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Why Disney Resort's ridiculous price increase makes sense – The Motley Fool

In what is becoming an annual ritual, Disney (NYSE: DIS) just announced price increases for passports and parking at their California parks. A day pass will now cost as much as $ 149 and parking $ 25, a 10% and 25% increase, respectively.

With higher cost, the screams of consumers inevitably come and this round is no different. But it has not deterred holidaymakers in the past. Disney assumed a similar increase in early 2018, but its presence was still up 4% year-on-year. The result was an increase of 10% in parks and resorts revenues and an increase of 18% in the segment's operating profit.

As unpleasant as inflation can be for consumers, Disney fans find a way to enter the Magic Kingdom, regardless of cost. Paired with the latest flight, if the crowd continues to grow, Disney could be in for another record year 201

9 at its resorts. More than a simple cash grip, there are good reasons, however, that Disney raises its entrance fees.

Crowd control

Anyone who has braved a Disney park on a holiday or high season weekend can attest to the narrow lines and wait long for attractions. Overcrowding is bad for business. It can reduce visitor spending in the park, it increases operating costs on the busiest days, and it can reduce the risk of a repeat visit.

Disney's price increases are an attempt to smooth things out. While the peak season and weekend fare for tickets increased by 10%, the cheapest one-day passes – those that fall on weekdays for holidays – only went up 7%. It is a trend that the company has been involved with in recent years.

In addition, theme parks have rolled out computer-based ticket sales in recent years. Visitors can use an interactive calendar on Disney's resort sites to plan their vacation around the most cost-effective days. While planning trips around holidays and weekends can be simplest for many, a simple push from the calendar tool can persuade some to arrange their trip on a closed day and help level out human mass.

A larger payday for employees

During the summer and autumn of 2018, Disney settled wage negotiations with their employees. For California's resorts, the new minimum wage jumped to $ 15 an hour on January 1, compared to the state-owned minimum wage of $ 12 an hour for large corporations. In Florida, Disney will cover a dollar a year until it reaches $ 15 an hour in 2021, with the minimum jump of $ 13 in September. It compares to Florida's minimum wage of just $ 8.46.

Wage increases can be a big draw on companies 'profitability and cause investors' anxiety. To strike a balance between taking care of employees and shareholders is a long order, and Disney's wage hint certainly has an effect on the bottom line. Still, the guests at the parks on foot should help mitigate the problem. While no-one will be rich in $ 15 an hour, pricier tickets mean that employees get a much-needed cost-effective increase, and investors will not feel so much about profits.

  An artist's illustration of New Star Wars Ride Smugglers running on Star Wars Galaxy's Edge, which opens at Disneyland in the summer of 2019.

Disney will open Star Wars : The Galaxy Edge at Disneyland and Disney World 2019. Image source: Disney.

Intellectual-property mania

Disney owns some of the best-known entertainment brands out there. In addition to classic Disney characters, there are Pixar, Marvel superhero universe and Star Wars . In addition, when the acquisition of 21st Century Fox (NASDAQ: FOXA) (NASDAQ: FOX) is finished, Disney will get another piece of the Marvel universe – including X – But the series – like other Fox franchises as Avatar . The company's parks have in recent years added theme attractions and costumed characters, as they become popular in the theaters, but 2019 can be one of the greatest new introductions so far.

That's because the new Star Wars : Galaxy Edge Expansions opens in California and Florida later this year. What in itself can clog Disneyland and Disney World over the summer and fall months, but add to the fact that the final installment of the family Skywalker family closes with not yet the title Star Wars: Episode 9 in December? It can add a particularly busy year to Disney presence.

At the beginning I mentioned that the ticket increase was not as much money as they were managing a busy schedule, but increasing the cost before a big new opening could actually be opportunistic at Disney's part. And why not? If the cost is really based on demand, and the demand to enter the Disney resorts is high, too low a price tag can exacerbate the "too busy" problem. Thus, with long lines likely and higher pricing here, it looks like Disney parks are set to have a big year.

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