Disney Walks Fine Line On Pricing In Orlando
03 Agosto 2009 - 3:54PM
Noticias Dow Jones
Walt Disney Co. (DIS) raised admission prices between 2.5% and
5.3% at its largest theme park in Orlando, Fla., over the weekend,
even as it offers other deals to spur demand from consumers cutting
back spending on vacations amid the recession.
The uptick in admissions prices at Walt Disney World was smaller
than similar increases the company has made in recent years, but
the move still reflects confidence that Americans will continue to
come to Florida in search of Disney magic even as job losses
mount.
Disney has less exposure to the slump in ad spending than some
of its big media counterparts, but its theme-parks business has
been a source of worry on Wall Street during this economic downturn
as consumer spending has proven to be a particular weak spot.
The company reported last week that revenue from its parks
division was down 9% in its fiscal third quarter ended in late
June, while operating profits dropped 19%. Disney Chief Executive
Robert Iger acknowledged that the economy was taking a toll on the
business, even as various price promotions the company began
rolling out last year boosted domestic attendance by 3%.
More worrisome was the 7% decline in hotel bookings it reported
so far in its September quarter compared with the same period last
year.
Overall, Disney's quarterly results followed a script that is
being read throughout the business landscape, with bottom-line
results deteriorating but managing to beat expectations on Wall
Street thanks to aggressive cost-cutting measures, even as revenue
declines continued to disappoint. The company reported a 26% drop
in net income and a 7% slide in revenue.
"With falling attendance and lower in-park per capita spending
due to the weak economy, Disney clearly needs to raise admission
prices [at Walt Disney World] to mitigate the pressure on
earnings," Pali Capital analyst Richard Greenfield said in a blog
post Monday.
Walt Disney World accounts for over half the revenue from the
company's theme-parks business. Greenfield noted that the popular
adult five-day ticket price increased just under 3% compared to a
4.6% increase last year.
The price hikes come as Disney is offering deals on dining
options in its parks and hotels in order to lure vacationers. It
recently concluded a promotion that offered seven days of
accommodations and admissions to customers for the price of
four.
Disney walks a fine line on pricing in this recession between
keeping its profits at acceptable levels, while driving as many
vacationers to its parks as possible. Its strategies have shown
some success, but they have also weighed on the company's profit
margins.
"We continuously monitor the price of our tickets to ensure
pricing reflects a strong entertainment value," said a spokesman
for Walt Disney Parks and Resorts.
Its willingness to raise prices and whittle back some promotions
suggests that Disney is expecting an economic recovery as the stock
market rebounds and economists find signs of a turnaround in some
economic indicators.
"If they don't raise admissions prices at all now and an
economic recovery comes later this year, they could find themselves
in a position next year where they would have to raise prices at a
surprisingly higher rate to keep pace with overall market growth,"
said UBS analyst Michael Morris. "They want to avoid that."
Disney's shares closed Monday up 1.6% at $25.52.
-By Nat Worden, Dow Jones Newswires; 212-416-2472;
nat.worden@dowjones.com