As an industry, we have been discussing dynamic pricing for more than a decade. Numerous iterations pop into the public forums occasionally: variable, seasonal, and, lately, surge pricing.
Last week, the CEO of Merlin Entertainments, Scott O'Neil, appeared on CNBC and was almost offended that the hosts referred to the current Merlin strategy as "surge pricing," quickly correcting her and informing the audience that the practice is dynamic, not surgebut is that true?
Mr. O'Neil is not alone in this view, and I in no way intend to single him out; any discussion with any of the prominent amusements, attractions, or theme park executives would have followed the exact path as this one did. During the segment, the host referenced airlines and hotelsI would add cruise lines to that equationand then mentioned that they have been charging different prices (depending on when) for a long time.
Theme parks and attractions have often attempted to leverage that example as well. However, that is not a fair comparison, and here is why.
All Three of These Other Examples Have a Limited Physical Inventory and That Inventory Quantity is Public Knowledge, Objective and Serves as a Benchmark?
The 737, depending on configuration, has a maximum number of 149 seats. When that plane is at capacity, they do not continue to squeeze more people in as standing passengers (although they would if they could; that's not the point of this piece).
Cruise Ships have a specific number of cabins, and hotels have a certain number of rooms; although these entities might love to add more people, if possible, their desire to maximize demand has a threshold. However, theme parks and attractions play a very dubious game of keeping attendance numbers secret. Just ask them the number that would lead to the cut-off for allowing people in, and you will hear double talk and ambiguity.
Although we hear stories from complaining consumers that they could not ride their favorite attractions, we never hear stories about the parks closing the turnstiles. I can only remember one or two times that ever happened. If no tangible attendance number defines total capacity, how do you protect the guest experience?
They don't! This lack of transparency in attendance numbers is one critical issue that tarnishes the rhetoric and certainly places the integrity of the dynamic advocates in question.
The System Is Not Really for the Guest
The host directed a very astute question highlighting the fallacy of Dynamic Pricing at theme parks. She mentioned that the investors love it, but guests don't. Even the parks and attractions that have implemented these complex systems to protect the guests' experience have proven they cannot (because of point number one).
People still wait in ridiculously long lines, and many cannot even get to their favorite attractions. How has this pricing strategy helped the guest experience? That was, after all, the promise and what Mr. O'Neil called the differentiator between dynamic and surge.
The negative impact of dynamic pricing on the guest experience indicates that this system is not serving its intended purpose. It is more like surge pricing because you often pay more for a worse experience.
When Uber or Lyft engage in surge pricing, the cost of the fare increases, and they warn you of the increase ahead of time, but they don't promise a "better experience" because they know that busy periods mean more traffic and more time spent sitting in traffic. In that sense, there is a certain refreshing honesty and integrity that is missing from the theme parks and attractions rhetoric.
They Tinker With the Experience
If I book a flight from Boston to Orlando in November, it will be less than booking one in July on the same airline. However, that is different from the theme parks and attractions space. They may offer their "value season," but buyers beware, you are not getting the same product.
The hours are typically reduced, the number of shows may be less frequent, water parks may close depending on the weather, and usually, they use this time to repair attractions or elements in the park.
So, as a guest, are you really paying less for the same product because of the season, or are you paying less because you are getting less? The product itself remains the same when you spend less based on the season at a hotel, a cruise, or an airline. This is not true at attractions and theme parks.
They Don't Allow Enough Disparity In the Pricing To Warrant an Accurate Dynamic Model
I often fly from Orlando to Portugal, so I will use this as an example. The difference in flight costs is substantial. When I fly at the least busy time of year, my roundtrip ticket can be as low as $500. When I travel during the busy seasons, the same ticket on the same airline can be $1,700.
That's quite a swing, and it is significant enough to change behavior, which is supposed to be the goal. Mr. O'Neil reminded us of our economics classes in the interview, which made me reflect on pricing elasticity; if there is no pricing elasticity, then there is no dynamic pricing. There's plenty of proof for this being a problem.
Just think of the last time your favorite attraction declared they would launch a dynamic pricing model; suppose their ticket had previously been $70. In a genuinely dynamic model, they would now offer tickets that were $45, but they would also be offering tickets that were $100. Do you see that when a new dynamic model is launched? No, you typically see that the $70 becomes the starting point of the new normal, and prices only go up from there.
That's not dynamic pricing. That's a cleverly crafted price increase. These tactics indicate that many of these theme parks and attractions are going merely for the appearance of offering something valuable to the customer rather than doing so.
It Simply Conflicts With Their Brand
Every organization will struggle when it tries to deliver something, fulfill something, or execute a strategy that conflicts with or opposes its fundamental brand promise. This is one of the reasons why it's so hard for these entities to deliver a dynamic model.
They all still want to discuss providing families with valuable and affordable fun experiences. Rightly so, after all, families should be at the core of what these institutions do, but the reality is that's just marketing speak these days.
None of these pricing decisions start with considering the average income of a family. They don't consider the additional expenses. The families must pay even to visit them, to begin with. They hardly try to accommodate families by allowing them to bring in food or concessions, and if they accommodated families, then the bottle of water would not be five dollars but maybe two dollars, and you can still see a pretty sizable profit at $2 for a bottle of water.
It doesn't bother me that these businesses or organizations have a purely capitalistic motivation; it doesn't bother me that they desire to make the most profit.?They can earn as much as possible from everyone who enters their gates.
The part that bothers me is that they sometimes try to portray themselves as altruistic or focused on families; when the evidence is contrary, they should stop being so hypocritical about it, and maybe everybody will be more accepting.
Just call it surge pricing and do it, embrace it, and stop talking about how it was cooked up to benefit Families and guests, that simply isn't true.
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