Nikki Nolan Nolan Consulting
When Disney established its $99 price point in 2014, it could no longer continue to walk in micro-steps towards a perceived $100 “wall” – instead, it had to move the wall. Someone had to do it at some point and, as the market leader, Disney was the logical fi rst mover. Disney’s bold 2015 pricing decision is supported by historic double-digit growth of underlying fi nancial performance, indicating there’s been no signifi cant resistance to their price points and strategies so far. A company shouldn’t necessarily be bound by something as artifi cial as a triple-digit price barrier. It’s not that there isn’t a psychological barrier, but that recent pricing policy at Disney
World hasn’t actually had a negative impact on overall park and resort performance. In taking its pricing decisions,
Disney would have looked at its own wealth of internal data as well as broader tourism data and trends and economic indicators, including household expenditure surveys, consumer confi dence and much more In fact, when one compares historical growth of Disney’s lead price against any number of proxy measures and comparables in the US – including leisure services expenditures and pricing for cinema tickets and sports events – Disney’s price growth, is pretty consistent with the upper end of the leisure industry. Increases in the consumer price index (CPI) tend to be similar over time to infl ation – a 2 to 3 per cent average annual
growth rate – and overall growth in expenditures for leisure services is just over 3 per cent. Over 10 and 20-year periods, growth in average cinema ticket pricing is a little higher again, and sports tickets are in the 5 to 8 percent growth rate range. Disney’s lead price growth – at an average annual of 5 to 6 per cent over the same periods, puts Disney towards the upper end of the range, but certainly not as an outlier. Also important to the
Disney pricing policy is the “destination” factor – i.e., hardly anybody pays the walk-up price. Instead, the lion’s share of Disney World’s customers, including international visitors, purchase tickets online, in advance, and typically as part of a multi-day pass and/or package, which offer savings. A more cynical hypothesis, I suppose, might say that
the more you communicate a lofty lead price while simultaneously offering signifi cantly discounted package pricing, the greater the perception of savings by customers. This year’s headline price increased 6 per cent, but multi-day tickets went up between 3 and 4 per cent. For regional parks, who rely
on fi xed markets and repeat visitors and face resistance to price rises, there’s an awareness about what Disney’s charging and, as a result, a $62 or $67 lead price at Six Flags or Cedar Fair – which, again due to season passes and promotions, no one really pays – suddenly seems a relatively good deal. In that way, I suppose it’s fair
to say that Disney is pulling the whole train along in terms of the industry’s lead price point.
nikki.nolan@
nolanconsultingservices.com
A more cynical hypothesis might say the more you communicate a lofty lead price while simultaneously offering signifi cantly discounted package pricing, the greater the perception of savings
Tim Baker Touchstone Partners
Pricing is a touchy, tricky and critical issue. Everyone has a view about price levels that are or are not acceptable, and – given the chance – we’re all forthright in broadcasting these views. But what price levels really are acceptable? As business operators, it’s as wrong to under-price our services as it is to overprice. We need to hit the sweet spot where our visitors agree they’re getting great value for money while we’re maximis- ing our revenue opportunity. Finding that sweet spot needs objective evidence. This evidence can come from three routes: looking at what’s
©CYBERTREK 2015 AM 2 2015
around you in the immediate vicinity; understanding what is in the consideration set for those who choose (or choose not) to visit you; and through indirect questioning. What else is available to leisure visitors to the area? How do they compare with you in terms of what they
offer (dwell time, age appeal, interactivity etc)? Is there a “going rate” for your area? Where else did visitors think of visiting before they came here today? Where else will they go on this trip? What do they compare you with? Can you get a fi x on pricing in the consideration set? Most importantly, what is the value of your equity? Are you seen as a value- added or commodity player? This massively affects where you should pitch your price. We can’t directly ask the target audience what they’re prepared to pay for entry – this almost always generates undervalued estimates as people try to haggle the price down. But by using indirect
questioning and modelling, we can generate highly accurate insights into price thresholds and the effects of raising – or lowering – your price. Disney and Universal will
have carefully modelled pricing scenarios before making these decisions. They’ll know how many fewer visitors they’ll get, and that their businesses will improve at these prices. The visitor experience may
improve with slightly fewer numbers, higher spenders will still come and maybe spend more. Is $100 too far for these attractions, in this location? Not for these attractions, in these locations. But that doesn’t mean it’s OK for you.
tim@touchstonepartners.co.uk attractionsmanagement.com 31
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