Paying the $3 Billion Price Tag for FASTPASS+

Written by Kevin Yee. Posted in Kevin Yee, Walt Disney World

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Published on July 16, 2013 at 4:00 am with 34 Comments

The latest test of MyMagic+ (and its FASTPASS cousin, FP+) will start next week, involving guests at Bay Lake Tower–in other words, the DVC crowd. Disney may well get different feedback from this population than it got from the last test, which stressed visitors who come a little less frequently.

More and more rides now sport FP+ entrances (and they say “Disney FASTPASS+” rather than “Disney’s FASTPASS+”, which matches the moves by the company mostly on the West Coast so far to brand slightly differently than the past decade has done, by removing the possessive format).

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FP+ is not the same thing as MyMagic+ even though they are used interchangeably by some fans. FASTPASS+ alone is not costing all that money. But let’s assume for the sake of argument that it is. Can they still recoup their investment?

A backlash about FP+ is growing in some corners of the online communities. For many, they resist the idea of having to plan out STILL MORE of the vacation that far in advance. Restaurant reservations may have started this trend, but now it’s gone even further. I can completely see this complaint and line of thought. After all, as a local visitor, I seldom plan even a day in advance. That said, there really are folks in the world who prefer a vacation that is planned out. Consider the very highly-rated Disney Cruise Line experience. A DCL vacation is pretty planned out in advance. All you do during the vacation is show up and experience what you pre-selected, AND MANY PEOPLE REPORT THIS IS AMAZINGLY RELAXING. All the guesswork is gone, there is no stress, and they simply show up. It’s pretty clear that WDW wants to harness that same sense of all-encompassing, pre-planned, all-inclusive vacation for the “land” as well as for the “sea.”

All the moves in recent years have gone in this direction. Resort mugs, if you buy them, gives you length-of-vacation free soda (just like on DCL). Your room was paid for before you arrived. Your food is included in the cost of your vacation (if you bought the DDP). Really, the only part DIFFERENT in WDW versus DCL was the fact that on DCL, your shore excursions were decided and scheduled long before you got there, and at WDW you had to employ strategy while on your vacation. The move to FP+ will erase that last remaining difference. Now WDW really will be just like DCL in tone and feeling for those who stay on Disney property the whole time and buy the pre-planned everything. All-inclusive, here we come!

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A key component of the criticism has been to focus on the price tag. $3 billion, many people grumble, to fix a system that currently isn’t broken. Well, I do think it’s at least SLIGHTLY broken. There are many families who don’t know how to fully exploit the FP system, which means the tickets stay available longer in the day for the families who do know the tricks. There is an imbalance here; the FP system “works” because there are lots of families who don’t know they should be using it. In other words, the super-benefits of the past 14 years have largely come at the expense of those who don’t use it–and some of THEM aren’t coming back. Disney, as a company, can’t afford to lose this segment. They have to keep the once-a-year visitor (and once-per-decade visitor) happy just as much. So the current FP system had to morph into something else.

The new FP+ system will “flatten” the playing field somewhat. There will be less advantage to knowing the system well or to being a frequent visitor. I’m always something of a long-term thinker, and even though this means my advanced-knowledge advantage will go away, I’m in favor of things that keep the infrequent visitor happy, because this encourages Disney to build more rides for said infrequent folks, and I benefit as a result.

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But there is a crucial shift underway here, and I’ve not seen it discussed online before. Disney is moving AWAY from a certain business model and indeed an entire mindset. In all the years of being in the amusement park industry, Disney has pursued a model that rests on a single assumption: building new stuff drives new attendance, which will drive additional profits. Think of it as “build it and they will come.” That model is now being updated. The new model essentially aims to maximize profits from those who do come, almost as if to assume that people are coming anyway, and we can therefore focus on squeezing every last dollar out of those who come. This is obviously dangerous. What if people sense the attitude shift and stop coming in droves?

But I think they won’t sense it. FASTPASS+ is a riddle wrapped in a mystery to most of them. They will see the smoke and mirrors but not the magician behind it all. In other words, they will see the “DCL benefit” (all-inclusiveness) without seeing the “profit motive” behind the move. At its core, the entire NextGen initiative is about changing the way the company creates money. In the past, the point was to build more rides and attract new audiences to pay admission. Now, the paradigm has shifted. The point now is to squeeze profit out of those who are already coming. And the method by which it will happen will be completely invisible to most users.

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The focal point is almost certainly going to be the concept of upselling. Sure, you can buy a basic ticket to WDW. You don’t HAVE to buy the RFID pass and reveal your information. But if you *do* want to personalize and customize, the world is without borders! You can make ride reservations two months in advance (presently four rides, up from the test previously which allowed three rides). You can have Talking Mickey Mouse offer personalized birthday greetings to your young child. You can have the Small World dolls say something to YOUR daughter, singling her out on the boat full of strangers. You have to pay for the signature experiences in the parks (and some people will). As for those ride reservations, we don’t know full details yet but it seems obvious they are going to be differentiated by package. If you’re an annual passholder, perhaps you get twenty of them per quarter. Maybe you’ll get four per day if you stay at an All-Stars Resort. Will you get six per day if you stay at the more-expensive Polynesian? (Probably). Disney has long been in the hotel business rather than the theme park business, and FP+ promises to VAULT the company priorities further in that direction. The focus will be on “heads in beds” and with the lure of additional ride reservations, the full-price deluxe resorts will be hard to pass up for some infrequent visitors.

Let’s circle around now, finally, to the issue of finances. Disney hasn’t disclosed precisely how much this effort will cost, though a New York Times article in January estimated $800 million to $1 billion. We’ve heard from articles with inside access that the true price tag is closer to $1.5 or even $2 billion. The program isn’t even active yet, so I would not be surprised to see it cost even more when all is said and done (that would match other projects of this scale, in fact). So for the sake of making a point, let’s assume it’s super-expensive. Let’s use the figure of $3 billion. We can still see a way for Disney to recoup that money.

Let’s say that only 17 million people visit Walt Disney World per year (it’s more than that, but this is the MK attendance figure, so let’s use it as a baseline). If you get each of those visitors to pay $10/day more in 2014 than they paid in, say, 2011, then you’re making $170 million more per year. If you do that for 20 years (pretending that inflation didn’t exist), you’re at $3.4 billion dollars after twenty years.

If you were Disney management, would you approve a $3 billion investment that would return $3.4 billion in twenty years at a minimum? You might. You would at least pay attention to the numbers. $10 per person, per day in additional spending isn’t really that much money. If you convince people to spend more for the “better” hotel (and more FP+ tickets) then you’ve already made your money back. Anything extra is gravy. All those packages and character experiences you can sell now? Pure profit on top of all that.

But the reality is that few Disney execs will wait 20 years. They may be looking at numbers for 10 years, or even for five years. If the latter, they would need to generate four times that much per person–$40/day extra. At these numbers, it’s looking a little less likely that FP+ alone and upsold hotel rooms would recoup ALL of that, so they may end up depending somewhat on those upsold character experiences. Or accessories to go with your MagicBand, which they’re already starting to sell.

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The recent news about RapidFill mugs at Disney’s resorts is part of this. The new RapidFill mugs are RFID-enabled “length of stay” soda/coffee mugs that will replace existing refill stations. Translation: your old mug from a previous vacation will not work to turn the soda machine on. If you want soda, you’ll have to pay for it on your current trip. This is another example of Disney enhancing profit not by “creating something new” but by “leveraging what’s already there.” This is the new paradigm of thinking, and the shifted mindset. Instead of “build it and they will come,” the operating metaphor now is “since they’re coming anyway, let’s maximize what they spend with us.” This is surely going to backfire with SOME of the heretofore audience. The question is how large is that audience with which it will not resonate?

Time (amortization) and increased guest spending (on the MARGIN, not “new” spending by “new” people) provide a simple, short answer for how Disney expects FASTPASS+ to pay for itself and generate future profit. Big Data is here to stay; Disney is merely the latest company to find a way to leverage it.

Free Online Class: Fairy Tales

Some of you know that my “day job” is in Higher Education. Among the classes I teach is one on Fairy Tales, with focus on Disney, Grimms, and Perrault. This college class is now available to the general public, and it’s completely free! There’s not even a book to buy for the class!

The class is a massive open online course (MOOC) and is administered through canvas.net - it’s free to sign up and take the class! It’s a four-week course starting on August 5.

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Here’s the schedule:

Week 1 – Cinderella
Week 2 – Snow White and Sleeping Beauty
Week 3 – Rapunzel and the Frog Princess
Week 4 – Little Mermaid and Beauty and the Beast

The class was built to expect about two hours of engagement/interaction (“work”) per week, so it’s not meant to overload the participants with chores and duties. In that sense, it’s less rigorous than my regular college classes. The class doesn’t have any required (synchronous) meetings; you do the work whenever you want within the week.

This course does not have a completion certificate – you’d be taking it just for the fun of it. There aren’t any papers or projects. While the class does offer quizzes and discussion boards, there isn’t really a rigorous process to “pass” the course since there isn’t a certificate offered anyway.

The class is, however, experimental in a different sense: it’s got game elements in it. We added badges and group competition, as well as Easter eggs, throughout the class. Each group is named after one of Walt’s seven dwarfs–it works a lot like the Harry Potter “house” competition, where individuals can earn badges for the whole group. This should be fun!

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Please feel free to sign up and spread the word. I can’t wait to share with you what these fairy tales used to mean and how they’ve been changed for modern audiences!! Sign up here: https://www.canvas.net/courses/fairy-tales-origins-and-evolution-of-princess-stories#enroll_form 

More information and updates

Kevin Yee is the author of numerous independent Disney books, including the popular Walt Disney World Earbook series and Walt Disney World Hidden History. Readers are invited to connect with him online and face to face at the following locations:

 

About Kevin Yee

Kevin Yee is an author and blogger writing about travel, tourism, and theme parks in Central Florida. He spent more than a decade working at Disneyland and cultivating a never-ending fascination with that park’s rich traditions and history. Now relocated to Orlando, Kevin enjoys the Disney offerings on both sides of the country. Kevin is the author of numerous independent Disney books, including the popular Walt Disney World Earbook series and Walt Disney World Hidden History. Readers are invited to connect with him online and face to face at the following locations: UltimateOrlando.com – Kevin’s personal blog for daily WDW updates Public Facebook page – or friend his personal Facebook account, Twitter feed (user UltOrlando), Google+ account (user cafeorleans), Email at [email protected], Weekly Walt Disney World, a Facebook group of regulars who visit Disney World each weekend. Visitors from out of town are encouraged to come and say hello when in Orlando! Join the FB group to learn when/where the next meet is. Kevin’s books on Amazon

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34 Comments

Comments for Paying the $3 Billion Price Tag for FASTPASS+ are now closed.

  1. It is a nice article Kevin, but I think Disney will be making their money back rather quickly, my analysis:

    WDW gets about 48 million guest visits to the parks, but the number of unique visitors is less because, obviously, some people stay more than a day, so maybe 30 million or so unique visitors.

    I would estimate that NextGen costs about $750 to $900 million . . . but this is for rolling out the whole program to ALL the Disney parks worldwide. Disney has 126 million guest visits annually, so WDW is about 1/3 of that number, give or take, and will shrink when Shanghai opens, yes costs for NextGen at WDW are slightly more because you’ve got more gates and hotels and stuff, but you also can do the whole resort at once.

    I would estimate that MagicBands/FP+ at WDW costs about $250-$300 million. If 30 million unique guests spend an extra 20 bucks (over the course of the vacation), then Disney gets back their money in a year, considering taxes and other costs.. (The early reports are that MagicBand/NextGen is a huge success in terms of the money Disney is making). Disney is also hooking younger generations with tech, which makes sense. MagicBand started, in part, because an exec noticed a person giving up on buying a hat in Adventureland because of a long line at a shop. He realized that if guests could quickly buy stuff, they’d buy more stuff. $19.95 for a hat isn’t much for somebody who has already committed to a WDW vacation, but such purchases help WDW’s bottom-line.

    Plus, there are also labor savings with the tech, and less time in lines means less aggravation. Disney spends $1 billion a year on park maintenance (not new rides), this new infrastructure relieves pressure by automating some duties, and makes some machinery obsolete.

    I won’t comment about the situation with ride capacity at the Magic Kingdom, but the fact that they recently doubled Dumbo’s capacity, and added an omni-mover Fantasyland ride kinda hints at this issue. Adding a new land to AK will help with the crowds, though the project might have hit the skids temporarily.

    A likely scenario for a major build at WDW involves Iger leaving in 2016, Avatarland quietly cancelled, and a re-evaluation of resort needs, guest capacity at that time. Then, maybe in 2017-8, you’d see those bulldozers for another WDW project post New Fantasyland. Of course, MagicBand/FP+ will mean more profits for WDW, and this is a good thing for aficionados who want new attractions as having more money to lure guests into the world’s biggest human trap built by a mouse is a good thing.

  2. Although I haven’t been on a Disney Cruise, I understand the business model and have seen similar systems. At first glance, it seems like it would be a good idea to bring it to the parks…but theme parks are a MUCH more complex entity.

    Cruise Ships have a much more limited number of experiences and guests, and most of those experiences aren’t subject to closures, bad weather or other problems.

    The mere fact, as you stated that there is still a large group of people who don’t plan their vacations and DO want to make last minute trips to WDW means that Disney is creating overwhelming favoritism for those guests, and we don’t yet know what percentage of FP+ will be taken WELL BEFORE the park even opens every day.

    The other part that stinks is to make this new FP+ system SEEM to be useful, they’re adding it to lots of attractions that never previously had FP, or needed it, because they were low attendance or high capacity attractions. They’re trying to make something out of nothing and hoping guests are too stupid to notice.

  3. My main problem with this article is the flawed comparison to the Disney Cruise Line. On a cruise, you have no choice about which island to experience on which day. You have no choice about what time of day to go on an excursion. Of course it’s stress-free, because there is no planning involved. The ship will stop at Castaway Cay on the day it stops there, and you can’t alter that. There are almost no variables to affect your choice of activities.

    Pre-planning a vacation at WDW is a completely different experience. Disney doesn’t tell you which park you must visit on which day. Disney doesn’t tell you that a particular park excursion starts at one specific time. You have to make these decisions yourself.

    For these experiences to be even remotely similar, you’d have to be on a cruise in which you could steer the boat to any destination you wish, at any time. It’s an “apples and oranges” comparison, which invalidates the entire discussion.

  4. We’ll have to wait and see exactly how Disney handles this. I don’t see them offering different amounts of fastpass reservations with different hotel levels because I think that would generate too much bad publicity. Disney’s whole goal right now is to get people to stay on property the whole time and not go to Universal or Sea World. That’s why it only costs $2 to make your ticket a 7-day ticket instead of a 6-day, because then you’re looking at $2 for one more day at WDW, or almost $100 to to go Universal or Sea World. My guess is that the fastpass reservations will work one of two ways:

    # 1 The longer ticket you buy, the more reservations that you get per day. So a 1-day ticket gets 3 reservations per day, a 4-day ticket gets 4 reservations per day, and a 7 day tickets gets 5 reservations per day.

    # 2 You purchase reservation packages the same way that you purchase the dining plan. There are three levels just like the dining plan: classic (3 res / day), plus (4 res / day), and deluxe (5 res / day).

  5. “(pretending that inflation didn’t exist)” But guess what, it does exist! And guess what else? 3 Billion is across the entire resort, but yet you only use the MK attendance figures.

    So your numbers are way off. They can recoup that investment in as little as 4-5 years with ticket prices going up, et. al.

    If you’re gonna make an argument, as least *TRY* and get some of the numbers right.

    So unlike you Kevin.

    Thomas

    • My numbers are “way off” to prove a point. Even if you took the WORST possible scenario (using MK as the WDW attendance, using $3 billion rather than 800 million), you can see that WDW will recoup the money in short order no matter what.

      And when you re-add inflation BACK into the mix, yes, that means the recouping happens even faster.

  6. I’m excited with the oppurtunity to plan out my complete vacation at WDW. Its a huge investment of money for a 7-10 day vacation for a family of 4, so having everything setup and ready to go once you get there is a big plus, and that includes FP.

    The number being thrown on this site with the story and its comments varies from $700 million up to $3 billion. At issue as well is if it applies to one park, on destination (WDW) or all Disney destinations. Seems like it would have made the most sense to use a number somewhere in the middle, i.e. maybe 1.5 billion, and then looked at the complete resort, WDW, to calculate if this will be profitable or not.

    Lastly, I think everyone agrees WDW needs a new land. Pretty sure Disney realizes this as well, and that the money being spent on tech doesn’t mean we won’t be getting something dramatically new, instead we will be getting both.

  7. Simplification is the name of the game, at least for WDW. The size of the place is a blessing and a curse. For many, it’s too big, too expensive, and too confusing, and they leave broke and too angry, vowing to never return because they don’t feel it was worth the money. So, what to do?

    It may be further down the road, but I believe part of this massive “boondoggle”, as many are calling it now, is a plan to create “automatic” or pre-planned vacations tailored to the guest experience. This is no secret, really. They’ve written (and so have I) about it in more than one patent for the project. It’s not likely this will solve all the complaints, but it should help, at least for the first time visitor.

  8. Kevin,
    Thanks for writing this. It touches upon many issues that have been upsetting me for the past few months. The “paradigm shift” is very real and it seems short sighted. You talk of the days of yore when attendance drivers were new attractions, but that still happens. It’s just not happening in Walt Disney World. The Wizarding World of Harry Potter and Cars Land were both huge attendance drivers. Sure, you could argue that Harry Potter “repackaged” Dueling Dragons and Flight of the Unicorn, but not in the same way Disney is currently doing.

    I was driving home today and came up with an idea for my next column and it largely focused on this shift in philosophy. I really believe it isn’t a shift in philosophy, but rather the Orlando executives not knowing any other way. They can’t push for new attractions because that costs money, but repackaging what’s already there can work wonders. They’ve been successfully doing it for years because the competition was so fickle. Now that the competition has changed they don’t know any different. They’ve forgotten what made them great in the first place.

    • If you mean by repackaging: The replacement of Horizon with the awful Mission to Mars, the re Imagineering of Journey into Imagination, the Honey I shrunk the audience replacing Captain EO (or it’s reverse), the Ellen’s Energy Crisis makeover, replacing Alien Terror with Stitch, putting Nemo tv screens into the Living Seas, replacing the bakery with Starbucks, replacing Skyway with Tangled toilets, replacing Jules Verne with Monster ‘comedy’ club, replacing the AK boat tour with nothing, Replace 20.000 Leagues with the Little Mermaid, re imagine the animation studio building tour into the empty asb tour, repackage the beautiful view when you enter the Disney Studios with a ugly hat and loud music offerings that doesn’t fit the area, then I’m not very excited. Yes Universal did great by re theming 2 rides but they also added a well themed street and very detailed stores and restaurant and toped it of with a huge new cutting edge magical ride.

  9. One more comment I wanted to add….and this was kinda mentioned in the article I believe…

    This is what it all boils down to…the whatever Billion dollars spent, the mymagic, fp+, etc.

    Is Disney doing this to add more guests to their parks? If the answer is “no”, then the only possible reason to spend that much money is that they want to squeeze more money out of their existing clientele base….like sponges.

    I don’t want to sound harsh about it, but that’s basically what it sounds like.

  10. I might be able to accept FP+ begrudgingly since I know there will be a way to still maximize our time at the parks (there are smart people on the Internet who study it). What really bugs me is what this means in terms of Disney’s focus on efficiency and maximizing profit over attractions. That’s the part of this article that really bugs me and makes me wonder if I want to plan so many trips to Disney World with my family. I’d rather go to California due to the ease of getting around and better atmosphere, but four plane tickets from Missouri is pricey.

    The recent examples of Harry Potter at IOA and Cars Land at DCA show the huge attendance gains (and subsequent food and merchandise profits) that come from putting in new attractions that people want. I just don’t see why Iger and the other top brass don’t see that this is what people really desire. Top-notch attractions and service are what built the company’s reputation. They may be able to keep the stock price high for a while, but eventually even the less frequent guests will catch on and choose Universal, Sea World, or other locations. Brand loyalty is not the same as it was even 10 years ago. If Disney doesn’t keep up with the tide and offer something new, people will eventually just skip it. We’re already seeing it with anecdotes about long-time Disney fans deciding to bypass the parks on their latest trips. This will only continue if nothing big is announced at D23.

  11. Some people just expect that if you’re paying more you must be paying for quality. Consistent (and agressive) price increases was something consistently Michael Eisner referred to as “Price Integrity”.

    The FastPass+ system really is just a re-telling of an old (and highly debated) sales strategy.

    Salesman #1 is working his butt off. He’s making a lot of money but working himself ragged; constantly drumming up new business, providing quality, and making sure the current customer base is happy.

    Salesman #2 is also highly profitable but not nearly as busy. He too is always on the lookout for new clients, provides a quality product, and consistently keeps his current client base happy. What’s his secret? He just charges more.

    Salesman #1 argues that if he charged more he would lose customers!

    Salesman #2 argues that it’s worth losing customers if you’re working half as hard and making more money.