Why is Walt Disney World So Expensive?


A Disney World vacation is no cheap matter. We’re reminded of that every year when ticket
prices are regularly bumped up. It’s usually paired with a bunch of news
articles about Disney becoming an increasingly expensive experience. However it wasn’t always that way. Back when Disney World opened in 1971, an
adult eleven ride ticket book cost $5.75 and a room at The Contemporary cost up to $44
a night. Even adjusted for inflation, that would come
out to around $34.50 for the tickets and $264 for the hotel. In reality, a one-day Magic Kingdom ticket
costs $132 with tax, and a night at The Contemporary, facing the theme park, can run around $675
a night. So what happened? When did Disney World get so expensive? Well the quick and short answer is that CEO
Michael Eisner and CFO Gary Wilson happened. The long answer is that, circumstances at
the time really made the decision simple and it’s kind of hard to vilify them for what
was otherwise a sound business move. You see, Disney as a company was in a bit
of a rough spot when Eisner took over as CEO. With the death of Walt Disney in the later
half of the 1960s, the 1970s were somewhat of a lost era for the company. Sure today we can look back at projects like
Robin Hood and The Rescuers and see them as classics, but the truth is the company wasn’t
growing financially during this time. A company once known for constant innovation
at the hand of Walt Disney quickly became one that relied on its old tricks due to a
“What would Walt do?” mentality. This lack of evolution and change was partially
beneficial for fans, as it was an era in which admission prices at the parks didn’t rise
too steeply. Annual increases ranged from fifty cents to
a dollar or so. As CEO at the time Card Walker put it: “We
have to keep our prices low, so that guests feel they’ve gotten good value.” It was a continuation of Walt’s own approach
to the parks. Profit was secondary to making something people
loved. Unfortunately corporate raiders on Wall Street
didn’t care about what Walt thought twenty years prior, and so the stagnation of the
company into the early 1980s made Disney a prime target for a hostile takeover. Thanks to the efforts of Walt’s nephew,
Roy E Disney, the raiders were ultimately warded off. If you want to know more about how, I have
a great book suggestion at the end of this video. Long story short however, it meant a change
of leadership at Disney, and that meant bringing in Michael Eisner and Frank Wells. Even before officially signing on as CEO,
Eisner saw the value that was being underutilized at the Disney parks. In order to keep away any future wall street
raiders Disney needed to start improving their bottom-line, and fast. Eisner brought in a new Chief Financial Officer
from Marriott named Gary Wilson, and without any hesitation ticket prices started to go
up. Just to give you an idea of the rate and amount
of the increases, consider this. During the two years prior to Michael Eisner
joining the company, Disney World ticket prices rose twice for a total of three dollars, from
$15 for a one-day ticket to $18. In the two years following his arrival tickets
rose in price five times, jumping eight dollars to $26. The surprising part for Disney was that even
with the frequent price hikes, attendance wasn’t dropping, proving Eisner right. There was more value in the admission to Disney
parks than Disney was realizing. The new Disney leadership also saw value that
was going unrecognized elsewhere, specifically in hotels on property and in VHS releases
of Disney’s classic films. The company similarly cashed in on those opportunities,
and by 1987 the company’s operating income jumped from just under three-hundred million
dollars to nearly eight-hundred million dollars. The turnaround kept raiders at bay. Prices continued to rise in the 1990s and
early 2000s. Even into Bob Iger’s tenor as CEO over the
last ten years, tickets would see annual hikes that leave us at the prices we have today. Now some might argue that Disney is very different
from the state it was in thirty years ago, and so they should stop raising prices. However even though Disney improved drastically,
they weren’t always totally in the clear. For instance, as late as 2004, Disney was
the target of another takeover bid, this time by Comcast. For better or for worse, the growth-focused
mindset of Wall Street and the constant looming threat of being purchased, willingly or otherwise,
by a bigger fish means companies like Disney are forced to try and grow every single year. This means more revenue, and this means higher
prices to get there. So ultimately Disney World is so expensive
because historically the price hikes were crucial to elevating the company as a whole
and closing a near 15 year gap of stagnation. It protected the company from outside buyers
by making the company more valuable. But beyond that the answer is because, when
all is said and done after each price hike, people are still willing to pay for it. If you’re interested in learning more about
the attempted hostile takeover of Disney in the early 1980s that resulted in Eisner stepping
in as CEO, I suggest checking out Storming the Magic Kingdom by John Taylor. You can find a link to the book
in my description below. I want to thank you for watching, and I’ll
see you next time.

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