Walt Disney (DIS) learned a powerful lesson over the past few years when it comes to its U.S. theme parks. The company can keep making the proposition worse for customers by raising prices and taking away perks and people will still come;
Families want vacations at Disney World and when you're already shelling out thousands of dollars for tickets and hotel accommodations, what's a little more money.
That's why you hardly heard a complaint when the company turned its FastPass+ -- something that visitors to its Florida Parks got for free -- into Genie, a paid system offering roughly the same thing. Certainly, some regular visitors and annual passholders were upset at the change, but people who visit once in a lifetime or even once every few years just saw it as something else they had to pay for.
The change will benefit Disney's bottom line when but it also showed the company that it does not need to offer some of the perks it traditionally has. And, that's likely why the company felt comfortable dropping its Magical Express shuttle service which brought people staying in on-property resorts from the airport to their hotel free of charge.
Image source: Shutterstock.
Disney Does Not Need to Spend the Money
Staying on property has never been cost-effective. There are resorts of all types throughout the Orlando area that charge less than Disney does for its properties, but staying off-site robs visitors of some of the Disney magic. You miss out on perks like Disney's transportation system and, in some cases, getting early morning access to certain parks.
Mostly, though, Disney's marketing team has made the idea of staying on-site part of the magic and people shelling out for a Disney World vacation want all the magic they can get.
The Magical Express made staying on property feel even more magical as the Disney-branded bus picked you up at the airport without you needing to shell out any more money. Now, the service will still run, but it won't be called the Magical Express, and people who take it will have to book trips through Mears, the bus company that operated the prior service for Disney.
Why Does This Matter for Disney Shareholders?
While changing FastPass to Genie created revenue for the company where there was none previously, this move removes an expense. It cost Disney money to shuttle customers from the airport to their hotels and now, the Mouse House won't have to pay that money.
That's important because while Disney has reopened all of its theme parks, that segment of its business took a major hit during the pandemic.
"The most significant impact on operating income was at the Disney Parks,
Experiences and Products segment due to revenue lost as a result of closures and/or reduced operating capacities," the company explained in its fourth-quarter earnings release. Although results improved in the second half of fiscal 2021 compared to the second half of fiscal 2020 from reopening our parks and resorts, we continue to be impacted by reduced operating capacities."
Until the crowds fully return -- and that may not happen, even in Florida until the second half of 2022 -- it makes sense for Disney to cut expenses wherever its customers will bear it. In this case, it does not seem like ending the Magical Express will lead to any meaningful amount of (or maybe any) visitors opting to not take a Disney World vacation or choose to stay off property.
