Deep look at Disney’s pricing strategy around the opening dates of Epic Universe

Analysts at Barclays Equity Research have in a note to clients discussed Disney’s (DIS) pricing strategy around the opening dates of Universal’s Epic Universe park in Florida.The Universal (UVV) opening is the largest of its kind in 25 years and its competitive impact on Disney (NYSE:DIS) is a major near-term investor concern. However, historically the opening of new themed parks has been associated with a mixed impact, says the report. However, the impact of a theme park of this size is harder to anticipate.The report observes that comparing ticket pricing in the window coinciding with the opening of Epic Universe is one way to contextualize the relative position of Disney vis-à-vis Universal.Accordingly, the price difference between Disney and Universal Parks in Orlando, starting with the 1-day 1-park tickets and then three-day packages are compared in the report.Epic Universe guests are required by Comcast to buy a 3-day package including 2 extra days at two other Orlando based Universal parks. Annual passholders are required to buy 1-day Epic tickets as add-ons, likely due to the potential cannibalization of ticket sales at other parks given the overlapping IP (like Harry Potter). By contrast, Disney’s four Orlando-based parks have vastly different themes.Based on figures pulled from the Disney and Universal booking websites, the price premium commanded by Disney over Universal starts to decline around Memorial Day (which is also the opening day for Epic), then turns into a discount and remains so until later in the year, the report pointed out. “The same trend is also seen in the highest priced Magic Kingdom tickets...Disney World discount vs Universal in August could partially be due to Florida school start dates in mid-August. However, even in early August, Disney World is priced in line with Universal rather than at a premium,” the analysts added.The comparison of 3-day one park per day tickets of Disney parks and Universal packages including 1-day at Epic Universe shows that Disney has in-line or cheaper 3-day packages than Universal, but becomes expensive at year end.The upshot of the firm’s analysis is that “although Disney’s relative price is cheaper vs Universal in the Epic opening window which could help capture some of the incremental visitation to Orlando due to Epic, this should not impact per cap contribution to revenue growth.” This is supported by the fact that while Disney tickets appear discounted compared to Universal, the implied YoY price increase in its Orlando parks actually runs a bit ahead of last year.Per cap spending dilution will likely be offset by the new Lightning Lane Premier Pass, priced at $329-$449/person for Magic Kingdom, and lower for other parks in a bid to capture high-end consumer demand.“The Premier Pass price is over twice the standard entry ticket price for Magic Kingdom, ~1.7x, 1.1x and 0.9x the entry price for Hollywood Studios, EPCOT and Animal Kingdom, respectively,” the report stated.And at these price points, there are some sold-out dates. The firm believes if even 1-2% of visitors buy these passes, then high margin revenues of $240mm-$470mm are likely to result, and this will offset some promotional discounts.