Disney's U.S. theme park ticket hikes point to continued strong demand and pricing power

Published Wed, Oct 12 20225:06 PM EDTUpdated Wed, Oct 12 20225:11 PM EDT

Club holding Disney (DIS) is raising the prices of some U.S. theme park offerings, a potentially notable development after what CEO Bob Chapek told CNBC two months ago about what it would take for further hikes to occur. "It's all up to the consumer," Chapek said Aug. 11, when pressed on whether there'd be increases to ticket prices. "If consumer demand keeps up, we act accordingly. If we see a softening, which we don't think we're going to see, then we can act accordingly, as well. We're very flexible." Those August remarks came to mind when we got word of these new price changes. The hikes are also happening when there have been questions about how well demand at Disney's theme parks will hold up in the face of persistent inflation and worries of an economic slowdown. What's changing Recall that Disney adopted dynamic-pricing model a few years ago that results in higher admission prices on historically more popular days. Following these recent pricing changes, a single-day adult ticket to Disneyland Resort in California is $179 on the highest-demand days, about an 9% increase. For context: That's what it will cost to go to the park on Nov. 26, the Saturday after Thanksgiving, according to Disneyland's website. A few days later, on Wednesday Nov. 30, the website shows a single-day ticket is $144. Two-day ticket for Disneyland is now priced at $285, a nearly 12% increase. The price of some parking options also rose. Disney also made changes to the pricing of Genie+, a popular and relatively new digital feature that unlocks premium benefits inside the theme park such as bypassing lines for attractions. At Disneyland, the price of Genie+ is now $25 per day when purchased in advance, up from $20. At Walt Disney World in Florida, Genie+ now ranges between $15 and $22 through the end of October — with prices at the higher end of the range on more popular days. It used to be $15 on all days. After October, the price is of Genie+ at Disney World is subject to change again, according to a company spokesman. It will remain variable, based on demand on a given day. The popularity of Genie+ has exceeded management's expectations and helped to boost per capita spending at the theme parks. On the company's third-quarter earnings call in August, Chapek said around 50% of parkgoers upgrade to purchase Genie+. The Club's take In recent months, we've made our frustrations clear with the performance of Disney's stock. We think the market is getting this all wrong based on the strength of the company's underlying businesses, especially the highly profitable division that includes theme parks. However, we understand Disney's theme parks do have economic sensitivity — vacation plans may be scaled back in a recession — and that's what investors may be worried about, in addition to the losses in the streaming division. We believe in Disney's unrivaled franchises in the long-term, though. In the near term, these latest price hikes at the theme parks may point to continued theme park-strength, based on Chapek's August comments to CNBC: "If consumer demand keeps up, we act accordingly." We know demand has been booming for the last few quarters, as Covid restrictions have eased and many people felt more comfortable to resume their pre-pandemic ways. In its fiscal third quarter, which was reported in August, Disney's parks, experiences and products division recorded $7.4 billion in revenue, up 70% year over year, and far ahead of the Wall Street estimate of $6.75 billion. The division also contributed around 61% of the company's overall operating income in Q3, despite making up only roughly 34% of quarterly revenue. The primary source of the theme-park strength in California and Florida has been U.S. residents, Chapek has said before, noting that international travel hasn't fully recovered yet, so there's more pent-up demand that's likely to be unleashed in the future. We'll get a more detailed look at how Disney's theme parks did in its fiscal fourth quarter when the company's official quarterly results hit the tape after the Nov. 8 closing bell. (Jim Cramer's Charitable Trust is long DIS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A performer dressed as Mickey Mouse entertains guests during the reopening of the Disneyland theme park in Anaheim, California.

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