Warren Buffett once said, “The single-most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business. I’ve been in both, and I know the difference.”
One company with an excellent business franchise that can pass on inflation costs (without a prayer session!) is Disney. To examine its strength, we have compiled data for the price of general admission to Disney World, its Florida resort which opened in 1971.
In its first year of operation, Disney World, which comprised one theme park, attracted 11 million visitors. In 2019, prior to the pandemic, Disney World’s four theme parks all ranked in the top 10 most-visited theme parks in the world and, combined, had 59 million visitors.
The chart on the right highlights the price of 1-day general admission to Disney World versus US inflation over the 50-year period since 1971.
US inflation over that period has increased by 4% compound per annum since 1971. In comparison, Disney has increased the price of 1-day general admission to its Florida resort at nearly double the rate of inflation – with prices growing by 8% compound per annum from $3.50 per person in 1971 to $159 per person today (during peak times).
With visitor numbers increasing every year, it is fair to say that the higher admission prices have not discouraged its guests. In other words, Disney’s sizeable competitive advantages have given it significant pricing power.
Disney’s share price has been very weak in 2022 and a key question we will try and answer for members of the website is whether the value on offer in Disney’s shares suggests a buying opportunity or not. We are introducing full coverage of Disney in the coming weeks in the members’ area of the website.
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