Theme park enthusiasts cheered when Walt Disney's (NYSE:DIS) flagship Florida resort resumed sales of its annual passes in early September. That window was mostly closed over the weekend without any advance warning.
Disney World has temporarily stopped selling three of the four annual passes that it began selling two months ago. Only the cheapest option -- the $399 Pixie Dust Pass for Florida residents that is only good on weekdays during non-peak and non-holiday periods -- is currently available. Holders of the three discontinued passes will be able to keep renewing them.
It's an odd move at first glance. Why would Disney only keep its cheapest annual pass around? Why would the House of Mouse want to keep higher-paying regulars away? It's a move that won't make Disney very popular in social media circles, but there's a financial method to the madness.
Image source: Walt Disney.
It's a small world
Suspending annual pass sales is a new move in Florida, but Disneyland fans in California know the drill. The world's leading theme park operator routinely stops and starts annual pass sales on the West Coast to regulate the flow of locals who are loyal but also spend less than visitors on one-day tickets.
Disney has made it clear that it's prioritizing quality over quantity when it comes to guest counts, preferring to make more money with fewer guests. The controversial rollout of Genie+ and Lightning Lane+ in Disney World last month -- where guests have to pay more for access to expedited queues -- was an outrageous notion to Disney fans, but a common practice with other theme park operators.
Keeping just the Pixie Pass going will help flesh out park traffic during the slow times of the year when it wants more annual pass holders around. Pixie Pass holders will likely forgo premium access to expedited queues, so they'll wait in standby lines. More people in the standby queue, in turn, will encourage the less frequent visitors to pay up for Genie+ and Lightning Lane+ to milk more out of their day at one of Disney World's four gated theme park attractions.
The math is different during peak travel periods where it would prefer to fill the park with one-time visitors and tourists who are going to pay premium prices over annual pass holders paying between $1 and $4 a day for year-round access. It's cruel math for the resort's biggest fans who don't have the means to spring for daily premium upgrades, but if Disney World wants to position itself as a more exclusive and premium experience it's an obvious move.
As a bellwether for travel and tourism stocks, all eyes will be on Disney. The move to cut off big-ticket annual pass sales as a way to increase revenue may to be a hard concept to wrap your head around at first. However, it's clear once you size up the limited capacity. With the easing of international travel restrictions and robust crowds since Disney World kicked off its 18-month celebration of the resort turning 50 it's the new reality. The passes will likely return at some point next year if and when crowds start to thin out, and just as we learned now it probably won't stick around for long.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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