The End of the Middle-Class Magic Kingdom

Once a haven for all, Disney World now caters to the affluent, leaving the middle class behind in an increasingly stratified America

The “middle class squeeze” has been one of the themes of American political discourse in the past decade. A recent NYT essay (gift link) on changes at Walt Disney World generated a lot of buzz for really bringing this to life.

This piece highlights how Disney World has become a two-tier experience, a VIP one for the well-off, and a much degraded one for everyone else. In fact, the middle-class finds Disney World increasingly out of reach.

This moment was years in the making. Ms. Cressel requested Disney gift cards for several birthdays and Christmases, dug up discounts and paid for her park tickets in installments. Her mother arranged space in a time-share nearby, and a friend will take Amtrak’s Auto Train from Virginia to Florida with the group’s luggage to avoid airline baggage fees.

Yet for all her planning, Ms. Cressel enters the reservation system at a disadvantage. The system dispenses front-of-the-line spots and gives priority to travelers who book a guide, purchase expensive passes or stay at a Disney property. As a visitor on a budget, Ms. Cressel is near the bottom of a pecking order in which, on many days, thousands of spots for the park’s premier rides are reserved for the big spenders.

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.

The author zeroes in on an important point. Disney used to be the epitome of the mass market, middle class America that defined the country in the postwar era from 1945 to around 1990. People of all stripes watched the same TV shows and consumed the same products - because we had no choice. That was what was on offer.

While the process began earlier, the 1990s were really when mass market America began to fragment. This was widely observed to have shattered the shared cultural experience of America. We went from three TV networks to “57 channels and nothing on” to personalized streaming just for you. There was an explosion of new consumer amenities such as coffee shops and microbrewed beers.

The cultural aspects of this were well-known, and perhaps best encapsulated in Charles Murray’s “bubble quiz” in which he asked people questions to illustrate how disconnected they were from the culture of middle and working class America.

But this fracturing is not just cultural, it’s economic. We see this in changes in the Disney World experience:

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.

The mass market experience is what I had when I visited Disney World as a kid. Like many people of my generation, we, despite not having much money, were able to make one trip to visit Disney and the Kennedy Space Center. I recall that I was able to ride everything I wanted without any problems.

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.

Now, there is an apparently bewildering array of different actual VIP options. Without them, it’s much more difficult to get access to rides and such.

This is the way a lot of America has been moving, best epitomized by air travel. Everything is rationed by money and status, from seats to lounge access.

One reason for this is better technology, which is noted in the essay:

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.

It used to be that companies didn’t have the technology to easily support all these different offerings and pricing options. Now they do. I experienced the early stages of this as a consultant myself, when retailers were starting to be able to use technology to do much more product assortment and pricing variation by individual store. Now they can do it by individual person in some cases.

But it’s also enabled by the fact that there are simply far more higher income and even wealthy people than there used to be.

In the 2020s, however, the growing ranks of the affluent presented a profit source that could not be ignored. According to Datos Insights, in 1992 there were 88,000 households worth $20 million or more in 2022 dollars; by 2022, there were 644,000. Those who could pay almost anything for a vacation were becoming their own mass market.

Five years ago I did an analysis of households making over $200,000 per year in the city of Indianapolis. Between 2000 and 2010, that number barely changed, going from 6,013 to 6,045 - within the margin of error. But between 2010 and 2018 that climbed from 6,045 to 13,186 - an increase of almost 120%. The most recent data I have in my database is from 2022, when that number went to 26,423 - doubling again in just four years. And Indianapolis is not a particularly prosperous city.

Now, some of this is just inflation pushing people into higher income brackets. But there are just a lot of people making a lot of money today. A couple where I live who are both middle managers at Eli Lilly could easily have a household income north of $350,000. The median individual employee at Facebook makes $379,000.

This has produced asymmetric financial competition. It used to be that there were rich people, but the middle class wasn’t really competing with them. Rich people bought mansions or luxury cars, but it didn’t affect the average person. There weren’t enough rich people to affect how long it took you to get through the line at Disney World, for example.

Today, there are so many people with so much money that the middle class is now in direct competition with people who have vastly greater financial resources. I believe this is one thing that has sent housing prices through the roof. Following the rule of thumb that you should spend no more than three times your income on a house, that $350,000 couple - who, by the way, I took from a real example mentioned in my local newspaper - can afford a $1.1 million house without even stretching themselves.

No surprise, housing prices have soared as this happened. A decade ago, someone making the median income for the state of Indiana could have afforded to buy our house in Carmel, Indiana. Now it’s way out of reach. In part, that’s because there are so many households with so much more money. Again, some of that is inflation. But some of it has been financial rewards flowing towards the upper middle class that the Atlantic once called “the 9.9%” of the people at the top of the income distribution.

Now the family making the median income isn’t just competing with a few rich people at Disney, but with millions of people who have the cash to splurge on premium experiences - and a company in Disney that’s now very motivated to serve this new market segment. (To be clear: a lot of these people are Trump voting ruralites and other such people. It isn’t just upscale suburbanites, who may actually be less attracted to Disney these days).

Another problem is capacity. In 1980, America had 227 million people. Now it has 340 million. That’s a 50% increase in population. But all too many things that people want and need haven’t expanded by anything close to that.

Addressing this is one motivation behind the so-called “Abundance agenda” on the left. These center-left technocrats want to make it easier, for example, to build more houses to bring down costs. Undoubtedly, we’ve overzoned American such that we can’t build enough homes to keep up with the growth in households. Reform is badly needed here.

But there’s a two-fold challenge for the Abundance agenda. The first is that some things can’t be expanded. Think about our national parks, for example. In theory we could acquire new ones, but realistically there aren’t enough high quality natural environments out there. A friend of my wife’s visited Arcadia National Park while on vacation in Maine and spent over two hours in a futile search for a parking spot before giving up and leaving. In some cases, sheer numbers of people have been a factor in degrading the middle class experience through competition for scarce resources.

The second is that companies with leverage have made intentional choices to constrain capacity growth in order to establish a premium positioning. The Ivy League schools have infamously not increased enrollment, but they were always an exclusive product.

But it’s also true of Disney. Disneyland opened in 1955. Walt Disney World opened in 1971. Epcot Center opened in 1982. Disney Hollywood Studios opened in 1989. Disney’s Animal Kingdom opened in 1998. Disney California Adventure Park opened in 2001.

There’s easily demand for another core Disney park in the United States. The population is up by 2/3rds since Disney World opened. But it hasn’t built one. And after opening four new related theme parks over a 19 year period, Disney hasn’t opened a new US theme park in the past 24 years. It’s more profitable for them to limit capacity and extract more money through them via these premium pricing approaches.

This isn’t just limited to Disney. Economist Conor Sen observed:

The new Nashville football stadium has ~9,000 fewer seats and thousands of fewer parking spaces than the current stadium, with part of the rationale being that “cheap seats” require more land and parking spaces and contribute to congestion but not profits.

Taking your kids to a football game is now also a luxury experience. The Titans are explicitly reorienting themselves around this approach.

The government - that is to say the middle class and working class taxpayers - are funding this to the tune of $1.2 billion. So not only is the middle class getting squeezed out by the Titans, they are being forced to pay for their own displacement.

The net result (back to the NYT essay):

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.”

…

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.

The economics of appealing to the middle class aren’t what they used to be. The market, and increasingly the culture, is dominated by the affluent. And technology is enabling companies to see these previously invisible class divides and act on them.

Based on what we earn, we see different ads, stand in different lines, eat different food, stay in different hotels, watch the parade from different sections and on and on. What’s profitable today is not unification. It’s segmentation.

Click over to read the whole thing. Again, this is a gift link.

These sorts of trends account in part for the sour mood among the American public. They are getting squeezed out of things that used to be considered part of ordinary American middle class life - or at least being forced to pay dearly to get them.

But to avoid ending on a downer, I want to point out that not everything is like this. There are still new, interesting examples of mass market, middle class experiences in America.

One of them is the interstate convenience store chain Buc-ee’s. The same time the NYT essay on Disney World came out, Pirate Wires published this fantastic paean to Buc-ee’s (highly recommended reading):

Buc-ee’s, a near-highway megachurch and pilgrimage destination for the uniquely American blend of comfort, commerce, spectacle, and hometown folksiness, stands unrivaled. It singlehandedly creates family memories, feeds our most desperate attempts to fill various God-shaped and antisocially created holes, raises up some of our most disavowed and disaffected, hooks us on sugar and stupid white-labeled landfill filler, and puts smiles on millions upon millions of traveling American faces. Paradoxical cultural phenomenon, beloved landmark, bona fide megastore, and bearer of the American spirit, I salute you.

Buc-ee’s locations have upwards of 120 gas pumps. Their stores are 70,000 square feet, with large, pristine bathrooms, lots of tasty if unhealthy junk food, and shelves full of kitschy merchandise. They employ 200 people at surprisingly high wages. It’s probably a better gig to clean bathrooms at Buc-ee’s than to work in a nearby bulk distribution warehouse.

For a lot of Buc-ee’s fanatics, that chain is now the real magic kingdom. There is something awe inspiring about visiting one. It’s an experience, not just a bio break.

It’s also a quintessentially middle-class experience, open to all on equal terms. Locations are scare enough to make them desirable. But they are plentiful enough - and large enough - to ensure access and prevent overcrowding. People are provided a high quality experience - those famously clean restrooms, the barbecue sandwiches, etc. - at a reasonable price. And without any obvious two-tier service or cash extraction gimmicks. Even people without much money to spend can still fuel up, use the facilities, and maybe make a small dollar purchase.

Buc-ee’s apparently prints money, too. This shows that there can be a powerful economic model behind an essentially mass market, middle class, but high quality product offering.

It makes me wonder how many other Buc-ee’s type opportunities there are out there in other industries. While we wait for those, in the meantime the world is trending in the Disney direction.