Pricing and Raw Data

Report
AMUSEMENT PARKS
By Marc Sourour, Ben Chartock, and Megan
Eisenbrown
Agenda
Industry Structure
Pricing Strategies
Raw Data Analysis
Recommendations
Why Amusement Parks?
Highly
Concentrated
Industry
Huge Variety in
Pricing Strategies
Ease of Access
to Data
Entertaining to
Research
INDUSTRY
STRUCTURE
Amusement Parks in the United States
Industry Overview
• Definition: This industry is made
up of amusement and theme
park companies that operate
mechanical rides, water rides,
games, themed exhibits,
refreshment stands and other
attractions
• Amusement Parks:
• Not themed and simply consist of
distinct attractions or rides.
• Theme Parks: Have a specific
theme in one or more areas of the
park.
Product Segmentation
(by percent of industry revenue)
Theme Parks
in the
Southeast
38%
Theme Parks
in the West
19%
Theme Parks
in Other US
Regions
23%
Amusement
and Water
Parks
20%
Theme parks account 80.0% of total industry revenue.
Market Segmentation
Competitive Landscape
Major Player Market Share
The Walt Disney
Company
• Enterprises: 457
• Major Players: 5
19%
• HHI: 1865.21*
• C4: 73%
36%
Universal Parks &
Resorts
8%
SeaWorld Parks &
Entertainment
8%
Six Flags Inc.
11%
18%
Cedar Fair LP
Other
• Highly concentrated Industry
• The top four players in this industry will account for over 70% of total industry
revenue.
Barriers to Entry
High
Competition
High
Concentration
High Capital
Costs
Technology
Change
Factors affecting entry
Mature Life
Cycle
Overall difficulty of entry: High
Area of
Land
Required
Product Differentiation
1
2
3
4
In response to this high level of competition in this industry, the
major players must differentiate their parks.
Industry Organization
Demand Industries
Supply Industries
Beer Wholesaling
Hotels & Motels
Confectionery
Wholesaling
Amusement
Parks
Consumers
Demand Drivers
Real household
disposable
income
World Price
of Crude Oil
Social or
geopolitical
factors that
influence travel
Per Capita Disposable
Income
Other social
factors
Seasonal
factors
Demand Drivers
FY13: The increase in per capita disposable income is
expected to drive growth in the industry in 2013.
Government Regulation
• Regulation of the industry is medium but increasing
• Regulatory Agents:
• The Federal Consumer Product Safety Commission
• Occupational Health and Safety Administration
• Missouri, Utah, and District of Columbia do not require any regular
inspections
Major Players
The Walt Disney
Company
Universal Parks &
Resorts
SeaWorld Parks &
Entertainment
• Market Share:
36.0%
• FY12 Profits: $12.9
billion
• 5-Year Growth
Rate: 4.0%
• Brand Names:
Disneyland, Walt
Disney World Resort
• In the news:
Redesign completion
• Market Share:
17.3%
• FY12 Profits:$2.3
billion
• 5-Year Growth
Rate: 12.4%
• Brand Names:
Universal Studios,
Islands of Adventure
• In the news: The
Wizarding World of
Harry Potter
• Market Share:11.0%
• FY12 Profits: $1.4
billion
• 5-Year Growth
Rate:2.3%
• Brand Names:
SeaWorld, Busch
Gardens, Adventure
Island, Discovery
Cove, Waterworld
Country USA,
Sesame Place,
Aquatica
Major Players Continued
Cedar Fair LLP.
• Market Share: 8.2%
• FY12 Profits: $1.1
billion
• 5-Year Growth
Rate:1.6%
• Brand Names: Knott’s
Berry Farm, Cedar
Point, Dorney Park and
Wildwater Kingdom,
Valleyfair
Six Flags Inc.
• Market Share: 8.20%
• FY12 Profits:$1.1
billion
• 5-Year Growth
Rate:2.1%
• Brand Names: Six
Flags
• In the news:
emergence from
bankruptcy in 2010
PRICING STRATEGIES
3rd degree price discrimination
• Affiliations
2nd degree price discrimination
• Seasonality
• Time sensitivity
• Quantity discounts
1st degree price discrimination
• Booking choices
Affiliations
• Florida residents,
Disney Club
members, annual
passholders, and
members of the
U.S. Military can
purchase Walt Disney
World park tickets at
a discounted price.
• Universal Orlando also offers discounted pricing for
Florida residents.
Seasonality
• Hotel prices at Walt Disney World fluctuate based on the
time of the year.
Disney's Pop Century Resort Price (Avg/Night)
220
Avg price per night
200
180
160
140
120
100
5/3/13
6/3/13
7/3/13
8/3/13
9/3/13
10/3/13
Check-in Date (6-night stay)
11/3/13
12/3/13
1/3/14
Seasonality
• Six Flags offers Junior pricing for
everyone through May 27nd when
you bring in a can of Coca-Cola.
• Universal offers a 3rd day free with
the purchase of a 2-day ticket until
June 30th.
Time Sensitivity
• Consumers that are more
$125
$80
$45
time sensitive will have to
pay more.
• Different levels of the “FLASH
Pass” exist to extract
additional consumer surplus.
• “Express Pass” prices are
based on demand and
seasonality for Universal.
December 2013
Sun
Mon
1
Tue
2
Wed
3
Thu
4
Fri
5
Sat
6
7
$35.99 $35.99 $35.99 $35.99 $35.99 $45.99 $55.99
8
9
10
11
12
13
14
$45.99 $35.99 $35.99 $35.99 $45.99 $45.99 $55.99
• Disney has a free ‘regular
flash pass’.
15
16
17
18
19
20
21
$45.99 $55.99 $55.99 $55.99 $55.99 $55.99 $55.99
22
23
24
25
26
27
28
$55.99 $55.99 $55.99 $69.99 $89.99 $119.99 $119.99
29
30
31
$119.99 $89.99 $69.99
“The Longer You Play, The Less You
Pay Per Day!”
• Similarly to most amusement parks, Disney’s pricing
structure provides those who spend more time at the park
with cheaper tickets.
Six Flags Price Discrimination
Six Flags ticket
purchasing location
• Purchasing tickets online will save you $25 on
a general admission ticket.
At the
park
29%
• Junior ticket price is the same online or at the park.
• Age (3+) and height (4.5ft or 1m37)
discrimination are in effect.
• Buying more than three Season Passes will
reduce the cost per pass.
Online
71%
Booking choices
Book your Disney vacation here!
Confusion
• A search for a booking at Walt Disney World lead to 26
hotels available, 4 rooms in one of the hotels, more than 4
ticket options, 6 dining options, and 3 transportations
options.
That amounts to over 7,488 price points!!
• Each phase of reserving your booking allows you to add
more options, increasing the cost of the trip.
• Allows Disney to approach 1st degree price discrimination.
RAW DATA ANALYSIS
Via online survey results:
•
•
•
•
Competition Factors & Pricing
Demand for Bundling
Advanced Booking Demand
Price Discrimination on peak times
Number of people visiting each park
Competition & Monopoly Pricing
• Data collected:
Information regarding appetite for “thrill rides & exciting
roller coasters,” as well as data regarding individuals’
visits to the top amusement parks in the United States
(based on a 2011 industry report - Global Attractions
Attendance Report)
Estimating Park Extremeness
• Question:
Does Disney offer a different
level of “extremeness” than
Universal Studios?
|
Summary of risk appetite
Disney |
Mean
Std. Dev.
Freq.
------------+-----------------------------------0 |
4.3846154
1.1208971
13
1 |
4.08
1.1924935
50
------------+-----------------------------------Total |
4.1428571
1.1757927
63
|
Summary of risk appetite
Universal |
Mean
Std. Dev.
Freq.
------------+-----------------------------------0 |
4
1.0540926
19
1 |
4.2045455
1.2309865
44
------------+-----------------------------------Total |
4.1428571
1.1757927
63
|
Summary of risk appetite
both |
Mean
Std. Dev.
Freq.
------------+-----------------------------------0 |
4.173913
1.0292174
23
1 |
4.125
1.2646577
40
------------+-----------------------------------Total |
4.1428571
1.1757927
63
THRILL CONTINUM
Monopolistic Competition
• Are the Big Two parks behaving more like oligopolists and
driving prices up, or is competition driving prices down?
• Both factors are at play!
• Differentiated products on the thrill scale indicate lessened
competition and prices driven up
• Close proximity (both located in Orlando) indicates competitive
behavior and prices driven down
Park attendance by region
If you were given a chance to go to one of the major amusement parks in
the United States for an overnight stay, which region would you chose to
go to?
128 respondents
Should I go to Florida or California?
Should I go to Florida or California?
Demand for Mixed Bundling
Price Discrimination on Peak Times
• Florida residents can buy tickets to Universal Studios’
Halloween Horror Night at different prices depending
on which day one wants to go: Sundays,
Wednesdays, or Thursdays are $41.99, on Friday the
price is $51.99, and on Saturday it is $66.99. Which
night would you buy a ticket for?
• We measured the time and price sensitivity of 128
students facing this hypothetical choice.
Which day would you buy a ticket for?
DATA SHOWS:
1) More people are
interested in offpeak, lower price
tickets than high
price weekend
tickets
2) We see evidence
of aversion to
buying the
highest price
tickets.
Preferences tend
away from the
extreme.
Industry Outlook
• Strong revenue outlook
• Travel spending expecting to increase
• Decline in unemployment rates
Investment Recommendation
• No clear strategy
• Several ways to invest in theme parks
• Cedar Fair and Six Flags are the most concentrated bets
in the industry, BUT
• Disney is the leader in theme parks, BUT
• Blackstone’s (owner of SeaWorld) future is unclear
Source: USA Today “The Ups and Downs of Investing in Theme Parks”
Recommendations
• Disney should advertise its free basic “flash pass” or
begin charging for it, even a small amount would lead to
an almost 100% margin on the pass.
• The industry should continue their current pricing
structure, the confusion caused by all the choices causes
increased extraction of consumer surplus.
Recommendations
• Advertise, Advertise, Advertise!
- Major Players in the industry should highlight
heterogeneity of the products offered in continued
advertising campaigns.
This will drive up prices & increase revenue
by changing demand.
Questions?
Book your Disney vacation here!

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