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A Disney World vacation is no cheap matter.
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We're reminded of that every year when ticket prices are regularly bumped up.
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It's usually paired with a bunch of news articles about Disney becoming an increasingly
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expensive experience.
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However it wasn't always that way.
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Back when Disney World opened in 1971, an adult eleven ride ticket book cost $5.75 and
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a room at The Contemporary cost up to $44 a night.
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Even adjusted for inflation, that would come out to around $34.50 for the tickets and $264
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for the hotel.
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In reality, a one-day Magic Kingdom ticket costs $132 with tax, and a night at The Contemporary,
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facing the theme park, can run around $675 a night.
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So what happened?
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When did Disney World get so expensive?
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Well the quick and short answer is that CEO Michael Eisner and CFO Gary Wilson happened.
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The long answer is that, circumstances at the time really made the decision simple and
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it's kind of hard to vilify them for what was otherwise a sound business move.
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You see, Disney as a company was in a bit of a rough spot when Eisner took over as CEO.
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With the death of Walt Disney in the later half of the 1960s, the 1970s were somewhat
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of a lost era for the company.
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Sure today we can look back at projects like Robin Hood and The Rescuers and see them as
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classics, but the truth is the company wasn't growing financially during this time.
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A company once known for constant innovation at the hand of Walt Disney quickly became
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one that relied on its old tricks due to a “What would Walt do?” mentality.
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This lack of evolution and change was partially beneficial for fans, as it was an era in which
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admission prices at the parks didn't rise too steeply.
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Annual increases ranged from fifty cents to a dollar or so.
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As CEO at the time Card Walker put it: “We have to keep our prices low, so that guests
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feel they've gotten good value.”
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It was a continuation of Walt's own approach to the parks.
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Profit was secondary to making something people loved.
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Unfortunately corporate raiders on Wall Street didn't care about what Walt thought twenty
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years prior, and so the stagnation of the company into the early 1980s made Disney a
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prime target for a hostile takeover.
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Thanks to the efforts of Walt's nephew, Roy E Disney, the raiders were ultimately
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warded off.
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If you want to know more about how, I have a great book suggestion at the end of this video.
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Long story short however, it meant a change of leadership at Disney, and that meant bringing
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in Michael Eisner and Frank Wells.
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Even before officially signing on as CEO, Eisner saw the value that was being underutilized
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at the Disney parks.
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In order to keep away any future wall street raiders Disney needed to start improving their
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bottom-line, and fast.
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Eisner brought in a new Chief Financial Officer from Marriott named Gary Wilson, and without
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any hesitation ticket prices started to go up.
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Just to give you an idea of the rate and amount of the increases, consider this.
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Just two years prior to Michael Eisner joining the company, Disney World ticket prices
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rose twice for a total of three dollars, from $15 for a one-day ticket to $18.
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In the two years following his arrival tickets rose in price five times, jumping eight dollars
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to $26.
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The surprising part for Disney was that even with the frequent price hikes, attendance
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wasn't dropping, proving Eisner right.
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There was more value in the admission to Disney parks than Disney was realizing.
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The new Disney leadership also saw value that was going unrecognized elsewhere, specifically
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in hotels on property and in VHS releases of Disney's classic films.
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The company similarly cashed in on those opportunities, and by 1987 the company's operating income
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jumped from just under three-hundred million dollars to nearly eight-hundred million dollars.
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The turnaround kept raiders at bay.
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Prices continued to rise in the 1990s and early 2000s.
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Even into Bob Iger's tenor as CEO over the last ten years, tickets would see annual hikes
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that leave us at the prices we have today.
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Now some might argue that Disney is very different from the state it was in thirty years ago,
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and so they should stop raising prices.
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However even though Disney improved drastically, they weren't always totally in the clear.
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For instance, as late as 2004, Disney was the target of another takeover bid, this time
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by Comcast.
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For better or for worse, the growth-focused mindset of Wall Street and the constant looming
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threat of being purchased, willingly or otherwise, by a bigger fish means companies like Disney
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are forced to try and grow every single year.
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This means more revenue, and this means higher prices to get there.
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So ultimately Disney World is so expensive because historically the price hikes were
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crucial to elevating the company as a whole and closing a near 15 year gap of stagnation.
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It protected the company from outside buyers by making the company more valuable.
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But beyond that the answer is because, when all is said and done after each price hike,
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people are still willing to pay for it.
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If you're interested in learning more about the attempted hostile takeover of Disney in
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the early 1980s that resulted in Eisner stepping in as CEO, I suggest checking out Storming
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the Magic Kingdom by John Taylor.
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You can find a link to the book in my description below.
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I want to thank you for watching, and I'll see you next time.