Profit-Maximizing an Amusement Park - Gate Versus Food Value

A trip to an amusement park could be an exciting way to devote a summer day. With rising gas prices an amusement park "day-cation" is now a extra popular choice than ever. That is not to say a trip to the local park is affordable. Most parks charge an admission fee for entrance, parking pass fee, deposit for rentable locker, and charge tokens to play games. The typical amusement park prohibits guests from bringing their very own food in to the park. Various persons have unique demands for food. Many people are prepared to spend extra for food, when other individuals choose to consume ahead of going and not get food after they enter the gates. The park sells food at concession stands, but usually charge rates twice as a lot as restaurants outside the park. How can the park charge outrageously high rates and not shed small business? Would the amusement park acquire by charging a greater or perhaps a lower value for food? The key to profit-maximizing an amusement park is to come across the right balance in between the price of food and admission. Amusements Rides For Sale

Amusement parks can charge what they do for food and admission to get a number of reasons. They've to pay for maintenance on the park and upkeep from the rides, employees, food, water, electricity, new rides, and so on. If visiting guests want a secure, clean, open park that could add some fun rides and additions towards the park each season or two, they're the ones who are going to have to pay for it. If an amusement park lowered the value of food then people would must wait longer amongst new rides which ordinarily lead guests to begin to complain about if it gets as well long. Food pricing at amusement parks also must fit in the supply and demand realm. If a park gets overcrowded then new high capacity rides should be built so that you can service all of these folks. To a certain degree, the pricing helps keep the attendance on a controlled growth path though financing expansion. This may not be precisely the same for every single park. Such as a single or two perks like free of charge sunscreen or parking rolled into admission works for some parks. Other people make guests really feel in that 1 take a look at the park is trying to squeeze every single penny out of them. It is not very good for company when guests walk out the door feeling like they've been taken benefit of as they'll be much less likely to return. The most prosperous amusement parks are the ones that discover the equilibrium point among gate and food pricing.

In an effort to comprehend how an amusement park can charge high rates and nonetheless be effective a different query needs to become answered: Why do so many men and women pay a visit to amusement parks every year? In 2006, more than 335 million people visited America's theme parks. Usually, men and women visit parks for the rides. The rides are what the parks are selling to the client. The ride lineup is almost certainly the single greatest factor in the guest encounter for most folks through the gate. Most main cities typically only has 1 large amusement park inside a hassle-free range, the situation is basically one of monopoly also. Nonetheless, the rides are the product and every thing else is just specifics.

Certainly one of the biggest regional amusement-resort operators in the world, Cedar Fair, owns and operates eleven amusement parks in North America such as Cedar Point in Sandusky, Ohio. Consistently voted "Best Amusement Park in the World" in Amusement Currently polls, Cedar Point is identified as the roller coaster capital from the globe having a grand total of seventeen coasters, over any other park. A one day ticket for ages 3-61, 48" and taller throughout the 2008 season is $42.95. Parking is $10 and admission to Soak City Water Park will not be included.

Holiday Globe & Splashin' Safari in Santa Claus, Indiana, is a small family-owned and operated park with just four roller coasters. The park has been voted the "World's Friendliest Park" and the "World's Cleanest Park" for five years in a row by the readers of Amusement Nowadays magazine. A general admission one day ticket in 2008 costs $39.95, almost as a lot as Cedar Point. When Cedar Point has thirteen more roller coasters, Holiday World's admission is only three dollars less. However, Holiday World's admission includes several perks including admission to Splashin' Safari Water Park for no additional charge, free sunscreen, cost-free parking, and the biggie: no cost unlimited soft drinks. Which park is the better value for the guest and how does the profit-maximizing strategy of each park differ?

Known for some on the finest amusement park rides in the world, Cedar Point is also home to some with the highest food prices within the industry. The majority with the food venues are very fast-food oriented, with limited menus, and prices geared to get a semi-captive market of guests unwilling to endure the time-consuming hassle of driving the causeway back to the city just to get a cheaper meal. At Cedar Point throughout the 2008 season it really is $3.29 for a 16oz, $3.79 for a 22oz and $3.93 for a 32oz soda. A 20 oz bottle of coke at any Disney park is $2.00 even, a medium fountain drink is $2.19 and a significant is $2.69 (allearsnet.com). A six inch Subway sub sandwich is $7 plus tax at the Point. Outside the park a foot-long Subway sub is only $5. A bottle of soda or water that can be found to get a dollar in most vending machines is $3.50 at Cedar Point. Two entrees at Panda Express are $8.99 compared towards the nearby mall cost of $6.99. Refills on the $8.95 souvenir cup are $1.99 which means most guests might as well just buy the $4 drink because the break even point is four drinks, not to mention the hassle of carrying the huge cup around all day with the possibility of it being lost or stolen.

Not only is the cost of food at Cedar Point high, but the quality is just as poor. Based on a recent take a look at, the service at various counter locations may be described as "glacial, not friendly and pathetic." Here's the deal with the food: A superior $2 hamburger is a superior $2 hamburger. Part of the problem is that a excellent $2 hamburger is a LOUSY $8 hamburger. And when the park tries to sell that $2 hamburger for $10, it is going to seem even worse. And yet, if a consumer were to spend $2 for it, they would possibly think it pretty darned very good. That is what value is all about. The prices at Cedar Point are too high when judged in comparison to the quality from the food (with park-specific locations) and when judged against the equivalent choice outside the park (visit website).

The very good news is that even if guests are stuck inside the park all day, most of your food items are optional. However, convenience is a big one. The majority of guests hate leaving a park and to go get something to consume as its time lost that could be spent riding the rides, the reason they came for the park in the first place. The whole process is bothersome: finding the way out of your park, getting the hand stamp, walking towards the car, driving out from the lot, finding a place to eat, eating, driving back for the park, finding a parking space again, and walking back via the gate. Within the end the majority of park guests are actually prepared to accept a little over a reasonable markup to just avoid the whole time and hassle of leaving the park for food.

How high can the rates of food go? Until the per-caps (spending per person within the park) actually drops or attendance significantly drops, there's not going to become a change. Would it be better to see the revenue made at the gate? If the park made the $43 admission ticket $50 then they could lower the price tag of food items inside the park by a dollar or two. The only catch is that men and women might just complain about the price to get in and not come inside the first place.

According for the article "Cheaper to consume at the Point, too" Cedar Point actually lowered prices for the 2006 season. "The price of regular one-day admission (in 2006) is $39.95, down $5 from last year's (2005) $44.95" and a "20-ounce Pepsi soft drink was $2.75, now $2.39." Why did the park lower rates? "Guest comments may have played some role in the decision, but so did the park's lagging attendance the past few years." Run the math: The gate admission dropped 11%. That means an almost 13% increase in attendance is needed to make precisely the same revenue. On top of that they dropped food prices within the park an average of 20%. Even if they make up the 11% cost drop at the gate, if in-park food buying remains constant (in terms of volume, not dollars), they're down in between 11% and 12% on food revenue. Still assuming the lower gate will drive attendance and knowing food dropped an average of 20% then the guest has to acquire 12.5% more food (based on an average) to make up the difference. So with the price tag drops, just to keep the numbers precisely the same, they need a 13% increase in attendance and on top of that need to have their guest to buy 12% additional food. And that doesn't take into effect the increased costs of putting more people by means of the gate and selling a lot more volume.

What was the result of lowering rates? Cedar Fair doesn't release per park attendance figures but since the 2006 season the food and ticket rates have gone back up (though the admission ticket price remains below the 2005 level.) The lowered costs did not pull in enough customers to make up the difference. The park is operating on fewer guests at a higher margin. Cedar Point would've been better off lowering the value of food or gate but not both. Cedar Point might as well charge high rates for food because lower food rates didn't increase attendance to make up the difference. In Cedar Point's case the high food prices are not hurting their enterprise because in the demand for their rides.

Vacation Globe has an interesting point of view on the food pricing concern. The park made a bold and risky move when president Will Koch decided to give away "free" unlimited soft drinks, included with the price of admission. Vacation Planet began their no cost unlimited soft drinks program in 2000, the same year they opened The Legend, a new three million dollar wooden rollercoaster. That year, they raised the ticket costs by $4.00 from the previous year's prices: $1.00 for the new ride, and $3.00 for the new unlimited soft drinks. The park built several "Pepsi Oasis" buildings with self-serve soft drink fountains. Were there guest complaints about the increase within the gate price tag? No. Were guests thankful for the free of charge soft drinks? Yes.

The article "Liquid Assets for Holiday Globe & Splashin' Safari" contains some interesting inside information. In 1999, the year just before they changed to absolutely free soft drinks, Holiday World's annual attendance was 564,373. In 2006 the park surpassed the one million mark for the first time in their history when 1,004,788 guests passed by way of the turnstiles, a 78% increase in attendance in just seven years. Through that period, each year set a new attendance record (with the exception of 2005). But attendance isn't anything, attendance can't be spent, it doesn't exactly translate to additional revenue.

One of the most amazing fact is on average guests have been spending extra money inside the park as total per-capita spending has risen more than the seven year period by 41%. Guests are spending more money on food. Total per-capita food spending has risen by 20% (according towards the park "it took only until 2003 to recover the loss in food per-caps within the food service department not allocating any gate per-cap to foods"). Guests don't feel "cheated" by the food pricing like they would at a park that charges an arm-and-a-leg for it. Also, the self-serve drink locations speed up service at food venues leading to greater capacity and much more profits. The park makes money by serving far more guests and by not needing the additional personnel to serve beverages. The park has also found guests stay longer, as they feel extra comfortable, hydrated, and less tired. When visitors stay longer within the park they spend extra money and when they leave happy they are much more probably to return.

From exactly the same article, "We intentionally maintain our costs lower than most of our competitors. We believe that the irritation we cause guests does not make up for the added revenue we might receive if we charged larger prices for our food. In fact, we try to stay within 20% in the pricing at fast food chains. Thinking about the cost of a meal at Holiday World in comparison with a meal at a fast food location, our total cost may well be lower than it would be outside the park because the food costs are reasonable, and the drinks are free of charge."

Essentially the most important impact that the no cost soft drinks scheme has had on the park is in the no cost advertising that it generates for them. What's by far the most powerful word in advertising? Cost-free. President Will Koch had this to say about the unlimited drinks program: "I regard it as one of the finest business decisions that our company ever made. It symbolizes quite a few other value messages about our park, and gives our target market something extra to talk about right after their take a look at. This word-of-mouth advertising is far more effective than TV, radio and outdoor combined. It has been a big contributor to our attendance growth. Implemented well, it could work in other parks as well as it has in ours."

Is Holiday World's approach better than Cedar Point's pricing strategy? According to "Summer Entertaining!" the park served 380,000 gallons of totally free soft drinks last year (2007). Vacation Planet recently broke the 1,000,000 mark in attendance so for the sake of simplicity just round that down to an even one million and run the math. The result is surprising: 380,000 gallons = 48,640,000 ounces. 48,640,000 ounces divided by 1,000,000 guests = among 48 to 49 ounces per guest. That is just a single and a half large drinks at a park like Cedar Point that charges almost $4.00 a cup for that massive drink (32 oz). Is the average guest really drinking much less than two massive cups worth of soft drinks? It's no wonder Vacation Planet has seen revenue grow since adding absolutely free drinks - they're only giving away an average of $6 of soft drink (at the "highway robbery" Cedar Point pricing) to each guest on average. Vacation World has found the perfect niche in terms of how to price tag their park as could be seen in their attendance growth and guest satisfaction.

One more small park recently converted to Vacation World's pricing formula. Magic Springs, in Arkansas, went to free drinks and sunscreen last year. They increased the gate by $7 (now $45.99 + tax in 2008)and parking by $2 (now $9). The park is home to six roller coasters. The free drinks and sunscreen costs a family of four $30 extra (four tickets plus 1 parking pass). Even if drinks were $3 each - that is ten drinks. How many families of four were buying ten drinks just before the change? It doesn't matter because now they are being forced to have ten drinks to be able to break even.

Who does this "free" soft drink strategy benefit and who does it hurt? First off, this strategy really benefits the park. The real value that you can't put a cost on is being able to tell individuals they get totally free drinks. This translates to free of charge advertising because it generates a lot of interest by word-of-mouth. In terms of your guests, those who drink a lot of beverages at the parks really benefit from this type of pricing but it also really hurts the guests that don't stay within the park very extended. If an amusement park includes parking within the ticket price tag what happens for the people that get dropped off or take public transportation for the park? They're paying for an alternative they won't even use. For some guests this pricing scheme ends up costing them much more, but for the park it is the best solution.