Executive summary
The global amusement, leisure, and recreation industry is entering a transformative era where traditional pricing models are rapidly becoming obsolete. To adapt, industry leaders are increasingly adopting data-driven pricing approaches that respond in real-time to market demands and consumer behaviour.
Specifically, best-in-class organisations are turning their back on traditional one-size-fits-all ticket prices and instead embracing dynamic pricing, advanced segmentation, subscription models, two-step pricing, and loyalty program revitalisation. In an industry burdened with high fixed costs and volatile demand, such sophisticated pricing structures are likely key to achieving sustainable profitability.
The evolution of pricing
Over the last 50 years, the attraction industry globally has been a slow adopter of advances in pricing techniques (Figure 1). Indeed, even as late as the early 21st century, the prevailing pricing model was a single-entry price, reviewed annually — a model that dates back to the 1960s. By comparison, adjacent industries such as airlines, hotels, car rental and even sporting events have been utilising advanced, data-driven approaches to customer pricing for more than two decades.
Figure 1
Evolution of amusement, leisure, and recreation pricing
More recently, the financial viability of amusement, leisure, and recreation ventures has faced mounting challenges stemming from labour cost escalations, the disruptive impact of the Covid-19 pandemic, and heightened competition from alternative entertainment avenues. Consequently, many industry operators have found themselves compelled to adopt a more proactive stance towards revenue management methodologies with the intention of rebuilding declining margins.
In the next evolution of attraction pricing, it is expected that operators will begin to embrace dynamic pricing as a new normal and will implement capabilities to adjust the price of an entry ticket to reflect real-time market conditions.
A revenue framework for attractions
Our research suggests that operators internationally are focused on improving pricing and growing revenue through four key approaches – which together create a strategic framework for revenue management (Figure 2).
The first approach involves continuously matching demand with price levels, ensuring that pricing is responsive and adaptable to real-time market conditions. This focuses on achieving an optimal price for a defined period. In the second approach, pricing strategies are aligned with consumers’ willingness to pay, which helps in maximising revenue while differentiating service offerings. This can also be described as obtaining the optimal price for a defined segment. The third approach centres on maximising incremental customer value by leveraging data insights to offer personalised pricing and promotions that encourage higher spending. Finally, the fourth approach aims to optimise channel pricing strategy, ensuring that all sales channels are utilised effectively, and that pricing is structured to push consumers down the preferred sales channel.
This multi-faceted framework allows amusement operators to choose which pricing tactics might result in the greatest revenue uplift, taking into consideration any required investments in IT capability. The framework also provides playbook for organisations seeking a wholesale transformation of their pricing capability.
Figure 2
Dynamic pricing and revenue management
Continuously match demand and price levels
Dynamic pricing, rooted in the early 1980s within the hotel and airline sectors, has evolved as a strategic imperative for revenue optimisation in tourism. Recognising the perishable and finite nature of travel products, this approach ensures active management to maximise revenue before products expire. Market-driven fluctuations in consumer value further underscore the need for dynamic pricing, requiring operators to tailor their prices according to market demand.
Leveraging this model, revenue yield is optimised by catering to price-insensitive customers during peak periods and engaging dormant, price-sensitive customers during low-demand periods. In the amusement, leisure, and recreation sector, tickets exhibit the exact characteristics which are conducive to dynamic pricing. Experimentation with seasonal pricing in the attractions industry commenced around 2016, with leading international players (like Disney) now deploying up to five demand-based pricing tiers across all ticket combinations (Example Case Study 1).
Notably, approximately 60% of theme parks in North America have integrated date-based dynamic pricing into their operational frameworks, signalling a pervasive adoption trend within the region. Top of Form
Example case study 1: International operator tier pricing
Key insights:
- Dynamic pricing can lead to an increase in customer satisfaction by reducing overcrowding and improving the overall visitor experience.
- Implementing dynamic pricing requires sophisticated data analytics capabilities to accurately forecast demand and adjust prices in real time
Aligning pricing with willingness to pay
Amusement parks are increasingly leveraging advanced customer segmentation to offer price points tailored to different customer groups’ willingness to pay. Traditionally, attraction pricing has been confined to 2-3 price points, resulting in overlooked margin and volume potentials (Figure 3). To address this, operators are increasingly employing pricing tactics, such as bundling and unbundling ticket benefits. By doing so, they create additional price points which reflect more accurately customers’ willingness to pay, thus optimising revenue streams.
Differentiating between local, national, and international segments and then sub-segments within each of these requires a nuisance approach to creating a spectrum of price points. Innovative operators utilise blackout dates to limit the potential market for low-cost tickets, whilst promoting open access, valet parking, “bring a guest” and VIP treatments to justify higher price points (Example Case Study 2).
Figure 3
Typical segmentation price points
Example case study 2: Merlin annual pass pricing models
Merlin utilise a highly tiered structure for their annual pass, offering an impressive 5 different tiers. The organisation intentionally utilise a wide pricing spread across their options such that the top tier pass costs more than 300% of base level pass. This approach aims to separate on a spectrum; budget conscious visitors from time-sensitive visitors who are willing to pay a premium for convenience.
Merlin differentiate their passes across 15 different dimensions, the most important being blackout dates, attraction availability, requirements for pre-booking and availability of pay-by-the-month functionality. They also offer a range of unique premium offerings to entice visitors to the higher tiers, including bring a guest, free refreshments, valet parking and special member events.
Exploring subscriptions to deepen customer relationships
Subscription models, although in their infancy within the theme park industry, present intriguing opportunities to foster enduring relationships with repeat customers. The proliferation of subscription models across various “new economy” sectors, from Netflix to Amazon and Software as a Service (SaaS) providers, has reshaped consumer engagement. Characterised by periodic (typically monthly) payments, auto-renewal mechanisms, flexible subscription level transitions and the option to purchase add-ons seamlessly, these models aim to streamline transactions while nurturing ongoing customer relationships (Example Case Study 3).
Despite their historical absence in the attraction sector, innovative players are now venturing into trials to assess their viability and potential impact. As such, subscription models represent a promising avenue for theme parks to remove friction from transactions, transform one-off purchases into lasting customer connections, and adapt to evolving consumer preferences.
Example case study 3: SeaWorld Orlando
SeaWorld Orlando has introduced a membership program that offers tiered benefits based on different subscription levels. This model has proven successful in encouraging repeat visits, fostering a sense of loyalty and smoothing revenue due to seasonal variations.
Key characteristics of the attraction subscription models:
- Provide for monthly automated payments – potentially with penalties for early cancellation.
- Are auto renewed on a fixed date (similar to software licenses).
- Provide customers with the ability to seamlessly move up and down tiers.
- Have the ability to manage (and bill) “add-ons” – thereby making it easier for a client to select an upgraded experience
Two-step pricing: Insights from the cruise industry
The philosophy of two-step pricing is a strategic approach widely employed in sectors like holidays, cruises and flights, where purchases are made in advance. Consumers in these markets typically exhibit an increasing willingness to pay over time, often influenced by the tendency to “forget” or “ignore” previous expenditures (Figure 4). To effectively unlock this heightened willingness to pay, suppliers must carefully orchestrate several key conditions:
By adhering to these conditions, suppliers can effectively leverage a two-step pricing strategy to drive revenue growth and expand the service lines offered to a consumer.
Figure 4
Changes in willingness to pay over time
Revitalising loyalty programs
While historically embraced by the airline and hotel sectors, loyalty programs have been somewhat overlooked by the amusement, leisure, and recreation industry. However, a resurgence of interest in these programs is proving to be surprisingly effective for operators who have adopted them (Example Case Study 4).
This new perspective on an old concept offers several notable advantages:
- Dynamic incentives: Points management provides parks with a dynamic tool to incentivise customer behaviour, whether related to food and beverage consumption, merchandise purchases, or park attendance.
- Effectiveness over discounts: Loyalty programs can often be more effective than discounts in driving customer action, particularly when nominal discounts are met with scepticism.
- Compelling rewards: Program rewards, such as exclusive experiences, ride passes, VIP spaces, and “bring-a-friend” tickets, are highly compelling to consumers due to their uniqueness.
- Low incremental costs: Despite their appeal, reward programs typically represent a low incremental cost for parks, making them economically feasible.
- Enhanced customer insights: Loyalty programs, coupled with robust data analytics, excel in tracking and predicting customer behaviour, providing operators with integrated insights surpassing those of traditional admission and merchandise POS systems.
Example case study 4: Six Flags
In 2018, Six Flags, the world’s largest regional theme park company, launched a new, exclusive, members-only rewards program. The Six Flags Membership Rewards allows members to earn points each time they visit the park, go on rides, see a show or make a purchase. Members can also earn additional bonus points for participating in contests, taking surveys, and reading Six Flags newsletters.
Members can redeem their points for rewards, including VIP tours and VIP parking, private character meet and greets and dining experiences, cabana rentals, Fright Fest haunted maze passes, and exclusive member merchandise.
“Our experience isn’t buying stuff. Certainly, we sell stuff, but our experience is really about riding rides and having amazing experiences, so we wanted to wrap our loyalty program around those experiences.”
Said Mark Kupferman, Vice President of Insights (Apr 2011-Aug 2020)
The shift to online sales and digital engagement
Undoubtedly, the industry is undergoing a rapid transition towards online sales, driven by the imperative to cultivate digital relationships with customers. This movement signifies a decisive departure from traditional ticket office models, which have long been targeted for cost reduction and replaced by advanced ticketing options. Next-generation pricing strategies are poised to expedite this shift, potentially rendering the traditional ticket office obsolete. These innovative strategies hinge on advance purchases and establishing direct, ongoing relationships with customers –capabilities unattainable through ticket booth sales. Parks are adopting diverse approaches to prioritise online sales, ranging from offering substantial discounts for online purchases to leveraging targeted marketing efforts to encourage virtual consumer interactions (Example Case Study 5). In some cases, parks are even eliminating in-person sales capabilities altogether. This concerted push towards online channels underscores the industry’s commitment to enhancing customer convenience, maximising revenue streams, and embracing digital transformation.
Example case study 5: Europa-Park
The Europa-Park Group, which operates Europa-Park, the Rulantica Water World, and the newly opened Svalgurok outdoor water park, capitalised on the re-opening of parks following COVID-19 by implementing an “online tickets only” policy. This strategic move enabled the park to manage attendance effectively by days, aiding in compliance with post-COVID restrictions and enhancing both park planning and revenue management. The reopening also served as a low-cost promotional opportunity, educating customers on the need to pre-book their visits, which helped prevent overcrowding at the gates. Additionally, the group introduced VirtualLine, a new virtual queueing system aimed at improving the customer experience by reducing physical wait times.
Key insights from this initiative include the recognition that digital transformations, while requiring significant initial technology investments, can yield substantial long-term savings and boost revenue. Moreover, for online platforms to be successful, they must be user-friendly and incorporate real-time data analytics to optimise performance.
Conclusion: A great rollercoaster is no longer enough
The economic model of attractions is firmed skewed against operators; high fixed costs, volatile seasonal demand, increasing regulatory oversight and a crowded “experience” market. Fighting back against this requires operators to become more sophisticated in the way in which they manage revenue, such that they don’t leave any margin on the table. Such revenue management implies not only a more sophisticated pricing philosophy but also improved technology capability, capable of discerning margin opportunities at a micro level. Detailed slicing of pricing opportunities can be based on time (e.g., data based), segment or product characteristics. Gathering and utilising great-willingness-to-pay data can swing the pendulum back in favour of operators, whilst counter-intuitively improving the customer experience through greater experience tailoring.
Luke Ingles
Managing Partner
luke@barcley.com.au
Sanuri Da Silva
Senior Consultant
sanuri@barcley.com.au
About Barcley Consulting
Barcley Consulting is a boutique management consulting firm focused on helping market leading companies with Strategy, Innovation and Execution. For more information on other publications please visit www.barcley.com.au