Disney World is getting so expensive, it's pricing out the middle class

• Disney World raised its prices twice in 2018 and switched to a dynamic pricing model that charges higher prices during peak summer months and winter holidays.
• This is the fourth time in park history that annual pass prices were raised twice in the same year.
• The new model prices out many of its pass holders in the middle class - the old model doesn't work in the modern US economy anymore.
• According to Robert Niles, editor of Theme Park Insider, Disney Parks wants to use pricing and promotions to equalize crowds throughout the year.

Narrator: In 2018, Disney World raised its ticket prices, twice. Take the park's platinum pass for example, it's the standard option that grants access to all four parks with no blackout dates. In February, the price went from $779 to $849, then in October its price jumped from $849 to $894, as Disney unveiled its dynamic pricing model. That's a 15% increase in just one year.

This is the fourth time in park history that annual pass prices were raised twice in the same year. The first time was 1997 in anticipation of Animal Kingdom's 1998 opening. Similarly, the price markups in 2018 are in advance of Disney World and Disneyland's 14 acre Star Wars theme lands, called "Galaxy's Edge." And Disney parks expansion doesn't stop there. Hong Kong Disneyland is spending $1.4 billion on Avengers and Frozen themed attractions. On top of that, it's adding capacity to Tokyo DisneySea, and updating Epcot and Disney Studio park at Disneyland Paris.

Despite all the costly expansions, Disney Parks and Resorts reported a $4.5 billion operating profit for the 2018 fiscal year. That's over 100% increase from 2013. So, if it is steadily profiting, why are Disney Parks becoming so expensive?

From the mid-80s into the early 20 00s, Disney Parks pulled way ahead of its competition. In 2002, Magic Kingdom's attendance alone nearly doubled its closest non-Disney competitor, MGM Studios. But in 2010, that changed when Universal opened the Wizarding World of Harry Potter.

Robert Niles: It was game on in this business all of a sudden Disney had a competitor again and Disney does not like to lose, not just lose, Disney doesn't even like to compete. Disney wants to dominate its competition.

Narrator: Disney launched a full out retaliation against Universal and other competitors. In 2011, it announced Pandora, its Avatar themed attraction located in Animal Kingdom. Then over the following six years, it opened new attractions in all four major parks. And by 2017 Disney Parks claimed 55% of North American theme park attendance.

Niles: This has been really successful, so everybody wants to come during summer vacation and Christmas when their kids are out of school. And the trouble is that if you spent billions of dollars really to build these attraction facilities. They are open 365 days a year. It's just not efficient to have them filled to the brim for four, five, six weeks out of the year and then not so much the rest of the time. So, they really want to use all of their pricing and promotions to try and equalize the crowds throughout the year.

Narrator: Disney World's second price hike of 2018 included a switch to dynamic pricing. Charging higher prices during those peak summer months and winter holidays and encouraging volume purchases.

Niles: Disney understands the demographic changes that are happening in the United States at this point. They understand what's happening with income and economic inequality. They know that the money is in the upper level, the top 10%, the top 1%. They've created a wide variety of new products to try and, frankly, extract more money out of the people who have money to spare.

Lee: Disney has several new offerings targeted at its wealthiest visitors, including dinners with Disney princesses, two Bibbidi Bobbidi Boutiques that offer a makeover, hairstyling, and costumes. And even private VIP tours of the parks. But the luxury offerings go beyond activities in the parks. In 2014, Orlando's first five-star resort opened on the Disney grounds, a Four Seasons resort with rooms starting at $449 a night. And Bora Bora Bungalows that cost $29 dollars when the park first opened can reach prices of $3,400 today.

Niles: Now the down side with that is if you are one of those remaining middle class people in America, you could get squeezed here.

Narrator: Since 2000, Disney World prices have steadily increased while wage growth has been falling from its 2001 high of 5.4%. And in 2018, Disney Parks reported a 5% increase in per capita spending in the parks and an 8% uptick in per room revenue in hotels.

Niles: Disney's done such a good job at becoming a cultural institution in the United States. It's done such a good job of becoming a lifestyle brand that some of the people who may have been early adopters to this brand are really feeling some pressure right now, because of the way the company is growing. People who were early adopters to this are used to a middle class pricing model that just doesn't really work in the modern economy anymore. And they feel frustrated that they put a lot of loyalty into this brand, into this company and now they feel like they really have to stretch to keep up. And that's tough, but at the same time, if Disney's going to grow, it's got to go where the money is. It's got to go in a direction that allows it to get maximum value from its investments and limiting itself only to its early adopters isn't going to allow the company to do that.