Source: PaxForex Premium Analytics Portal, Fundamental Insight
It was a week of price increases at Disney World. The big news on Tuesday was the switch of the Genie+ premium queue booking platform from a flat fee to a more expensive demand-based pricing strategy. That wasn't the only price increase.
- This week, the prices of many character lunches went up sharply;
- Reusable cups sold at resorts went up by 10%;
- Non-alcoholic beverage prices went up.
Genie+'s move away from a flat rate also coincided with Lightning Lane's move of individual purchases to variable prices, raising the cost ceiling of the fast-track queue for the best rides.
No one expects Disney to freeze prices. Demand is high. Operating costs are rising. However, no entertainment company has a net check when it comes to price elasticity. Nevertheless, there will come a point at some point when Disney goes too far. We may already be close to it.
Guests no longer go through the good old turnstiles at Disney World. There are points at the park entrances and Lightning Lane queues where guests can literally walk in using their tickets, MagicBand bracelets, or mobile devices. They literally sneak in. Do they also get an imaginative load in as well?
A trip to Disneyland has never been cheap, but now it's gotten a lot more expensive. Earlier this year, Disney reported that average revenue per daily visitor was up 40% over pre-pandemic levels. And that was before the last few waves of price increases. As high as the overall inflationary pressures have been nationwide, this figure has not increased by 40% in the last three years.
Investors tend to welcome price increases from up-and-coming brands that can pull it off, and there's no doubt that Disney's quarterly report next month will be strong for its theme park segment. The first fiscal quarter of 2023, which began two weeks ago, could be even stronger. People keep coming in. There have been some anecdotal reports that visitor numbers declined when schools in the region reopened after the summer break and after Hurricane Ian swept through the state, but many Disney World enthusiast groups online were filled with reports of guests returning to Mickey's House this week.
Success now doesn't mean success later. Disney World guests didn't plan for the price increases that occurred this week or the unpredictable nature of demand-based pricing for Genie+ and individual Lightning Lane purchases. The real test of strength will come later when the public takes a look at the new prices and decides whether a trip to the world's most visited theme park resort is definitively unaffordable.
The timing is also bad, as rising interest rates on consumer debt make it riskier to finance an upcoming Disneyland vacation with plastic. The anticipation of a recession also complicates things as we plan our upcoming spending. Do you really think it's a coincidence that major retailers and electronic stores just held Black Friday sales in early October? Businesses are trying to capture sales from shoppers who may not be spending as freely as we are approaching the holiday season.
That doesn't mean Disney is doomed. The company may not regret its actions this week. If the global economy goes down, it will hit all travel and tourism-related stocks, not just those that rose in value when they broke through the economy's yield signs. If the Disney bubble bursts, the situation will get ugly, given the high fixed costs of the resorts, but no one is going to fall apart while the parks are overcrowded.
As long as the price is below 100.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 96.29
- Take Profit 1: 91.00
- Take Profit 2: 85.00
Alternative scenario:
If the level of 100.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 100.00
- Take Profit 1: 104.00
- Take Profit 2: 109.00
