Disneyland was going to have to at least partially refund those passes when it implemented a reservation system. Once Disneyland started down that path, it quickly became evident that the easiest decision was just to refund everyone and start over.
With Flex Pass, Disneyland was taking a first, small step toward reinventing its annual pass program. Covid provided Disney with a convenient reason to accelerate that process and just hit the reset button that it probably could not have gotten away with doing so cleanly under normal operation.
Each of these decisions took away benefits and access that loyal Disney fans had come to cherish over the years. While that no doubt made these decisions difficult emotionally, they were becoming more evidently simple from a business perspective. The market was evolving, even before the pandemic, and at some point, Disney simply was going to need to make some potentially disturbing decisions in order to adapt to that.
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