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What’s the best way to put a price on a day of theme park fun? Very thoughtfully, and preferably using data, algorithms, and flexibility, experts say.
After decades of setting one admission price and sticking with it year-round, the world’s largest theme park operators are starting to inch closer to the models used by the bulk of the travel industry.
“For as long as I can remember, theme parks have always been a place where they would paint the price of a ticket on a piece of wood and nail to to a post at the front of the park,” said Martin Lewison, an assistant professor of business management at Farmingdale State College who studies theme parks. “Once a year or so they would raise the price. They would then discount off that price.”
Although observers and media have questioned for several years whether park operators would adopt demand-based pricing strategies similar to those used by airlines or hotels, only in recent months have the biggest players made moves in that direction.
“Nobody wants to be the first one to jump off the cliff,” said Dennis Speigel, president of consulting firm International Theme Park Services. “Once they see somebody adopt, then they become adopters. Our industry as a whole, we’re slow adopters. We have been for decades and decades.”
Earlier this year, Disney changed the way it prices one-day tickets domestically, introducing a three-tiered system that charges different amounts for entry according to the date when people plan to visit. At peak season, the Magic Kingdom costs $124 a day for adults, while other Orlando parks cost $114; in California, admission at peak times is $119. Multi-day tickets are sold as usual and not tied to a specific time of year.
Around the same time, Universal Studios Hollywood announced it would charge less for admission to those who bought tickets online for slower days. The “anytime admission” ticket without a specific date costs $115.
“Universal Orlando is still a little bit of a holdout,” said Robert Niles, founder and editor of Theme Park Insider. “Everybody is expecting them to move to a variable pricing system the next time they change their prices.”
Cedar Fair, which owns 11 regional amusement parks in the U.S. and Canada, said in 2012 that it would start using a new purchasing platform to “provide real-time data and dynamic pricing modification.”
And Six Flags Entertainment Corp., which has 18 parks in North America, started its own form of variable pricing in 2012. Most of the locations use the system, which offers discounted tickets online depending on the day of the week; historically slower days cost less. The pricing is based on history and forecasts, and tickets are cheaper in advance.
“We want you to commit to us,” said Brett Petit, senior vice president of marketing and sales for the parent company.
Moving in a Dynamic Direction
Airlines pioneered dynamic pricing, or revenue management, which is changing prices based on demand, and other parts of the travel industry such as hotels and rental car companies followed suit.
The pricing strategy most attractions are experimenting with today is better described as variable, differential, or seasonal — “baby steps leading up to” something that resembles the airline model in the next five or so years, Speigel said.
Pricetag, a Netherlands-based company that provides dynamic pricing consultation and software, has been in talks with attractions and theme parks in the United States. Eric Pastoor, the company’s vice president for operations, said interest has kept him “tremendously busy.”
“I can guarantee you that come 2017, a lot will move into this direction ” he said. “And I’m not just talking about differential pricing, I’m talking about real dynamic pricing.”
His definition of “real” dynamic pricing: Parks offer cheaper prices the farther in advance tickets are purchased, even for traditionally peak times, and as more tickets are bought, the price goes up. For the busiest times, there may only be a small number of cheaper tickets available, but the idea is that anyone who plans far ahead can have the chance at a good price — rather than only those who can travel on off-peak times.
“It will move to a top price, obviously, because you will always have a number of customers that won’t care about that,” Pastoor said. “But these people are less concerned with higher prices. You want to say, ‘We’re a park that has prices for everybody.’”
Park operators, especially Universal and Disney, have done strong business in recent years and may not have felt the need to tamper with their long-held pricing practices. And their is customer feedback to consider.
“Any time you do a change — especially to Disney, it’s so ingrained in the American culture — anytime they do any changes, people are just up in arms,” said Scott Smith, an assistant professor at the University of South Carolina who teaches theme park management and other hospitality classes. “Honestly, Disney has been doing so well I almost feel like it’s a why-rock-the-boat kind of thing.”
Why Make the Change?
The goal is to maximize revenue by spreading out visitors, encouraging more people to attend on slow days and fewer people on the busiest.
“It basically cuts down on your peak moment in the park, which cuts down on waiting times,” Pastoor said. “And if people are not waiting in line, they will spend more in your park.”
Smith said spreading attendance more evenly throughout the year also helps operators plan staffing levels and operations better.
In addition to allowing parks to plan, Lewison said smaller crowds should improve people’s happiness with their visits.
“That’s obviously the big determinant of satisfaction, how many rides did I get in,” he said. “You want guests to feel like they had a great time.”
Is it Working?
Niles, of Theme Park Insider, said early anecdotes indicate that, at least at Disney, efforts to even out the crowds with differential prices might be working.
“It seems as though the Fourth of July this year in both Orlando and Southern California, the crowds seemed really light compared to previous years,” he said. There were some differences: the holiday fell on a Monday compared to a weekend, and Orlando has been experiencing softer demand destination-wide.
But Niles wasn’t ready to rule out pricing as a factor: “It really does seem like the peak days aren’t quite as peak and the slower days aren’t quite as slow,” he said.
During an earnings call in May, the Walt Disney Company said attendance at Walt Disney World Resort in Florida saw “a modest decrease” in the beginning of the year. In the quarter that ended July 2, attendance decreased across domestic parks while revenue rose.
“We like the steps that we’ve taken in terms of pricing,” CEO Bob Iger said during the May call. “We’ve made a number of steps to essentially grow revenue, in some cases actually at the expense of some attendance where we’re changing our pricing approach sometimes in part to moderate attendance so the park experience is a little bit better.”
Still, Niles said he doesn’t expect to see Disney move toward a real-time dynamic system right away.
“The next step would be toward five tiers instead of three tiers, or maybe even beginning to adjust the price of multi-day tickets,” he said.
Maximizing Big Data
As park operators get more comfortable moving away from traditional pricing, observers think there are a host of opportunities to generate more revenue.
Lewison has proposed that parks create a loyalty program that ties big data into ticket buying and spending so they can create customized packages that appeal to individual guests’ behavior patterns.
“Everybody’s got little cards on their keychains for when they go to the grocery store,” he said. “It seems like a no-brainer and the technology is probably cheap these days.”
Disney has already laid the groundwork to put that idea into practice at Walt Disney World. The company spent a reported billion dollars creating its My Magic+ system in Orlando, which tracks behavior and spending through wristbands that let users enter the park, book rides, get into hotel rooms, and spend at parks.
“Disney did it the most expensive way they could have with these bands,” Lewison said. “You can do it a lot cheaper.”
Packages, Premium Experiences
Conversations about the future at Six Flags center on packaging products to add value.
“How do we get a park guest to spend more money than they think they’re going to spend and how do we package that and get that sold ahead of time?” Petit said.
He said the company knows a customer’s day could include multiple transactions: admission, food, merchandise, midway games, front-of-line passes, and more.
“How do we package that and make that a must-do scenario?” Petit said. “We want to pull you up into a higher price package. We’re upselling you, so to speak, in our pricing scheme so that we can maximize the revenue from each guest that day.”
The problem with upgrading at the moment is that the process is still more labor-intensive than the company would like; Six Flags wants to make that process simpler and mobile.
“Ultimately it will get to as quick as hitting some buttons on the phone,” he said.
SeaWorld’s Discovery Cove could provide a model for high-end experiences, Smith said: A limited number of people pay hundreds of dollars to swim with dolphins and get unlimited food and drinks. And Disney has a slew of behind-the-scenes tours that charge beyond the cost of admission.
“Those are the types of things that I think you’re going to see,” Smith said. “Provide them with these add-on options that the top 20 percent of the population can easily afford and would gladly afford.”
Niles said add-ons like photo packages, holiday after-hours events, or special parties tied to fireworks viewing could also be maximized.
“They’ve been doing a lot of upsell opportunities which they can then turn around and bundle into various packages if they feel the need to move product in one segment or another,” Niles said. “That’s something that they’ve already begun to do and I expect to see more of.”
He added: “They’re definitely being quite a bit more creative with pricing now than they ever have in the past.”
Lewison expects the same, but he urged parks to be cautious: “Of course they have to be careful, because many customers already feel nickel-and-dimed.”
Source: skift.com