amusement parks by marc sourour, ben chartock, and megan eisenbrown
TRANSCRIPT
AMUSEMENT PARKSBy 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 West
19%
Amusement and Water
Parks20%
Theme Parks in Other US Regions
23%
Theme Parks in the Southeast
39%
Theme parks account 80.0% of total industry revenue.
Market Segmentation
Competitive Landscape
• Enterprises: 457• Major Players: 5• HHI: 1865.21*• C4: 73%
• Highly concentrated Industry• The top four players in this industry will account for over 70% of total industry
revenue.
36%
17%11%
8%
8%
19%
Major Player Market Share
The Walt Disney Company
Universal Parks & Resorts
SeaWorld Parks & Entertainment
Six Flags Inc.
Cedar Fair LP
Other
Barriers to Entry
Factors affecting entryMature Life
Cycle
Technology Change
High Competition
Area of Land
Required
High Capital Costs
HighConcentration
Overall difficulty of entry: High
Product Differentiation
In response to this high level of competition in this industry, the major players must differentiate their parks.
1 2
3 4
Industry Organization
Amusement Parks
Beer Wholesaling
Hotels & Motels
Confectionery Wholesaling
Supply Industries Demand Industries
Consumers
Demand Drivers
World Price of Crude Oil
Per Capita Disposable Income
Real household disposable
income
Social or geopolitical factors that
influence travel
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
• 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
Universal Parks & Resorts
• 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
SeaWorld Parks & Entertainment
• 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 STRATEGIES3rd degree price discrimination
• Affiliations
2nd degree price discrimination• Seasonality• Time sensitivity• Quantity discounts
1st degree price discrimination• Booking choices
Affiliations• Florida residents,
Disney Clubmembers, annualpassholders, and members of the U.S. Military can purchase Walt DisneyWorld 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.
100
120
140
160
180
200
220Disney's Pop Century Resort Price (Avg/Night)
Check-in Date (6-night stay)
Av
g p
ric
e p
er
nig
ht
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
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.
• Disney has a free ‘regular flash pass’.
$125 $80 $45
December 2013Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 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
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• Purchasing tickets online will save you $25 on a
general admission ticket.• 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.
At the park29%
On-line71%
Six Flags ticket purchasing loca-
tion
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 ANALYSISVia 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
128 respondents
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?
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 off-peak, 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.