Why is Walt Disney World So Expensive?

A Disney World vacation is no cheap matter. We’re reminded of that every year when ticket prices are regularly bumped up. It’s usually paired with a bunch of news articles about Disney becoming an increasingly expensive experience. However it wasn’t always that way. So why is Disney so expensive?

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Back when Disney World opened in 1971, an adult eleven ride ticket book cost $5.75 and a room at The Contemporary cost up to $44 a night. Even adjusted for inflation, that would come out to around $34.50 for the tickets and $264 for the hotel. In reality, a one-day Magic Kingdom ticket costs $132 with tax, and a night at The Contemporary, facing the theme park, can run around $675 a night.

So what happened? When did Disney World get so expensive? Well the quick and short answer is that CEO Michael Eisner and CFO Gary Wilson happened. The long answer is that, circumstances at the time really made the decision simple and it’s kind of hard to vilify them for what was otherwise a sound business move.

You see, Disney as a company was in a bit of a rough spot when Eisner took over as CEO. With the death of Walt Disney in the later half of the 1960s, the 1970s were somewhat of a lost era for the company. Sure today we can look back at projects like Robin Hood and The Rescuers and see them as classics, but the truth is the company wasn’t growing financially during this time.

A company once known for constant innovation at the hand of Walt Disney quickly became one that relied on its old tricks due to a “What would Walt do?” mentality. This lack of evolution and change was partially beneficial for fans, as it was an era in which admission prices at the parks didn’t rise too steeply. Annual increases ranged from fifty cents to a dollar or so.

Unfortunately corporate raiders on Wall Street didn’t care about what Walt thought twenty years prior, and so the stagnation of the company into the early 1980s made Disney a prime target for a hostile takeover. Thanks to the efforts of Walt’s nephew, Roy E Disney, the raiders were ultimately warded off. If you want to know more about how, I have a great book suggestion at the end of this video. Long story short however, it meant a change of leadership at Disney, and that meant bringing in Michael Eisner and Frank Wells.

In order to keep away any future wall street raiders Disney needed to start improving their bottom-line, and fast. Eisner brought in a new Chief Financial Officer from Marriott named Gary Wilson, and without any hesitation ticket prices started to go up.

Just to give you an idea of the rate and amount of the increases, consider this. During the two years prior to Michael Eisner joining the company, Disney World ticket prices rose twice for a total of three dollars, from $15 for a one-day ticket to $18. In the two years following his arrival tickets rose in price five times, jumping eight dollars to $26. That would just be the beginning.

The surprising part for Disney was that even with the frequent price hikes, attendance wasn’t dropping, proving Eisner right. There was more value in the admission to Disney parks than Disney was realizing. By 1987 the company's operating income jumped from just under three-hundred million dollars to nearly eight-hundred million dollars. The turnaround kept raiders at bay.

Prices continued to rise in the 1990s and early 2000s. Even into Bob Iger’s tenor as CEO over the last ten years, tickets would see annual hikes that leave us at the prices we have today. Now some might argue that Disney is very different from the state it was in thirty years ago, and so they should stop raising prices. However even though Disney improved drastically, they weren’t always totally in the clear. For instance, as late as 2004, Disney was the target of another takeover bid, this time by Comcast.

For better or for worse, the growth-focused mindset of Wall Street and the constant looming threat of being purchased, willingly or otherwise, by a bigger fish means companies like Disney are forced to try and grow every single year. This means more revenue, and this means higher prices to get there.

So ultimately Disney World is so expensive because historically the price hikes were crucial to elevating the company as a whole and closing a near 15 year gap of stagnation. It protected the company from outside buyers by making the company more valuable. But beyond that the answer is because, when all is said and done after each price hike, people are still willing to pay for it.

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