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For the last decade, I have been perplexed by rising prices at theme parks. I have also been concerned about the enormous amount of discounting that parks and attractions find necessary to continue to “pump up” attendance.
Certainly during the last three years, our industry has seen an all-time high in discounting, which has become the “promotion du jour” in many parks.
Discounting has occurred on three fronts: it has occurred earlier than ever before, it has been deeper than ever before, and it has remained in the marketplace longer than ever before. Yes, in most instances it has maintained established levels of attendance, but it has also created a dilution of operating income.
The days of “build it and they will come” have subsided due in part to the maturing of our industry. We are reaching the point of saturation. Discounting has become a way to offset attendance decline due to the downward spiral of the economy, higher oil prices, growing competition, price increases and industry maturity. These issues must be carefully addressed.
So I ask you, is it time to take a lesson from airlines and hotels and develop a “yield management” mentality? For years, both of these hospitality industries have practiced yield management, with great results for both the business and the consumer.
You know the deal: book in advance for an off-peak flight and, if you’re lucky, it’ll cost you next to nothing. However, leave it to the last minute or catch a plane over a peak holiday period and you’ll pay for the privilege.
Yield management is defined as, “the process of understanding, anticipating, and influencing consumer behavior in order to maximize yield or profits from a fixed, perishable resource.”
These resources could be airline seats, hotel rooms, reservations – or admission income at a theme park or attraction. I have always said in our industry that we are a, ”top of the line business,” and there is no bottom line. If our turnstiles do not spin, neither does the in-park spending such as retail or food and beverage. We have to get people motivated to visit. In the future, we will need to do this even more due to the factors listed above, and also due to families changing their leisure patterns and lifestyles.
Our inventory is our attraction, and yield management involves strategic control of our inventory to sell it to the right customer at the right time and for the right price. The strategies and tactics employed are designed to improve profitability and, in our industry’s case, encourage more people to visit when we want and need them to, such as off-peak, via attractive pricing. Yield management focuses on maximizing expected revenues at lower periods of operation. Properly organized, it can also create new or higher spending among different visitor segments.
Yield management requires analytic metrics, detailed market knowledge, and supported computer systems. In today’s age of “computer science,” we can manage the visiting and spending habits of our guests on a weekly and daily basis. This starts at the turnstile and moves into the internal spending of our customers as they move through the park during their stay. At ITPS, we have been working on this concept for several years and believe than significant upward spending can be achieved.
There are three essential conditions for yield management to be applicable. These are that there is a reasonable amount of product available for sale, that the products sold are perishable (they cease to be of value after a certain period), and that different demographics are willing to pay a different price for using the same amount of product.
It’s time once again that we, the operators, orchestrated the discounting – when and how we need and want it to occur. Yield management is one very effective way of doing that, whilst effectively increasing revenues on admissions, food and beverage, games and merchandise. Two parks which are effectively using this pioneer concept in parks are Slagharen in the Netherlands and Playcenter in Brazil, both of whom have experienced extraordinary results. For more information on how this can be achieved in a theme park and attractions environment, contact us at +1 513-381-6131, or via www.interthemepark.com.
Dennis Speigel is president of International Theme Park Services (ITPS), based in Cincinnati, Ohio. ITPS is the industry's leading, independent management/consulting firm, offering services including feasibility analysis, design/masterplanning, pre-opening operational planning, on-site management, sponsorship & marketing, executive search and business audits.