Inflation is in the air in Central Florida. Walt Disney (NYSE: DIS) is highly likely to increase ticket prices either tomorrow or a week from tomorrow. Folks planning a trip in the near future may want to lock down their admissions sooner rather than later, and investors will start wondering what kind of impact the inevitable hike will have on Disney's top and bottom lines.
We can naturally assess the new pricing once it becomes official, but let's dive into why the House of Mouse is about to become a more expensive place to visit. Let's go over three reasons behind Disney World's upcoming cover charge increase.
Image source: Disney.
1. It's hard to break from tradition
You have to go all the way back to 1988 to find the last year that Disney didn't push its ticket prices higher. This was months after Black Monday rattled confidence on Wall Street, and amid tensions overseas that would eventually lead to the Gulf War in 1990. If prices increase at any point this year -- spoiler alert: they will -- it will be 31 consecutive years of hikes.
Arguing that the increase will happen this month is also based on the notion that history repeats itself. Disney has announced new pricing in February in each of the past five years, and the move has kicked in on Sunday mornings, when it is less likely to trigger a fan outcry.
2. This is going to be a big year for new attractions
Star Wars: Galaxy's Edge will open at Disney's Hollywood Studios later this year. The 14-acre expansion will feature two high-tech rides along with several shopping and dining options. It's going to be a tourist magnet. CEO Bob Iger even admitted during this month's earnings call that Disney doesn't plan to spend a lot on marketing the new land, figuring that it will pretty much sell itself.
Throw in the opening of the resort's first Mickey Mouse-themed ride, a new aerial gondola transportation system to whisk guests around, and several new shows and character experiences rolling out in the coming months, and Disney isn't phoning it in anymore. If there is any year when an increase is warranted -- in terms of both its own investments in its parks and as a way to regulate the crowds coming to pilot the Millennium Falcon -- it would be 2019.
3. Disneyland did it first
Disney's original resort in California already boosted its ticket and annual pass prices in 2019. Prices for most admissions rose 7% to 10%. Disneyland saved its biggest increase for its priciest annual pass, the Premier Passport, which also includes access to Disney World's four theme parks and two water parks. The high-end annual pass now costs $1,949, a hefty 23% increase.
It makes sense for Disneyland to go first. Its Star Wars: Galaxy's Edge is debuting a few months earlier this year. Going through with the inflation-besting increase at Disneyland pretty much seals the fate of a similar uptick at Disney World. The move should keep operating profits growing faster than segment revenue given the scalability of the theme park business, but on a more practical level it would probably infuriate Disneyland fans if they're the ones that got hit with a Han Solo tax this year.
Higher prices are coming, and it will probably happen either a day from now or eight days from now. It's time for Disney to milk its cash Clarabelle again.
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