1. Why do theme parks like Ocean Park offer huge discounts to Hong Kong residents and not to tourists? Nipun Sharma

2. Brief Outline Introduction - facts and assumptions Scenario 1 – No discount to local residents Scenario 2 – Heavy discounts to local residents

3. Ocean Park One day ticket to Ocean Park: – $ 185 / day Most expensive annual Pass available to a HK resident: – $ 550 / year Do the math… – $ 550 / 365 days ~ $ 1.5/ day

4. Comparison $ 185 Vs. $ 1.5 Tourists pay 122.8 times the money!!

5. Rationality assumption Opportunity cost for most people to spend a day at OP would exceed $ 1.5 – rational people will not attend every day (more like 3-5 times a year). If locals were irrational, Ocean Park would be in debt because $ 1.5 would presumably be far below their MC.

6. Facts and assumptions Tourists are generally not very price sensitive  inelastic demand Locals are  elastic demand – Diminishing marginal utility Tourist demand is higher during peak season ( Dec and Jan only) and lower the rest of the year Demand from locals is steady all year long

7. Scenario 1: Don’t offer discount to locals High demand from tourists during peak season. Low demand from tourists during the rest of the year. Low demand from locals all year long.

8. Numbers are relative The numbers are not REAL – just a set of easy numbers to show the relationship. OP needs minimum 40 tickets sold every month  to meet their reservation point

9. Tourist demand

10. PLUS

11. Demand from locals

12. EQUALS

13. Total demand under Scenario 1

14. Observations Ticket sales from Feb – Nov = 30 tickets short of reservation point. Ticket sales in Dec and Jan = 60 tickets above reservation point. Overall, park will not make enough profits year along  will shut down in the long run.

15. Scenario 2: Heavy discounts to locals High demand from tourists during peak season. Low demand from tourists during the rest of the year. Moderate demand from locals all year long.

16. Graph it out – same tourist demand

17. PLUS

18. Demand from locals - moderate

19. EQUALS

20. Total demand under Scenario 2

21. Observations Ticket sales from Feb – Nov = 20 tickets above reservation point Ticket sales in Dec and Jan = 120 tickets above reservation point Park will make more than enough profits to support it self all year long. Peak season will be HUUUUUGE.

22. Conclusion Scenario 1: OP can only sustain it self during peak season and be in debts during the rest of the year Scenario 2: OP will make a ridiculous amount of profit during peak season and a good amount of profit the rest of the year. Basic price discrimination Tourists – not price sensitive – incentive not required Gives residents incentive to revisit

23. Words from the creator of OP RAISE YOUR HAND FOR NIPUN…PLEASE. THANK YOU.