The pool at the All-Star Movie resort at Walt Disney World in Orlando, Florida (Photo from touringplans.com)
A recent article in the Wall Street Journal has the headline “Even Disney Is Worried About the High Cost of a Disney Vacation.” According to the article, “Some inside Disney worry that the company has become addicted to price hikes and has reached the limits of what middle-class Americans can afford ….”
As we discuss in Microeconomics, Chapter 15, the Walt Disney Company engages in price discrimination in a number of ways, by, for instance, charging more for ticket prices to its theme parks during the end-of-year holidays than on other days. Disney also offers hotels at different price levels, ranging from deluxe hotels like the Grand Floridian to more basic value hotels like the All-Star Movie Resort. In the case of hotels, some of the price difference is explained by differences in operating cost. Luxury hotels tend to have more amenities, including larger pools and restaurants on site, which raises their costs. Part of the difference in price, though, is the result of Disney estimating that people with higher incomes have a more inelastic demand for hotels than do people with lower incomes.
The Wall Street Journal article relies in part on data provided by Len Testa on his site touringplans.com. He notes that between 2018 and 2025, the percentage increase in the price Disney charged for staying at a value resort was less than the rate of inflation. In other words, the real price—the nominal price corrected for the effects of inflation—of staying at a Disney value resort decreased during that period. On the other hand, the percentage increase in the price Disney charged for staying at a deluxe was more than the rate of the inflation. So, the real price of staying at a Disney deluxe resort increased during this period.
One interpretation of these data is that over this period, Disney increased the extent of the price discrimination it was practicing with respect to hotel prices. It increased the gap between the price the families with more inelastic demand for Disney hotels pay and the price families with more elastic demand for Disney hotels pay. The article quotes Josh D’Amaro, who is the Disney executive in charge of the company’s theme parks, as saying “we intentionally offer a wide variety of ticket, hotel and dining options to welcome as many families as possible, whatever their budget.”
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