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AMUSEMENT PARKS By Marc Sourour, Ben Chartock, and Megan Eisenbrown.

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Presentation on theme: "AMUSEMENT PARKS By Marc Sourour, Ben Chartock, and Megan Eisenbrown."— Presentation transcript:

1 AMUSEMENT PARKS By Marc Sourour, Ben Chartock, and Megan Eisenbrown

2 Agenda Industry StructurePricing StrategiesRaw Data Analysis Recommendations

3 Why Amusement Parks? Highly Concentrated Industry Huge Variety in Pricing Strategies Ease of Access to Data Entertaining to Research

4 INDUSTRY STRUCTURE Amusement Parks in the United States

5 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.

6 Product Segmentation (by percent of industry revenue) Theme parks account 80.0% of total industry revenue.

7 Market Segmentation

8

9 Competitive Landscape Enterprises: 457 Major Players: 5 HHI: * C 4 : 73% Highly concentrated Industry The top four players in this industry will account for over 70% of total industry revenue.

10 Barriers to Entry Factors affecting entry Mature Life Cycle Technology Change High Competition Area of Land Required High Capital Costs High Concentration Overall difficulty of entry: High

11 Product Differentiation In response to this high level of competition in this industry, the major players must differentiate their parks

12 Industry Organization Amusement Parks Beer Wholesaling Hotels & Motels Confectionery Wholesaling Supply Industries Demand Industries Consumers

13 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

14 Demand Drivers FY13: The increase in per capita disposable income is expected to drive growth in the industry in 2013.

15 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

16 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

17 Major Players Continued Cedar Fair LLP. Market Share: 8.2% FY12 Profits: $1.1 billion 5-Year Growth Rate:1.6% Brand Names: Knotts 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

18 PRICING STRATEGIES 3 rd degree price discrimination Affiliations 2 nd degree price discrimination Seasonality Time sensitivity Quantity discounts 1 st degree price discrimination Booking choices

19 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.

20 Seasonality Hotel prices at Walt Disney World fluctuate based on the time of the year.

21 Seasonality Six Flags offers Junior pricing for everyone through May 27 nd when you bring in a can of Coca-Cola. Universal offers a 3 rd day free with the purchase of a 2-day ticket until June 30 th.

22 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 2013 SunMonTueWedThuFriSat $35.99 $45.99$ $45.99$35.99 $45.99 $ $45.99$ $55.99 $69.99$89.99$ $119.99$89.99$69.99

23 The Longer You Play, The Less You Pay Per Day! Similarly to most amusement parks, Disneys pricing structure provides those who spend more time at the park with cheaper tickets.

24 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.

25 Booking choices Book your Disney vacation here!

26 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 1 st degree price discrimination.

27 RAW DATA ANALYSIS Via online survey results: Competition Factors & Pricing Demand for Bundling Advanced Booking Demand Price Discrimination on peak times

28 Number of people visiting each park

29 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)

30 Estimating Park Extremeness Question: Does Disney offer a different level of extremeness than Universal Studios? | Summary of risk appetite Disney | Mean Std. Dev. Freq | | Total | | Summary of risk appetite Universal | Mean Std. Dev. Freq | | Total | | Summary of risk appetite both | Mean Std. Dev. Freq | | Total |

31 THRILL CONTINUM

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33 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

34 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?

35 Should I go to Florida or California?

36

37 Demand for Mixed Bundling

38 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 $ Which night would you buy a ticket for? We measured the time and price sensitivity of 128 students facing this hypothetical choice.

39 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.

40 Industry Outlook Strong revenue outlook Travel spending expecting to increase Decline in unemployment rates

41 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 Blackstones (owner of SeaWorld) future is unclear Source: USA Today The Ups and Downs of Investing in Theme ParksUSA Today The Ups and Downs of Investing in Theme Parks

42 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.

43 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.

44 Questions? Book your Disney vacation here!


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