Amusement Parks

1. Amusement Parks By Marc Sourour, Ben Chartock, and Megan Eisenbrown

2. Agenda Recommendations

3. Why Amusement Parks?

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

9. 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.

10. Barriers to Entry High Concentration High Competition Factors affecting entry High Capital Costs Technology Change Mature Life Cycle Area of Land Required 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 Demand Industries Supply Industries Consumers

13. Demand Drivers World Price of Crude Oil Per Capita Disposable Income

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 mediumbut 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

17. Major Players Continued

18. Pricing Strategies 3rd degree price discrimination Affiliations 2nd degree price discrimination Seasonality Time sensitivity Quantity discounts 1st degree price discrimination Booking choices

19. 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.

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 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.

22. Time Sensitivity $125 $80 $45 • 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’.

23. “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.

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. Thatamounts 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.

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 | 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 • Question: Does Disney offer a different level of “extremeness” than Universal Studios?

31. THRILL CONTINUM

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 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

35. Should I go to Florida or California?

36. Should I go to Florida or California?

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 $66.99. 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: More people are interested in off-peak, lower price tickets than high price weekend tickets 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 • Blackstone’s (owner of SeaWorld) future is unclear Source: USA 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 highlightheterogeneity 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!