OM in the News: Yield Management Enters the Magic Kingdom
“For the first time,” writes the Boston Globe (Feb. 29, 2016), “tickets to Walt Disney World in Florida and Disneyland in California will cost more during holidays and some weekends — up to 20% more — than during slower periods, as the bursting-at-the-seams parks seek to spread out demand.” Here at Disney World in Orlando, Florida, which includes four major theme parks, the price changes are complex, and vary by park. At the most popular Disney World park, the Magic Kingdom, which handles 20 million visitors annually, single-day prices will remain at the current level, $105, for value periods. Prices will rise to $110 for regular periods, and to $124 for peak.
Overcrowding during holidays has become enough of a problem — endless lines for rides do not make for “the Happiest Place on Earth” — that Disney had little choice in moving to a demand-based ticket-pricing structure, analysts say. Demand-based pricing (which we call revenue or yield management in Chapter 13) is commonly used in the lodging and airline industries. It has also been adopted by other theme park operators in the U.S., including Universal Studios, which will unveil a major Harry Potter-themed expansion of its Los Angeles park next month. Movie theaters and sports teams are also experimenting with similar pricing efforts.
For Disney, the change will likely shift people visiting during mid-tier times into the quietest ones. During high-demand periods such as Christmas, it will generate more money but likely create no noticeable attendance drop-off.
Classroom discussion questions:
- Why is Disney introducing demand-based pricing?
- What professional sports teams are using yield management?