Disney and Peak-Load Pricing

by Ray Keating

News/Analysis

DisneyBizJournal.com

September 25, 2018

On Monday (September 24), the Walt Disney World Resort announced that a new online vacation planning and purchasing destination will be launched on October 16 at DisneyWorld.com. Part of this new tool will be “date-based tickets.”

Why date-based tickets? As Disney explains: “When guests are ready to purchase tickets online, they may use an interactive online calendar, which displays different prices based on the dates guests choose to visit and states tickets will need to be used during a specific time period. The calendar also allows guests to quickly see the lowest-priced days within a month. For example, prices may be lower during off-peak travel periods.”

We economists call this peak-load pricing. It’s not unusual. Many utility companies, for example, charge more for electricity during high-demand periods, and lower prices when demand is low. One can also see this kind of pricing at use with toll roads – a higher toll is charged during rush hours, for example, versus periods of light traffic. It’s typical to see movie theaters using this kind of pricing as well, with matinee tickets or Tuesday nights being cheaper than Friday and Saturday night shows. The same goes for hotels – higher prices during peak demand, low prices at other times. The list goes on.

The idea behind peak-load pricing is basically to reallocate consumption from periods of high demand to periods of low demand. That way, resources and costs can be better managed, as consumers adjust their consumption choices accordingly. As any student of Economics 101 understands, changes in prices generate changes in consumer behavior.

Another phrase for this is “congestion pricing.” That’s the term typically used when it comes to tolls and traffic, but it would fit with what Disney is trying to do. Disney has a problem that all businesses would like to have. The good news is that high demand exists for its product – in this case, visiting Walt Disney World. The challenge is managing park congestion, if you will, so that people still have enjoyable experiences. Peak-load pricing will help this process.

Peak-load or congestion pricing is explained in Disney terms this way:

So why are we making these changes? As our parks have increased in popularity, there are more and more guests who wish to experience our world-class attractions. Introducing date-based tickets and pricing will allow us to better distribute attendance throughout the year so that we can continue to improve and deliver a great experience.

This economist says: Exactly!

As noted in the Disney video above, peak-load pricing is being integrated into the online process of planning a complete Walt Disney World vacation.

At the same time, though, Disney is not using peak-load pricing exclusively to address these kinds of challenges. Quite the contrary. It also is building to meet growing demand and to create new demand, including more hotel rooms and more attractions. Again, as noted by Disney on Monday:

This is an incredibly exciting time at Walt Disney World Resort, which continues to grow and expand with industry-leading immersive lands like Pandora – The World of Avatar at Disney’s Animal Kingdom and Toy Story Land and Star Wars: Galaxy’s Edge at Disney’s Hollywood Studios. In addition to these groundbreaking expansions, guests will also have a chance to experience upcoming attractions that take creative storytelling to the next level from the recently announced “Ratatouille” and “Guardians of the Galaxy” attractions at Epcot to a Tron-themed attraction at Magic Kingdom Park, to the first Mickey Mouse-themed attraction with Mickey and Minnie’s Runaway Railway and so much more coming soon.

Growth and the need for peak-load pricing makes for a nice combination for any business.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels, with the two latest books being Reagan Country: A Pastor Stephen Grant Novel and Heroes and Villains: A Pastor Stephen Grant Short Story. He can be contacted at raykeating@keatingreports.com.