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A bit of good news for the cast of Disney’s domestic theme parks and their guests. The starting hourly wage of the entry level cast member could be rising to $10.00. According to a report in Bloomberg news, the 25% raise would roll out over two years. Last week, Disney made the offer to the Service Trade Council, a group of labor unions that represents almost half of Walt Disney World’s employees.
I see a couple of factors behind this offer. First, there is a nationwide push to raise the minimum wage to $10.10. Disney can show that companies can make this leap on their own by making this move now. Second, Disney has successfully recovered from the down economy and reported record profit last year; $6.6 billion is a lot of Disney dollars. Third, Disney has been investing a ton of money in capital improvements, they have to balance that with some concern for the personnel side of the ledger too.
Of course, there are concessions Disney wants from the unions in return. Switching from Pensions to 401(k) style retirement plans is one. I’m sure there are many others. But hey, that’s what collective bargaining is all about.
There’s one big reason for the offer that Bloomberg doesn’t mention, the Orlando labor market is once again becoming very competitive. In February of 2014 it dipped to 5.5% unemployment rate. That’s nearing the 4% that’s typically considered full-employment (everyone who wants to be working is). Wage inflation is one result of low unemployment, so Disney might be forced to raise wages, even if they weren’t negotiating a new contract with its employees.
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The Walt Disney World Resort just released an interesting report that looks at the economic influence Team Mickey had on Florida in FY 2009 (which ended Oct 2009).
The $18.2 billion in annual economic activity generated locally by Walt Disney Parks and Resorts accounts for a staggering 2.5 percent of the gross domestic product for the entire state.
Of the 7.2 million Floridians in the workforce in 2009, more than one out of every 50 had a job that can be directly or indirectly tied to the operations of Walt Disney Parks and Resorts. Locally, 6 percent of all jobs in Central Florida can be attributed to Disney’s operations.
Those are some big numbers. But it has to be put in perspective. The end of 2007 saw a contraction of Florida’s economy that only grew worse through 2008 and 2009. While housing and auto sales plummeted dramatically, tourism was not as impacted as an industry. So Disney’s percentage of the GDP for the entire state is probably inflated. Similarly the percentage of the workforce.
Is it a little manipulative for Disney to release these numbers right now or justified crowing about legitimate economic impact? Let’s call it Mickeynomics – a little of both.
Sure without Disney, Florida’s economy would really be in a shithole. But to pick those particular numbers to crow about without sharing how that compares to similar numbers in a healthy economy is less than straightforward. Still, can you blame them?
Now let’s look into the near future a bit.
2011 is shaping up to be a lot like 2008. Gas prices are rising, which threatens to impact Disney’s family vacation based business. But 2011 is different than 2008 in that we’re coming out a recession, not heading in.
I have a theory about gas prices. When planning a vacation, families are actually more concerned with the overall cost of the vacation than the price at the pump. As gas prices go up so do airline tickets, making it significantly more expensive to fly a family of four to Orlando. So expensive that driving, the time it takes, and the wear and tear on the car begins to look like a better option. If you do the math, it actually is far less expensive.
This economic equation means families who live within a days drive of Disney World are now more likely to drive to Disney for a vacation instead of flying somewhere (Mexico or the West Coast, for instance). That’s new traffic for Disney, and it can actually come close to replacing the volume of visitors who live more than a days drive away and are instead choosing to vacation closer to home.
What Disney saw in 2008 was that those who drive, tended to stay in Orlando a day or two longer on average. But they didn’t travel as frequently throughout the year, rather they saved it up for one long vacation. This means that the number of visitors to the parks only declines slightly, and it also tends to spread the visits out over the whole year. That’s the pattern we saw in 2008 and 2009 and the pattern we’re seeing now.
My only question is with the economic recovery just barely underway, are families saving more and passing on travel this year in order to rebuild their savings? What Disney needs is for the Southeast US to recover quicker than the rest of the nation. Those are the customers Disney World needs to covet for the foreseeable future. DVC members are already locked in, but everyone else wants maximum entertainment value for their vacation dollar. Disney can provide that, but they must continue to offer the highest quality as well.
I’m sure Disney would prefer to continue to ween its market off the discounts it offered in 2008 and 2009 to bring in business, so the only other option is improved entertainment value. To me this means, more rides per capita, more shows and parades, tastier food options, longer park hours, and better festivals. I think we’re seeing some of this already. What else would you like to see Disney do, excluding discounts, to increase the value for your travel dollar?
Read the rest of the 2009 Mickeynomic numbers released by Disney below the cut: