We’ve been saying that Disney makes less money from Annual Passholders (AP) and we’ve been wondering how long until they remove them. Now an investment journal “Investopedia” has just posted an article outlining why Disney dropping Annual Passes is a great move for investors.

According to the article, Disney is dropping Annual Passes from Disneyland, not because it’s closed but because those customers are worth as much to the company.

“These decisions are driven by analyses showing pass holders to be among the least profitable visitors to these theme parks, combined with state-mandated restrictions on attendance in response to COVID-19.

The holders of annual passes to the aforementioned Disney theme parks are mainly local residents who tend to spend significantly less on food and merchandise than visitors from afar. Additionally, these pass holders are, as a result of living nearby, highly unlikely to book rooms at the Disney-operated hotels associated with these parks. Moreover, despite rapid escalations in the prices of passes over the years, the effective entrance fee revenue per visit from pass holders often works out to be significantly less than the daily or multi-day fees paid by other visitors.

Meanwhile, especially at the California parks, which have an estimated 1 million pass holders, pass holders add to overcrowding, which diminishes the experience for the more profitable guests. As a result, a number of these preferred visitors become less enthusiastic about returning in the future.”

The Investor focused article indicates that Disney needs to remove the AP program so they can make more profit, as a large amount of the passholders save significantly on multiple trips to the parks, don’t pay for hotels as often and don’t spend as much on food and merchandise. Oh and those pesky passholders cause overcrowding.

So we’re back to the old “overcrowding” discussion.

Disney used this as a reason to raise the prices and then let just as many people in as before. Special events like Mickey’s Not So Scary Halloween Party, cost everyone extra, including Passholders, and they sometimes pack it so full the supposed “benefit” of “lower crowds” and short wait times, simply isn’t there.

If the issue is Pandemic related, the pandemic will end eventually and crowd levels will be back to normal parameters. So ending the programs based on a short term event wouldn’t make sense, unless Disney was already looking for a reason to terminate the programs to make more money.

Given how they’ve been raising prices and adding fees since before the pandemic, they’ve already been trying to get as much “blood out of the rock” as they can. Removing the Annual Pass program gives them a way to charge more.

The article even admits that they likely won’t see any increase in revenue by doing this until parks open. Because Disney knows when Disneyland reopens Annual Passholders would have flooded back in and would take up the majority of the capacity caps so they couldn’t make significant money at the gates.

The article tries to argue that by removing the APs from Disneyland they can control the crowds better:

“Eliminating or restricting the issuance of passes also allows Disney to control access to its parks better than before and thus may help to speed the reopening of its California parks. After reopening, attendance caps mandated by government in response to COVID-19 are likely to persist for some time.”

But this is not the case. That’s what the new Park Pass System being used at Walt Disney World is for. Guests need to have a park pass to enter, even if they have tickets or an annual pass. Disney has also made APs a separate group from daily ticket holders on availability. So the argument that passholders will take up all the capacity isn’t a solid one.

What About the Future of Annual Passes?

Right now all we know about Disneyland is that other “membership programs” will be rolled out. When and if they do, I fully expect them to offer less for either the same cost or more. Walt Disney World has stopped the sales of new Annual Passes and according to the article, they don’t expect new passes to return until 2022 and with the return they will have far more restrictions.

“Resort officials at Disney’s California parks have indicated that replacement programs for annual passes are under development. In Florida, theme park experts believe that sales of new passes are unlikely to resume before 2022, and when they do, they probably will have restrictions on usage to avoid overcrowding on peak days. In this vein, some observers speculate that Disney may experiment with dynamic pricing, with entrance fees floating in response to anticipated or actual fluctuations in daily supply and demand.”

So they are possibly going to make it even more confusing than it already was with their “date based pricing” for those buying short term tickets. 

I do have to wonder if all of these changes stem from the opening of Disneyland’s Galaxy’s Edge. They blocked out APs and Cast Member passes and then the crowds weren’t there like they expected. The blockout decision was quickly reversed. Demonstrating that AP holders do indeed make up the bulk of their audience, at least in Disneyland. Which is why they used the shutdown as an opportunity to cancel and “retool” offerings to make more money.

Everything stated in the investor article is what we have been saying at PNP and over on our Clownfish TV YouTube channel. We told you it was coming. It’s all about profits.

What do you think? Comment and let us know!

Source: Investopedia