Walt Disney World is hooked on the discount drug.
This week marked the return of its "buy four nights, get three free" promotion at some of its hotels. And Disney revealed this week that guests can earn a free theme park ticket next year by volunteering after the free-on-your-birthday deal ends Dec. 31. This summer it extended its free-dining promotion until mid-December.
It begs the question: Will Disney ever be able to stop pushing these markdown meds?
Consumers and companies are easily addicted to price cuts.
Consumers often begin to believe that the discounted price is the "real" cost rather than the original "inflated" price that they become reluctant to pay in the future. And companies like how discounts keep demand and volume up even when — as in Disney's case — the cuts eat into the bottom line.
Disney has confronted the question about whether it will be able to raise prices as employment improves and consumers begin to spend again.
Chief Financial Officer Tom Staggs has said the company "is being very thoughtful and deliberate" about its offers.
"As we see recovery, I think that we will have the opportunity to be less aggressive on promotions, when that point comes," he said over the summer.
In other words, Disney says it can stop any time it wants.
And so can every corner junkie, right?
Analysts have questioned whether Disney is devouring future demand by "pulling forward" vacations that would have been taken later. The company says it is tapping new customers that otherwise would not have vacationed at Disney at all.
The recession put extreme pressure on companies to slash prices. Some have resisted more than others.
Darden Chief Executive Officer Clarence Otis, for example, said he has refrained from the steep discounts offered by casual-dining competitors.
"If we were to have discounted and had somewhat better sales, I don't know that our earnings would have been any higher," Otis said this week. "So we wind up in the same place and the price of winding up in the same place would have been degrading the brands, conveying a message that the only relevant part of the brand equation is price, which we think is damaging over the long term."
Darden's same-restaurant sales for Olive Garden, Red Lobster and Longhorn Steakhouse were down 5.3 percent for its first quarter reported this week. But its profit was up 16 percent, beating analysts' expectations.
When Disney reported its most recent earnings in July, its domestic theme-park attendance was up 3 percent and flat in Orlando, helped along by the discounts. But, overall profit for the company's third quarter fell 26 percent.
To be certain, the businesses of Disney and Darden are different, though the risk of brand erosion is a concern for both.
Disney says it is important to keep park attendance steady because the parks are a vehicle for brand exposure and instilling loyalty in consumers who will go on to purchase other Disney products.
The reintroduction of the "buy four, get three" free hotel nights deal means it will be in place for all but about two months of this year. It ran from January to mid-August and will begin again Nov. 1 to March 27, though there are blackout dates around the holidays.
Disney is putting new limits on its markdowns. "Buy four, get three free" excludes the resort's cheapest hotels this time around and requires the purchase of four-day rather than single-day passes among other restrictions.
Those changes are signs that it is weaning consumers from the earlier, steeper discounts.
But the longer the discounts go on, the harder the habit will be to break.
Beth Kassab can be reach at 407-420-5448 or email@example.com. Read her blog at orlandosentinel.com/thebottomline.
Disney World revives hotel promotion, B7