| A trip to an amusement park can be an exciting | | | | their guest to buy 12% more food. And that |
| way to spend a summer day. With rising gas | | | | doesn't take into effect the increased costs of |
| prices an amusement park "day-cation" is now a | | | | putting more people through the gate and selling |
| more popular option than ever. That's not to say | | | | more volume. |
| a trip to the local park is cheap. Most parks | | | | What was the result of lowering prices? Cedar |
| charge an admission fee for entrance, parking | | | | Fair doesn't release per park attendance figures |
| pass fee, deposit for rentable locker, and charge | | | | but since the 2006 season the food and ticket |
| tokens to play games. The typical amusement | | | | prices have gone back up (though the admission |
| park prohibits guests from bringing their own food | | | | ticket price remains below the 2005 level.) The |
| into the park. Different people have different | | | | lowered prices did not pull in enough customers to |
| demands for food. Some people are willing to pay | | | | make up the difference. The park is operating on |
| more for food, while others prefer to eat before | | | | fewer visitors at a higher margin. Cedar Point |
| going and not buy food after they enter the | | | | would've been better off lowering the price of |
| gates. The park sells food at concession stands, | | | | food or gate but not both. Cedar Point might as |
| but usually charge prices twice as much as | | | | well charge high prices for food because lower |
| restaurants outside the park. How can the park | | | | food prices didn't increase attendance to make up |
| charge outrageously high prices and not lose | | | | the difference. In Cedar Point's case the high food |
| business? Would the amusement park gain by | | | | prices are not hurting their business because of |
| charging a higher or a lower price for food? The | | | | the demand for their rides. |
| key to profit-maximizing an amusement park is to | | | | Holiday World has an interesting point of view on |
| find the right balance between the price of food | | | | the food pricing issue. The park made a bold and |
| and admission. | | | | risky move when president Will Koch decided to |
| Amusement parks can charge what they do for | | | | give away "free" unlimited soft drinks, included |
| food and admission for a number of reasons. | | | | with the price of admission. Holiday World began |
| They have to pay for maintenance of the park | | | | their free unlimited soft drinks program in 2000, |
| and upkeep of the rides, employees, food, water, | | | | the same year they opened The Legend, a new |
| electricity, new rides, etc. If visiting guests want a | | | | three million dollar wooden rollercoaster. That |
| safe, clean, open park that can add some fun | | | | year, they raised the ticket prices by $4.00 from |
| rides and additions to the park every season or | | | | the previous year's prices: $1.00 for the new ride, |
| two, they're the ones who are going to have to | | | | and $3.00 for the new unlimited soft drinks. The |
| pay for it. If an amusement park lowered the | | | | park built several "Pepsi Oasis" buildings with |
| price of food then people would have to wait | | | | self-serve soft drink fountains. Were there guest |
| longer between new rides which usually lead | | | | complaints about the increase in the gate price? |
| guests to start to complain about if it gets too | | | | No. Were guests thankful for the free soft |
| long. Food pricing at amusement parks also need | | | | drinks? Yes. |
| to fit in the supply and demand realm. If a park | | | | The article "Liquid Assets for Holiday World & |
| gets overcrowded then new high capacity rides | | | | Splashin' Safari" contains some interesting inside |
| need to be built in order to service all of those | | | | information. In 1999, the year before they |
| people. To a certain degree, the pricing helps keep | | | | changed to free soft drinks, Holiday World's annual |
| the attendance on a controlled growth path while | | | | attendance was 564,373. In 2006 the park |
| financing expansion. This will not be the same for | | | | surpassed the one million mark for the first time |
| every park. Including one or two perks like free | | | | in their history when 1,004,788 guests passed |
| sunscreen or parking rolled into admission works | | | | through the turnstiles, a 78% increase in |
| for some parks. Others make guests feel in that | | | | attendance in just seven years. During that |
| one visit the park is trying to squeeze every | | | | period, each year set a new attendance record |
| penny out of them. It's not good for business | | | | (with the exception of 2005). But attendance isn't |
| when visitors walk out the door feeling like | | | | everything, attendance can't be spent, it doesn't |
| they've been taken advantage of as they will be | | | | exactly translate to more revenue. |
| less likely to return. The most successful | | | | The most amazing fact is on average guests |
| amusement parks are the ones that find the | | | | have been spending more money inside the park |
| equilibrium point between gate and food pricing. | | | | as total per-capita spending has risen over the |
| In order to understand how an amusement park | | | | seven year period by 41%. Guests are spending |
| can charge high prices and still be successful | | | | more money on food. Total per-capita food |
| another question needs to be answered: Why do | | | | spending has risen by 20% (according to the park |
| so many people visit amusement parks every | | | | "it took only until 2003 to recover the loss in food |
| year? In 2006, over 335 million people visited | | | | per-caps within the food service department not |
| America's theme parks. Generally, people visit | | | | allocating any gate per-cap to foods"). Guests |
| parks for the rides. The rides are what the parks | | | | don't feel "cheated" by the food pricing like they |
| are selling to the customer. The ride lineup is | | | | would at a park that charges an arm-and-a-leg for |
| probably the single biggest factor in the guest | | | | it. Also, the self-serve drink locations speed up |
| experience for most people through the gate. | | | | service at food venues leading to greater |
| Most major cities usually only has one large | | | | capacity and more profits. The park makes |
| amusement park within a convenient range, the | | | | money by serving more guests and by not |
| issue is basically one of monopoly too. Still, the | | | | needing the additional employees to serve |
| rides are the product and everything else is just | | | | beverages. The park has also found guests stay |
| details. | | | | longer, as they feel more comfortable, hydrated, |
| One of the largest regional amusement-resort | | | | and less tired. When visitors stay longer in the |
| operators in the world, Cedar Fair, owns and | | | | park they spend more money and when they |
| operates eleven amusement parks in North | | | | leave happy they are much more likely to return. |
| America including Cedar Point in Sandusky, Ohio. | | | | From the same article, "We intentionally keep our |
| Consistently voted "Best Amusement Park in the | | | | prices lower than most of our competitors. We |
| World" in Amusement Today polls, Cedar Point is | | | | believe that the irritation we cause guests does |
| known as the roller coaster capital of the world | | | | not make up for the added revenue we might |
| with a grand total of seventeen coasters, more | | | | receive if we charged higher prices for our food. |
| than any other park. A one day ticket for ages | | | | In fact, we try to stay within 20% of the pricing |
| 3-61, 48" and taller during the 2008 season is | | | | at fast food chains. Thinking about the cost of a |
| $42.95. Parking is $10 and admission to Soak City | | | | meal at Holiday World in comparison with a meal |
| Water Park is NOT included. | | | | at a fast food location, our total cost may well be |
| Holiday World & Splashin' Safari in Santa | | | | lower than it would be outside the park because |
| Claus, Indiana, is a small family-owned and | | | | the food prices are reasonable, and the drinks are |
| operated park with just four roller coasters. The | | | | free." |
| park has been voted the "World's Friendliest Park" | | | | The most important impact that the free soft |
| and the "World's Cleanest Park" for five years in a | | | | drinks scheme has had on the park is in the free |
| row by the readers of Amusement Today | | | | advertising that it generates for them. What's the |
| magazine. A general admission one day ticket in | | | | most powerful word in advertising? FREE. |
| 2008 costs $39.95, almost as much as Cedar | | | | President Will Koch had this to say about the |
| Point. While Cedar Point has thirteen more roller | | | | unlimited drinks program: "I regard it as one of |
| coasters, Holiday World's admission is only three | | | | the best business decisions that our company |
| dollars less. However, Holiday World's admission | | | | ever made. It symbolizes a number of other |
| includes several perks including admission to | | | | value messages about our park, and gives our |
| Splashin' Safari Water Park for no additional | | | | target market something extra to talk about |
| charge, free sunscreen, free parking, and the | | | | after their visit. This word-of-mouth advertising is |
| biggie: free unlimited soft drinks. Which park is the | | | | more effective than TV, radio and outdoor |
| better value for the guest and how does the | | | | combined. It has been a big contributor to our |
| profit-maximizing strategy of each park differ? | | | | attendance growth. Implemented well, it could |
| Known for some of the best amusement park | | | | work in other parks as well as it has in ours." |
| rides in the world, Cedar Point is also home to | | | | Is Holiday World's approach better than Cedar |
| some of the highest food prices in the industry. | | | | Point's pricing strategy? According to "Summer |
| The majority of the food venues are very | | | | Fun!" the park served 380,000 gallons of free soft |
| fast-food oriented, with limited menus, and prices | | | | drinks last year (2007). Holiday World recently |
| geared for a semi-captive market of visitors | | | | broke the 1,000,000 mark in attendance so for |
| unwilling to endure the time-consuming hassle of | | | | the sake of simplicity just round that down to an |
| driving the causeway back to the city just to get | | | | even one million and run the math. The result is |
| a cheaper meal. At Cedar Point during the 2008 | | | | surprising: 380,000 gallons = 48,640,000 ounces. |
| season it's $3.29 for a 16oz, $3.79 for a 22oz and | | | | 48,640,000 ounces divided by 1,000,000 guests = |
| $3.93 for a 32oz soda. A 20 oz bottle of coke at | | | | between 48 to 49 ounces per guest. That is just |
| any Disney park is $2.00 even, a medium fountain | | | | one and a half large drinks at a park like Cedar |
| drink is $2.19 and a large is $2.69 (allearsnet.com). | | | | Point that charges almost $4.00 a cup for that |
| A six inch Subway sub sandwich is $7 plus tax at | | | | large drink (32 oz). Is the average guest really |
| the Point. Outside the park a foot-long Subway | | | | drinking less than two large cups worth of soft |
| sub is only $5. A bottle of soda or water that can | | | | drinks? It's no wonder Holiday World has seen |
| be found for a dollar in most vending machines is | | | | revenue grow since adding free drinks - they're |
| $3.50 at Cedar Point. Two entrees at Panda | | | | only giving away an average of $6 of soft drink |
| Express are $8.99 compared to the local mall | | | | (at the "highway robbery" Cedar Point pricing) to |
| price of $6.99. Refills on the $8.95 souvenir cup | | | | each guest on average. Holiday World has found |
| are $1.99 which means most guests might as well | | | | the perfect niche in terms of how to price their |
| just buy the $4 drink because the break even | | | | park as can be seen in their attendance growth |
| point is four drinks, not to mention the hassle of | | | | and guest satisfaction. |
| carrying the huge cup around all day with the | | | | Another small park recently converted to Holiday |
| possibility of it being lost or stolen. | | | | World's pricing formula. Magic Springs, in Arkansas, |
| Not only is the cost of food at Cedar Point high, | | | | went to free drinks and sunscreen last year. |
| but the quality is just as poor. Based on a recent | | | | They increased the gate by $7 (now $45.99 + |
| visit, the service at various counter locations can | | | | tax in 2008)and parking by $2 (now $9). The park |
| be described as "glacial, not friendly and pathetic." | | | | is home to six roller coasters. The free drinks and |
| Here's the deal with the food: A good $2 | | | | sunscreen costs a family of four $30 extra (four |
| hamburger is a good $2 hamburger. Part of the | | | | tickets plus one parking pass). Even if drinks were |
| problem is that a good $2 hamburger is a LOUSY | | | | $3 each - that's ten drinks. How many families of |
| $8 hamburger. And when the park tries to sell | | | | four were buying ten drinks before the change? |
| that $2 hamburger for $10, it is going to seem | | | | It doesn't matter because now they're being |
| even worse. And yet, if a consumer were to pay | | | | forced to have ten drinks in order to break even. |
| $2 for it, they would probably think it pretty | | | | Who does this "free" soft drink strategy benefit |
| darned good. That's what value is all about. The | | | | and who does it hurt? First off, this strategy |
| prices at Cedar Point are too high when judged in | | | | really benefits the park. The real value that you |
| comparison to the quality of the food (with | | | | can't put a cost on is being able to tell people they |
| park-specific locations) and when judged against | | | | get free drinks. This translates to free advertising |
| the equivalent choice outside the park (Subway | | | | because it generates a lot of interest by |
| example). | | | | word-of-mouth. In terms of the guests, those |
| The good news is that even if guests are stuck in | | | | who drink a lot of beverages at the parks really |
| the park all day, most of the food items are | | | | benefit from this type of pricing but it also really |
| optional. However, convenience is a big one. The | | | | hurts the guests that don't stay in the park very |
| majority of guests hate leaving a park and to go | | | | long. If an amusement park includes parking in the |
| get something to eat as its time lost that could | | | | ticket price what happens to the people that get |
| be spent riding the rides, the reason they came | | | | dropped off or take public transportation to the |
| to the park in the first place. The whole process | | | | park? They're paying for an option they won't |
| is bothersome: finding the way out of the park, | | | | even use. For some guests this pricing scheme |
| getting the hand stamp, walking to the car, driving | | | | ends up costing them more, but for the park it is |
| out of the lot, finding a place to eat, eating, driving | | | | the best option. |
| back to the park, finding a parking space again, | | | | Here's an interesting experiment: Gate price of |
| and walking back through the gate. In the end the | | | | $129 - everything included (parking, drinks, three |
| majority of park guests are actually willing to | | | | meals, free lockers, even a game or two on the |
| accept a little more than a reasonable markup to | | | | house). Rolling the entire visit into admission would |
| just avoid the whole time and hassle of leaving | | | | probably make people balk at the ticket price. To |
| the park for food. | | | | guests who stay an entire day, park their own |
| How high can the prices of food go? Until the | | | | vehicle, and make use of the lockers, this would |
| per-caps (spending per person in the park) actually | | | | be a great option, to others it would end up |
| drops or attendance significantly drops, there's not | | | | costing them much more. |
| going to be a change. Would it be better to see | | | | There is a sweet spot between the price of food |
| the revenue made at the gate? If the park made | | | | and admission that every amusement park must |
| the $43 admission ticket $50 then they could | | | | find in order to maximize profits. The best option |
| lower the price of food items inside the park by a | | | | for most parks in America to end up with greater |
| dollar or two. The only catch is that people might | | | | profit would be to raise each admission ticket |
| just complain about the price to get in and not | | | | $5-7 and include drinks and sunscreen. Looking at |
| come in the first place. | | | | the revenue generated by those items, parks |
| According to the article "Cheaper to eat at the | | | | might make a little bit less than selling those |
| Point, too" Cedar Point actually lowered prices for | | | | individually, but the increased customer happiness |
| the 2006 season. "The price of regular one-day | | | | would result in more than enough additional profit |
| admission (in 2006) is $39.95, down $5 from last | | | | spread throughout the park to make it |
| year's (2005) $44.95" and a "20-ounce Pepsi soft | | | | worthwhile. Even if parks ended up making a little |
| drink was $2.75, now $2.39." Why did the park | | | | less per guest per visit, happy customers are |
| lower prices? "Guest comments may have played | | | | much more likely to return, causing profits and |
| some role in the decision, but so did the park's | | | | attendance to grow. Rather than super sizing the |
| lagging attendance the past few years." Run the | | | | drink and charging an arm and a leg for it, add a |
| math: The gate admission dropped 11%. That | | | | few dollars to the entry ticket and include |
| means an almost 13% increase in attendance is | | | | unlimited soft drinks with nice small twelve or |
| needed to make the same revenue. On top of | | | | sixteen ounce cups. Someone who gets four free |
| that they dropped food prices in the park an | | | | drinks in a day still has only taken forty-eight |
| average of 20%. Even if they make up the 11% | | | | ounces of soda. If the gate price were right, the |
| price drop at the gate, if in-park food buying | | | | park could actually end up ahead thanks to the |
| remains constant (in terms of volume, not dollars), | | | | psychology of the cup size. Even though the |
| they're down between 11% and 12% on food | | | | opposite may be true, this type of pricing |
| revenue. Still assuming the lower gate will drive | | | | strategy makes guests feel they are getting a |
| attendance and knowing food dropped an | | | | great value for their money. Happy guests are |
| average of 20% then the guest has to buy | | | | much more likely to spend money and make |
| 12.5% more food (based on an average) to make | | | | frequent return visits in which they will spend |
| up the difference. So with the price drops, just to | | | | more money thus maximizing the park's profit. |
| keep the numbers the same, they need a 13% | | | | Note: Author most recently visited Cedar Point on |
| increase in attendance and on top of that need | | | | May 17, 2008. |