Disney: Model of the Upper Class Economy

Disney and the Decline of the Middle Class 

In the midst of its fixation on Trump, I found a great article in the NYTimes.  It is a beautiful illustration of what has happened to the American economy in the past decade or two.

The recently renovated 1,863-square-foot King Kamehameha suite at Disney’s Polynesian Village Resort, which offers a huge bi-level great room, views of Cinderella Castle and a soaking tub, can go for $3,000 a night. The sleek GEO-82 Bar and Lounge in EPCOT offers a package that includes a tower of small bites, champagne or cocktails and a table with views of the park’s fireworks show for $179 a person (entry to the park not included but required). A wine-paired prix fixe meal at the Michelin-starred Victoria & Albert’s at Disney’s Grand Floridian hotel starts at over $1,200 for two. And so on.

For most of the park’s history, Disney was priced to welcome people across the income spectrum, embracing the motto “Everyone is a V.I.P.” In doing so, it created a shared American culture by providing the same experience to every guest. The family that pulled up in a new Cadillac stood in the same lines, ate the same food and rode the same rides as the family that arrived in a used Chevy. Back then, America’s large and thriving middle class was the focus of most companies’ efforts and firmly in the driver’s seat.

That middle class has so eroded in size and in purchasing power — and the wealth of our top earners has so exploded — that America’s most important market today is its affluent. As more companies tailor their offerings to the top, the experiences we once shared are increasingly differentiated by how much we have.

Data is part of what’s driving this shift. The rise of the internet, the algorithm, the smartphone and now artificial intelligence are giving corporations the tools to target the fast-growing masses of high-net-worth Americans with increasing ease. As a management consultant, I’ve worked with dozens of companies making this very transition. Many of our biggest private institutions are now focused on selling the privileged a markedly better experience, leaving everyone else to either give up — or fight to keep up.

Disney’s ethos began to change in the 1990s as it increased its luxury offerings, but only after the economic shock of the pandemic did the company seem to more fully abandon any pretense of being a middle-class institution. A Disney vacation today is “for the top 20 percent of American households — really, if I’m honest, maybe the top 10 percent or 5 percent,” said Len Testa, a computer scientist whose “Unofficial Guide” books and website Touring Plans offer advice on how to manage crowds and minimize waiting in line. “Disney positions itself as the all-American vacation. The irony is that most Americans can’t afford it.”

Disney was never cheap. A family day at the original Disneyland in California, including tickets, some rides and food for four people, was about a $30 affair when the park opened in 1955, which was a lot of money when the median family income was $4,400. But $30 — roughly the cost of a week’s groceries — was still an attainable number for much of America’s rapidly growing middle class.

In the early years, Disney ticket prices rose so slowly that at times they got cheaper after inflation. An employee handbook from the 1950s quotes Walt Disney as saying, “We roll out the red carpet for the Jones family from Joliet just as we would (with a few embellishments) for the Eisenhowers from Palm Springs.” Versions of Walt’s “Everyone is a V.I.P.” credo were in Disney’s new-employee training materials long after his death in 1966. Fortunately for him and his shareholders, embracing everybody made good business sense. That began to change in the 1990s.

At the same time, smartphone apps transformed how companies connected to their customers. In 2012 the My Disney Experience app gave guests an easy way to check wait times, show times, restaurant bookings and more. In return, Disney gained a trove of information on exactly where guests went, what they purchased and how much they spent in its complex. The app eventually became so integrated with a visit that much of a Disney park day can be dedicated to checking it; savvy guests bring an external battery.

More than ever before, Disney and companies like it have access to data showing them who is willing to spend what for which experiences. “Disney is an analytics company that happens to do movies and parks,” Mr. Testa said.

Over my three-decade-long consulting career, I saw industry after industry use this kind of information to shift their focus to the big spenders in its customer base. Banks, retailers, hotels, airlines, credit card issuers, manufacturers and universities all learned that their richest customers didn’t just spend more than the rest; they spent multiples more. Many companies found that if they didn’t focus on their richest customers, they couldn’t provide competitive salaries to staff members, increase returns to shareholders and attract capital to invest in new products. Whereas in the 1970s and before, the revenue driving corporate profits came from the middle class, by the 1990s it was clear that the big money was at the top.

One of the economic puzzles of the past five years has been the persistence of serious consumer negativity at a time when nearly everyone has a job, median household incomes are historically high, and we are spending more than we did before the pandemic. Yet all but the most affluent are seemingly not happy with the economy or their place in it.

We all judge our well-being against something, typically our past and our peers. Through either of those lenses, the Disney parks — and many similar institutions of American culture — may offer a piece of the puzzle. Compared with the past, a Disney trip is more expensive, to be sure, but perhaps more important, it feels much more expensive, because at every turn one is being invited to level up and spend more. Thanks to social media, we can now see the experiences that divide us. Go to Instagram and search for #Club33, the invitation-only clubs hidden within Disney properties. What you see there will not make you feel a kinship with your fellow man, unless you are one of the very few invited in.

America’s 20th century was a fortunate moment when we could rely on companies like Disney to deliver rich and unifying elements of our culture. Walt Disney hoped that his audience would have “no racial, national, political, religious or social differences”; he wanted to appeal to everyone, in no small part because appealing to everyone was profitable. It was a time when big institutions were trusted, and the culture they created was shared by nearly all Americans.