HAN CHOE
BRIAN CHEN
MARCY LEON
RUBEN BUGARIN
J.D. PERALTA
INTRODUCTION
The history of theme parks stems from European pleasure gardens in the 16th century. Pleasure gardens were a place of recreation where the guests could also enjoy beautiful landscapes. These types of venues led to expositions and fairs in the United States. These large venues then paved the way to amusement parks, which then led to the creation of a different type of amusement park called a theme park. Theme parks are in fact amusement parks that are built and designed to portray specific themes or stories. The first of its kind was Santa Claus Land in Indiana, which is now known as Holiday World. However, it was the Walt Disney Company that utilized the theme park idea and made it popular. Today, the words amusement parks and theme parks are used synonymously. Theme parks provide attractions to their guests. These attractions are roller coasters, water rides, live shows, carnival type games, arcades, and merchandise stores. Dining is also provided to guests and come in the form of push carts, providing fast food, to seated indoor restaurants. Some theme parks offer tours as well as a resort to accommodate overnight guests. Large theme parks can also provide shoppertainment centers outside of their park walls. These shoppertainment centers are available for non park attendees as well. Shoppertainment centers offer retail stores, restaurants, and movie theaters. The invention of machined rides for entertainment is integral to the popularity of theme parks. One of these inventions is the Carousel which was originally created in Europe and gained fame in the US in the 1900s. Then there was the Ferris Wheel, invented in 1893 by a bridge builder named George W. Ferris. Finally, there was the invention of the roller coaster. It is believed that the first roller coaster was invented in 1883 by La Marcus Thompson in Coney Island New York. While the Carousel and Ferris Wheel are iconic rides, the invention of the roller coaster enabled engineers to expand on the original idea and create wild and sometimes terrifying designs. These rides are often trademarked and heavily marketed by parks in the media. Theme parks utilize a couple types of ticketing options to drive their revenue. There is the pay as you go system, a pay one price system, and a speedpass system. Pay as you go is an outdated system where the guests enter the park at a low admission fee but must pay for each ride as they go. This was a money saving system for its guests that did not intend to go on all of the rides, if any at all. However, it became tedious for the thrill seeking guests to constantly buy passes during their stay at the park. The system of pay one price bundles the entire theme park experience into the admission cost. The fee is high but saves the guest time and aggravation from having to purchase individual passes for each ride. Then there was the invention of a speedpass system where guests are able to pay an additional fee to get in a shorter line for a ride, or jump to the front of the line at a reserved time. This system can be costly to the guest, but it allows them to go about their day at the park without having to wait in lines that can stretch for hours at a time. Examples of a speedpass system are The FLASH pass at Six Flags Magic Mountain and Front Of Line pass at Universal Studios Hollywood. A couple of the major players in this industry are Walt Disney Parks & Resorts, Universal Studios Recreation Group, and Six Flags Inc. The Walt Disney Company launched their first theme park in 1955, in Anaheim California, and is now the most prominent theme park in the world. Their success is unmatched even to this day. The Themed Entertainment Association conducts an annual review of data from theme parks worldwide. In 2012, their study counted around 126 million guests attended Walt Disney Parks and Resorts. Universal Studios Recreation Group had around 34.5 million, and Six Flags Inc had 25.75 million attendees for the year. The Themed Entertainment Association also creates an annual list of the top theme parks in the world. Of the top 25 theme parks, 4 are in Southern California, 8 are in Orlando, 4 are in Western Europe, and 9 are in Eastern Asia. This data shows 4 major clusters in 3 different regions of the world. This indicates that the physical location of the park is very important to its sustainability and success. Their geographical location is also important due to weather inputs as seasons can affect the operation of the business. Theme parks are typically near a major highway which provides easy access to the park. Hotels are usually close by to accommodate overnight guests. Large theme parks are able to create an all inclusive environment in the form of a resort and shoppertainment centers, reducing the need for certain markets to be nearby. According to Salvador Clave, author of The Global Theme Park Industry, the globalization of the theme park industry began in the United States and Canada in the 1950’s. The development of theme parks then began in Europe in the 60’s, and then in Asia in the 70’s. The rest of the world began developing theme parks in the 80’s. In 2010, the IAAPA foundation was created as a means to observe and assist the amusement park and attractions industry. In the US, regulation of amusement ride safety is primarily though local governments. 44 state governments regulate safety of theme parks in their state. US theme parks are subject to state and local governmental codes, requirements, and safety inspections, and must pass rigorous inspections by insurance companies. Standards for ride safety in the US are set by the American Society for Testing and Materials (ASTM) and are used as a guideline for theme parks..
GENERAL ENVIRONMENT To fully understand where a firm stands in an industry they must look not only at what they have accomplished or what they are currently doing, but also to what is to come in the future. The study of external environment helps firms analyze the upcoming trends in an industry in order to gain success from potential opportunities. The external environment consists of three major analyzing tools: General environment, Industrial environment and Competitors environment. Each contribute to the broad study of the external environment by either analyzing its competitors , how attractive or unattractive an industry is and focusing on what will happen in the future. In the following sections we will use these three analyzing tools to gain a better understanding of the Theme Park Industry’s external environment. When analyzing the general environment of either an industry or firm, they are looking to find the trends and opportunities of the future. The general environment consists of factors that neither firms or industry have control over, yet these factors have an eminence impact that it can not be ignored by firms. According to the textbook Competitiveness & Globalization Strategic Management “The general environment is composed of segments that are external to the firm... These environmental segments affect all industries and firms competing in them” (p.41) These segments include: Demographic Dimension, Economic Dimension, Legal/Political Dimension, Technological Dimension, Social Cultural Dimension, Global Dimension and Physical Environment Dimension. As we take a closer look into the theme park industry we use these segments to be able to grasp a better comprehension of potential growth or trends to come. The theme park industry is an industry that has several ups and downs similar to some of the rides they provide their guest with. In order to focus on the future of the theme park industry one must take a closer look at what is occurring today in order to see the possibilities of tomorrow. As mention before there are seven different dimensions that make up the general environment but, for the purpose of studying the theme park industry there are three dimensions that have a hold on the industry and its future.
Social Cultural Dimension In today’s world a firm’s success can sometimes be determined by the attitudes of its customers. Therefore understanding the attitudes and cultural values of any demographic is very important for any firm or industry. Recently in the theme park industry there has been a controversy over the welfare and safety of Orcas being held in captivity in the well known park, SeaWorld. Through the widely talked about documentary, BlackFish, several hundreds of people had their eyes open to the dreadful truth of SeaWorld and it’s stars. As expressed through the film “[SeaWorld] is a multi-billion dollar corporation that makes its money through the exploitation of Orcas.”(Blackfish) and for this reason many of its customers have turned their back on SeaWorld. This particular controversy will not only be a major threat for SeaWorld but all theme parks that use animals for entertainment purposes. Even though SeaWorld has been known for years as the place to go and see a live show with such majestic creatures, it only takes one incident to change the precipitative of people. For SeaWorld it was the death of orca trainer, Dawn Brancheau, that lead to the creation of Blackfish. In the film it explicitly shows the depressing lives these beautiful creatures live through footages provided from years ago and some from today’s time.
Through the wide success of the documentary, large non-profit organizations such as PETA have stepped in and given their two cents on the matter. The combination of well known organizations and the negative perspectives society has can cause for SeaWorld to take a major hit in addition “It will have a ripple effect to the whole industry.” (Blackfish) People see theme parks as a getaway from reality a time to sped with friends and family, not a time to worry if what is ethically right when it comes to how a company is run. As the matter continues to unreel , SeaWorld and the theme park industry have to wait and see what is to come and possible opportunities there will be to fix the matter at hand.
Legal/Political Dimension Going along with the rise of negative publicity for SeaWorld, there has also been legal actions the people of San Diego and organizations such as PETA have taken in order to prevent further accidents with any performance animals. As of the year 2014 people that currently reside in the city of San Diego have urged State Assembly member Richard Bloom to propose a ban on orcas in captivity. The bill introduced in March states that it will be illegal to “hold in captivity, or use, a wild caught or captive-bred orca for performance or entertainment purposes.” Such a bill will cause a ripple effect in the industry when it comes to regulations on performance animals. Already, there has been changes made by Universal Studio in regards to their animal performers. Just recently it was reported that “ animal rights activists successfully persuaded NBCUniversal to ban all primates from Universal Studios in Hollywood and Orlando.” (Takepart.com) As society continues to voice their opinions on animals being used in the entertainment or theme park industry more legal doors will be opened in other states and/or countries.One way for sure the industry can guarantee any positive outcome is to unanimously agree upon the ending of using animals in any performances or keeping animals in captivity for entertainment purposes. This will help the industry gain some of their lost customers and maybe even attract a different demographic.
Technological Dimension Although currently in the theme park industry the magnifying glass is being held over the ethical side of running a business, there are great opportunities that await the industry. These opportunities come in the form of technology. As technology continues to grow, consumer also continue to ask for more ways to use these new technological advances in an everyday bases. Disneyland has come up with a game changer for all theme parks, they have designed a product that will make the “Disney” experience an even more memorable and personalized experience for everyone. MyMagic+ is a new system that allows guest to input their information such as name, birthday, ride preference and even credit card information all voluntarily to make their day easier and less stressful. Each guest staying at a disneyland resort will be given a “Magic Band” that will allow for all sorts of easy functions or information be at the ease of tapping your wrist. As described on disney.com “ MagicBands are innovative all-in-one devices that you can use to enter Disney theme parks, unlock your Disney Resort hotel room, use the FastPass+ entrance for attractions and entertainment experiences you selected, charge purchases to your room, and link Disney PhotoPass photos to your Disney account.” Such an innovation will push other competitors in the industry to move forward with MyMagic+ of their own. Since Disneyland is the first to introduce such technology consumers will have high expectations for all theme parks and will continuously compare Disneyland to any other park. Therefore competitors will have no choice but to grow as rapidly as technology is if not they will be left in the dust by their fellow rivals.
INDUSTRY ENVIRONMENT
Bargaining Power of Suppliers The bargaining power of suppliers is high for the amusement park industry. Despite the many suppliers that this industry deals with on a regular basis, the most important and influential of them are the ride manufacturers. Most of the roller coaster suppliers are international companies, which force theme parks to bid on the best roller coasters. By and large, the number of roller coaster manufacturers has dwindled down to a few major players. The biggest ones include Arrow Dynamics, Bolliger & Mabillard, Chance Morgan, Custom Coasters International, Great Coasters International, Intamin AG, Premier Rides, S&S Sports Power, Inc., and Vekoma International. Due to the limited suppliers available to the theme parks, they are willing to pay extreme prices for new rides. The cost of an average roller coaster can range from $1 million to $25 million for just the ride itself. The more complicated systems can go upwards of $30 million and more. In one extreme example, Disney paid $100 million to buy the ride ‘Expedition Everest’ from Vekoma for its Animal Kingdom theme park.
Bargaining Power of Buyers
Bargaining power of buyers is dependent upon the health of the economy. In a good economy, customers generally do not have much bargaining power. The amusement park industry is expected to generate revenue of almost $32 billion in 2017. Rising consumer spending on leisure and entertainment, higher disposable incomes, and an increased popularity of mass entertainment will fuel this spark in growth. Therefore, the healthy level of demand allows theme parks to raise ticket prices. For example, Disney’s admission price to its Magic Kingdom Park has gone from a price of $3.50 from its inception in October 1971 to a price of $99.00 in 2014. The $99.00 price is an increase of $4 from the year before. Universal responded by also raising its price from $92 to $96. A healthy economy justifies these prices increases, as guests are willing to pay the heftier prices. However, during economic declines, customers are more hesitant on spending their money on travel and tourism. Therefore, amusement parks have responded with unprecedented incentives to attract customers during the economic declines. For example, Disney offered guests free admission on their birthday for the first time in the history of the company. Ultimately, an economic decline forces theme parks to offer admission prices at steep discounts on season-pass and multivisit tickets, tickets for specific dates, and tickets to affiliated groups such as businesses, schools, and other organizations.
Potential New Entrants
The threat of potential new entrants is low due to barriers to entry in this industry being high. The top five companies have obtained 89% of total industry revenue. The major costs for an amusement and theme park operations are wages, purchase of goods for re-sale to visitors, and depreciation. Capital costs, such as maintenance and repairs, building new rides, liability insurance, and promotional efforts are extremely high as well-which also bars new companies from entering. Through a sample of 51 subject parks, the overall average of anticipated cost per first-year guest was $109.61. This means that if a park wanted to attract a million paying guests per year, the total investment needs to equal $109,610,000. For example, Disney’s Animal Kingdom opened at an investment per first-year guest of $118.33 while Legoland California opened at $111.58. Additionally, the trend of the investment dollar per first-year guest has been increasing over time.
Rivalry Among Competitors Rivalry among the three main competitors in the United States is neutral. The main competitors within the industry vying for market share include Disney, Comcast Corporation and its Universal Studios Theme Parks, as well as Six Flags Entertainment Corp. Most of the rivalry is non price-based. Product innovation drives these competitors to outpace one another with the tallest, fastest, and most thrilling ride while keeping them as safe as possible. For example, in 2014, the Zumanjaro Drop of Doom in Six Flags New Jersey will be a 415-foot-tall drop tower and clock speeds of up to 128 mph. The ride is unprecedented in that after a 30-second ascent, riders drop at 90 mph in a free-fall descent for 10 seconds. Stemming from product innovation, these rivals stay competitive by also offering creative entertainment venues during special holidays. For example, Comcast and its Universal Studios Theme Parks host a Halloween Horror Nights, where the park closes much later into the night for its guests to experience a frightful Halloween thrill. In addition, Universal CityWalk also offers a nightlife scene full of music, food, and drinks for young adults. The debut of new technology also keeps the rivalry high. Walt Disney introduced the “Fastpass” system which enabled guests to experience shorter wait times. There also exists a price-based rivalry, where any fluctuation in one theme park’s ticket price will directly influence the ticket prices for its competitors. Ticket prices are similar for all three theme parks. For example, Universal Studios Hollywood currently charges $80, Six Flags Magic Mountain charges $65, while Disneyland charges $87 for their admission prices. These three major competitors have had a history of adjusting their prices according to each other’s price adjustments over the years. Through quantification, the intensity of the rivalry can be measured. The CR4 test is a measure that accurately depicts how intense an industry is. The CR4 test is a concentration ratio that shows the percent of industry sales for the 4 largest firms in an industry. In 2013, the theme park revenue increased 2.8 percent from 2012 to a record of $13.4 billion. Among this revenue, the four largest firms totaled a revenue of approximately $7.1 billion. This is a CR4 of 52.3%. A CR4 of 60% or greater is considered to reduce the rivalry within an industry. Therefore, the amusement parks industry has a slightly reduced rivalry.
COMPETITORS ENVIRONMENT After a roller coaster ride during the recession, the Amusement Parks Industry has rebounded strongly, driven by a rise in International and domestic visitor numbers and a rising consumer spending. The Industry is dominated by five major players: Disney, Universal Parks and Resorts, Sea-World Entertainment, Six Flags, and Cedar Fair, all of which have performed strongly since 2009. Although the industry is highly competitive, the major players have the ability to raise ticket prices when demand increases, and prices have been increased to increase to propel revenues and increase profits. Over the last five years to 2014, IBISWORLD expects revenues to increase at a rate of 4% to $15.4 B at 2% growth, compared with a 1% growth from 2007-2012. Because the $37 billion dollar a year casino industry has not recovered, hotel room average national rates are at $107 a night, which helps amusement parks.
The Theme Park Industry
Is a low growth market with high market saturation in which operators must continuously invest in new rides and displays to maintain consumer interests and attract repeat visitors. Competitors have market commonality and have similar resources. The industry is in a FAST CYCLE MARKET in which the firm’s capabilities that contribute to competitive advantages aren’t always shielded from imitation. Thus competitive advantages are only sustainable until a competitor launches a new product. In this business, the speed and planning of a strategic move is important.
What Influences The Industry? All theme parks are operated on a year round basis, but peak attendance generally occurs during the summer months and during early winter-holiday periods. Uncontrollable factors such as: Bad weather, the state of the economy, travel related trends, the business cycle and exchange rates, the amount of leisure time available to families, oil and transportation prices are the main factors that affect the Amusement park industry. In 2009 the decline of the domestic economy and unemployment forced consumers to be more selective about how they spent their disposable income, but a turnaround began in 2010 with travel rates, income levels, and consumer spending increases. The Industry competes with other forms of entertainment such as lodging, tourism, a big resurgence of high tech museums, and recreational activities.
Higher demand has allowed park operators to raise prices. Disney hiked the price of its premium annual pass to California Adventure 30% to $649; daily admission is$87 vs. $41 in 2000. Sea World raised its Orlando annual pass by 24% to $149. Amusement parks have ramped up their capital investment to remain at the forefront of the industry with the most thrilling and technologically advanced rides. They have garnered more funds from guests through purchases of food, merchandise, and games. Low gas prices and an improving economy are driving up profits.
Competition in this segment competition has intensified due to market commonality and to Universal’s Strategic action as a FIRST MOVER by the unveiling of Harry Potter, The Transformers ride, The Spider-man attraction, The Despicable Me ride and the ongoing construction of The World of Harry Potter, which have boosted attendance to its parks. Universal has almost unlimited funds to spend from its parent COMCAST, moves faster than the competition and has gained market share. Domestic opportunities are diminishing but still exist for the major players, and growth over the next five years is expected to be subdued, but Industry revenue is expected to rise till 2019. To combat diminishing opportunities, major players are expanding to China and The Middle East to better compete.
Strategic Actions For Universal’s Orlando Attendance jumped 60% between 2009 and 2011 to 7.7 million annual visitors after it opened the Wizard World of Harry Potter Attraction at a cost of $100M, Transformers-3D, Spiderman, and The Despicable me ride which proved a potent draw even in a sluggish economy. Universal’s top executive announced that it intends to win market share away from Disney and other rivals by unveiling the opening of Dragon Alley, a follow-up of Harry Potter this summer 2014, and is also racing to replicate the attractions at its parks in California and Japan. Universal unveiled the opening of its fourth and largest on-site hotel at Universal Orlando, the 1800 room Cabana Bat Beach Resort is a joint venture with Loews hotels and is the largest hotel under construction in N-America. With Cabana Bay Universal Orlando will have 4200 on-site hotel rooms and intends to have 10 to 15000 hotel rooms in Orlando, compared with Disney World’s 26,000 rooms and time shares. Universal is the third-busiest in the world with 36 million visitors in attendance per year. Parks are the highest margin business at Universal’s parent COMCAST generating $953M in cash out of $2.1B last year. Parks generate 8% of Universal’s total revenue but make 20% of its total operating cash flow.
Walt Disney (DIS) The world’s largest theme park operator the #1 with 126 million visitors per year is watching all these with a clenched jaw. As a response in a secondary strategic action, Disney tripled its investments to $9.2 Billion on its resorts between 2008 and 2012. They refreshed Fantasy-Land in Orlando and built CARS-LAND at its Disney California Adventure. The investments turned this property around and attendance rivals neighboring Disney in attendance. Visitors to Disney climbed 8% and bookings are up 7% in 2013. In order to prevent market share erosion to Universal, Disney decided to beef-up a previously planned expansion to its Magic Kingdom Park in Orlando and spend $500M in an Avatar-flight simulation themed addition to its near-by Animal Kingdom Park. The $425M expansion opens this year, and Avatar with its secret design details will open in 2015. As a result of the strategy Disney’s theme park income surged 53% to $222M.
Six Flags Entertainment (SIX) Operates 18 parks across N-America. This year as a late mover, Six Flags invested $42M in new capital and announced a new strategic partnership to build a Six-Flag branded Quality Park outside The U.S. and wants to expand internationally. This spring the company will introduce several unique world record breaking rides, including Zumanjaro-the world’s tallest drop ride, New England Sky-Screamer, the world’s tallest swing ride, Goliath at six flags great America-the world’s fastest wooden coaster, and Medusa at six flags Mexico. The Company is also building a massive new water park inside Six Flags Georgia and introducing new attractions at each of its other theme parks. As a result, admissions were up 2% generating an income of $1.1B doubling its profitability, and increasing season pass penetration in the industry to 44% with visitors spending 7% more each visit, taking in consideration that the middle class is no longest the richest after the economy shifted. Six Flags has a great global brand and will be expanding to Dubai, Asia and Latin-America. Their tactics are: To offer instalment payments for visitors, to use its season pass approach and yield management pricing, and to focus on potential visitors within 150 miles of its locations.
Sea World’s (SEA) In a strategic move was bought by Blackstone (BX) in 2009 for $2.7B when the company was not profitable-had lost $58M in December alone. As a late mover in launching “Antarctica Empire of the penguin”, tactically deciding to charge higher prices, scale back discounts, steer ticket sales through more profitable channels, and marketing through mobile-commerce platforms, SEA has made more money. Another new draw in a late strategic move, SEA revamped their attractions, remarketed Discovery Cove, a park that offers luxury cabanas to not more than 1300 people a day, and decided to go public by filling an IPO in 2012 for $100 million, and expected to rise up to $500M, have catapulted the company to record sales. In 2011 net income was $19M and in the first nine months of 2012 was $86M. Because more than half of the company’s revenue comes from Florida a place vulnerable to bad weather, in July of 2013 attendance dipped 5.7%. SEA is facing bad publicity due to the release of “black fish” about the death of an orca trainer and is losing market share to competitors because it has been reducing discounts while raising prices. Although sales rose 3.3% to $272M and visitors attendance increased at its three branded parks, overall attendance fell 13% at its 15 parks in California, Texas and Florida as shareholder Black-Stone Group reduced its stake on SEA to 25%. Attendance in the first quarter of 2014 fell to 3.05 million guests from 3.5 million while SEA adjusts.
Comments
The CEO of Universal plans doubling down on theme parks, going after Disney’s market share, and building 12000 additional hotel rooms in Orlando , while investing $500M a year in its theme parks worldwide. Disney’s CEO Bruce Vaughn said “bring it on” and plans to fight back by developing plans for a wide variety of theme attractions to match Universal’s new developments. Disney has beaten every competitor since Disneyland opened in 1955, but victories have come from great effort. But no competitor ever has spent the money that Universal is now devoting to taking Disney’s market share. Will Disney executives need to open the budget and spend money to develop its Star Wars Marvel and other theme park plans? The invisible hand of the economy through theme park visitors will answer those questions by where they decide to spend their money next year.
OTHER INDUSTRY CHARACTERISTICS
Slow Industry Growth The Theme Park Industry is characterized by low-growth and high market saturations. In 2013 the growth rate of the theme park industry was 2.2% according to market research from IBISWorld. According to a Report by Global Industry Analysts, Inc. the Theme Park Industry is expected to generate $31.8 billion dollars by 2017 at an average annual growth rate of 2.4 percent. This will prompt firms operating in this industry to place strong emphasis on increasing revenue through one of two ways. The first way that firms in this industry can increase revenue is to increase their per capita spending by raising prices on ticketing, food, beverage, merchandising and other amenities. The second way is to expand or augment park operations to increase the volume of visitors to the park. According to The Walt Disney Company’s 2013 Annual 10K Report they experienced a 10% growth in revenue domestically. In that time the average amount that a guest would spend while at a Disney Park increased by 5 percent. The increased spending was due in large part by higher pricing for ticketing and amenities like food and merchandising. In Disney’s case the increased spending also included a hike in daily hotel room rates. During this time the amount of visits that Disney enjoyed increased by 4%. The increased volume was driven by growth in park attendance, hotel room occupancy and lengthening of cruise duration. At the Walt Disney World Resort the increase was driven by the launch of the Disney’s Art of Animation Resort in May of 2012. At the Disneyland Resort the increase can be attributed to the opening of their new Cars Land Theme area inside the Disneyland’s California Adventure Park. The increase in the duration of the passenger cruise length was a direct result of the launching of the Disney Fantasy in March of 2012. According to the Comcast Corp’s 2013 Annual 10K Report Revenue they experienced a 7.2% growth in revenue domestically. While they did not indicate what percentage revenue was driven by per capita spending and what percentage was driven by increased volume they did cite the motivating factors. Increased attendance at their Orlando resort was driven by The Wizarding World of Harry Potter attraction which opened in June of 2013. At their Hollywood resort their new Transformers attractions was the motivating influence. According to Six Flags Entertainment Corporation’s 2013 Annual 10K Report they experienced a 4% growth in revenue. This increase in revenue was driven almost 50/50 by per capita spending and increased volume. The 2 percent increase in attendance was attributed to the higher number of season pass holders, increased sales of their new membership program and of course new rides and attractions. Of the 2 percent increase in per capita spending 80% was driven by an increase in ticket pricing and the remaining 20% was driven by increase in pricing for food, beverage and their Flash Passes. In 2013 theme park admission revenue grew by 4 percent and accounted for 54% of their overall revenue; while amenities’ revenue grew by 1 percent it accounted for 40% of their overall revenue.
Technology Used for Crowd Control As is the case in any industry technology is greatly shaping the future of the Theme Park Industry. Parks can utilize technology to create new and more exhilarating rides or more interactive attractions. They also utilize technology to increase customer satisfaction and safety or they can utlizie it to help manage crowds and traffic flow. However these firms decide to use technology they must evaluate the benefits created by using technology against the cost of using that technology. There is growing trend within the Theme Park Industry to utilize technology to manage traffic flow. These new technologies help firms address the issue of having certain areas of the park be overcrowded while other areas of the park are not so crowded. The Walt Disney Company paved the wave for the industry in utilizing technology to manage traffic flow. One of the ways they have done is by employing cameras and computer programs that monitor traffic flow at each of their attractions. This allows the parks to monitor crowd traffic so that if any area of the park is experiencing large crowds then the park can launch a parade to help channel traffic into other areas of the park that are not as crowed. Another way that Disney uses technology to manage traffic flow is by their creation of the FASTPASS. The FASTPASS was launched in 1999 as an electronic ride reservation system. Essentially the FASTPASS allows guest to avoid long lines at the attractions on which the system is installed by receiving a ticket to come back to the ride at future time and wait in a shorter line. This allows the customer to enjoy other attractions while they wait. To prevent abuse Disney limits the number of FASTPASS per day ber ride and they limit each guest to one FASTPASS at a time. Although this feature does create many benefits it does have some downsides. The FASTPASS is only accessible for any given ride or attraction at the location of that ride or attraction. That means that a guess cannot freely access the FASTPASS from anywhere in the park. The FASTPASS does not currently limit when the tickets are issued so theme park attendees who come later in the day may not be able to take advantage of the benefits offered. Sometimes the FASTPASS demand creates a virtual wait time that is longer than if the guest waited in line to enjoy a ride or an attraction. Six Flags launched their own electronic ride reservation system in 2001 known as the FLASH PASS. The FLASH Pass like the FASTPASS allows guest to make a reservation on a particular ride at a future time so that they can enjoy other areas of the park while they wait. Just like Disney Six Flags offers a limited number of FLASH Passes per day. Unlike Disney Six Flags charges for each guest for this feature. The price of the FLASH PASS depends on the level of the feauture. The FLASH Pass has 3 levels: Regular, Gold and Platinum with pricing being $40, $65, $95 respectively per person. This price varies by park and by date. Additionally unlike Disneyland this feature allows guests to schedule when they will go on the rides and can be used almost anywhere in the park. The Gold level of the FLASH Pass promises to be 50% faster than waiting in line. While the Platinum FLASH Pass offers to be 90% faster than waiting in line. An additional benefit of the Platinum FLASS Pass is that allows users to go on a ride twice in a row without getting off and waiting in line again.
RECOMMENDATIONS The first recommendation that we have come up with for the Theme Park Industry is that they need to expand into emerging markets like Asia, Middle East and Latin America. One of the success factors of the Theme Park Industry is closely tied to the economic condition of the areas in which they operate. We are seeing the economic growth coming out of areas like China, Dubai and Brazil. This growth in economic prosperity will lead to the population having more disposal income to allocate to leisurely activities like theme parks. However, in order to be sensitive to cultural dynamics it might benefit theme park operators to either license operations of the park to firms within those geographic regions or be partners.
The second recommendation that we have come up is that the Theme Park Industry would best be served if it integrated Technology a lot more in their operations and the customer experience. The first area where the industry should follow the example set by Disney and incorporate Technology to manage crowd control. The biggest advantage of utilizing technology to monitor crowd activity would be to get a better idea of how each area of the park is utilized at any given time during the day throughout the year. They can monitor trends and patterns to either improve or replace low performing areas of the park. Crowd control technology can also be utilized to evenly distribute crowd activity throughout the park just as Disney does. The next area where the Theme Park Industry can utilize technology is utilizing the mobile devices that guests bring with them to enhance the customer experience. For example each theme park can create apps that function as electronic reservations systems similar to Disney’s FAST PASS or Six Flag’s FLASH Pass. Another option is that these apps can be used to place orders for food so that people don’t have to wait in long lines. Perhaps an even more innovative option would be help guest document their experience on social media. The possibilities are endless but the idea is that guests are already using their phones so they should make the most of it. The last area where we see the Theme Park Industry utilizing technology is in the rides directly. They could create rides that enhance the feeling by incorporating 4D Technology like the Transformers ride at Universal Studios Hollywood. Another they could explore is also creating Virtual Rides like Sea World’s Artick Expedition. Perhaps at some point Theme Parks could create a full theme park experience virtually. This could lead to limiting operating costs for firms but it could also mean that they could serve a larger customer base.
APPENDIX
|COMPANY |REVENUE FOR SEPT. OF |NET INCOME |PROFIT MARGIN |MARKET CAP |% INCOME FROM AMUSEMENT |
| |2013 | | | | |
|DISNEY |$12.309 BILLION |$1.840 BILLION |14.94% |$136.8 BILLION |8% of revenue and 15% of |
| | | | | |income: $12B |
|UNIVERSAL-COMCAST |$17.408 BILLION |$1.871 BILLION |10.74% |$133.717 BILLION |8% of income: $17.4B |
|MAGIC MOUNTAIN |154.18 MILLION |$13.31 MILLION |8.63% |$3.761 BILLION |100% |
|SEA WORLD |$538.38 MILLION |$120.19 MILLION |22.32% |$2.686 BILLION |100% |
REFERENCES
jrgarcia@tribune.com COMCAST CEO will compete aggressively with Disney.01-07-14
bfernandez@phillynews.com COMCAST doubling down on theme park business. 3-10-2014
calesci2@bloomberg.net Blackstone said to Plan Marketing Start for Sea World IPO. 04-03-2013
http://seaworldentertainment.com Sea World Reports record third quarter 2013 results. 11-13-13
http://www.ibisworld.com Amusement parks market research by IBISWORLD updated. 02-05-2014
http://www.businessweek.com/authors/578-christopher-palmeri. Us Theme Park Revenue is on its best ride in years. BloombergBusinessWeek, May 30, 2013.
http://www.businessweek.com/articles/2013-05-30/u-dot-s-dot-theme-park-revenue-is-on-its-best-ride-in-yearshttp://www.prweb.com/releases/2014/02/prweb11555552.htm http://www.forbes.com/2006/05/31/world-amusement-parks_cx_sb_0601feat_ls.html Bright, Randy (1987). Disneyland: Inside Story. Harry N. Abrams
