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In the News

Price Elasticity of Demand works at Disney parks in the US

Penny Brooks

21st June 2017

In February, Disney raised the price of tickets to visit its theme parks in the US. The price rises varied, but were typically just under 4%, with seasonal mid-tier day tickets costing $107, up from $102, and peak season tickets – generally for spring break, summer and Christmas break - now at $119, up from $114. Disney doesn't usually publish figures for the number of visitors to its parks, but has now said that the price rises in the US have led to a fall in ticket sales - of between 1 and 2 percent. This suggests that demand remains price inelastic, as the fall in demand is less than the increase in price.

So this would be seen as a successful pricing strategy for Disney, as it will have increased their total revenue from ticket sales. But has demand fallen as much as Disney wanted it to?According to the FT, the purpose of the price rise was to reduce crowding on the most popular rides, and a one or two percent fall in attendance may not have had a very noticeable effect there.

Visitor numbers have fallen in all of Disney's theme parks around the world, with a 14 per cent year-on-year fall at Disneyland Paris to 9.8m visitors, and a 10 per cent decline at Disneyland Hong Kong to 6.1m. In Paris,ticket prices rose by roughly 10%, again suggesting that demand is price inelastic. Visitor numbers in Hong Kong may not have been affected so much by prices as by the opening a year ago of the new Disney Shanghai, which has drawn visitors coming from main-land China away from the Hong Kong park.

Shanghai is another story. It has attracted over 11 million visitors in its first year. Although this is below some predictions of between 12 and 15 million, but is enough to create massive queues for the most popular rides of up to three hours - so it will be interesting to consider whether those queues are putting some visitors off. It is clearly not deterring other theme park operators, with Universal Studios already building a park in Beijing which is due to open in 2020, and the FT saying that others are piling into China, betting that an expanding middle class will spend more on entertainment and travel.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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