Profit-Maximizing an Amusement Park – Gate Versus Food Price

A trip to an amusement park can be an exciting way to spend a summer day. With rising gas prices an amusement park “day-cation” is now a more popular option than ever. That’s not to say a trip to the local park is cheap. 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 own food into the park. Different people have different demands for food. Some people are willing to pay more for food, while others prefer to eat before going and not buy food after they enter the gates. The park sells food at concession stands, but usually charge prices twice as much as restaurants outside the park. How can the park charge outrageously high prices and not lose business? Would the amusement park gain by charging a higher or a lower price for food? The key to profit-maximizing an amusement park is to find the right balance between the price of food and admission.

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Amusement parks can charge what they do for food and admission for a number of reasons. They have to pay for maintenance of the park and upkeep of the rides, employees, food, water, electricity, new rides, etc. If visiting guests want a safe, clean, open park that can add some fun rides and additions to the park every season or two, they’re the ones who are going to have to pay for it Bottled and jarred packaged goods. If an amusement park lowered the price of food then people would have to wait longer between new rides which usually lead guests to start to complain about if it gets too long. Food pricing at amusement parks also need to fit in the supply and demand realm. If a park gets overcrowded then new high capacity rides need to be built in order to service all of those people. To a certain degree, the pricing helps keep the attendance on a controlled growth path while financing expansion. This will not be the same for every park. Including one or two perks like free sunscreen or parking rolled into admission works for some parks. Others make guests feel in that one visit the park is trying to squeeze every penny out of them. It’s not good for business when visitors walk out the door feeling like they’ve been taken advantage of as they will be less likely to return. The most successful amusement parks are the ones that find the equilibrium point between gate and food pricing.

In order to understand how an amusement park can charge high prices and still be successful another question needs to be answered: Why do so many people visit amusement parks every year? In 2006, over 335 million people visited America’s theme parks. Generally, people visit parks for the rides. The rides are what the parks are selling to the customer. The ride lineup is probably the single biggest factor in the guest experience for most people through the gate. Most major cities usually only has one large amusement park within a convenient range, the issue is basically one of monopoly too. Still, the rides are the product and everything else is just details.

One of the largest regional amusement-resort operators in the world, Cedar Fair, owns and operates eleven amusement parks in North America including Cedar Point in Sandusky, Ohio. Consistently voted “Best Amusement Park in the World” in Amusement Today polls, Cedar Point is known as the roller coaster capital of the world with a grand total of seventeen coasters, more than any other park. A one day ticket for ages 3-61, 48″ and taller during the 2008 season is $42.95. Parking is $10 and admission to Soak City Water Park is NOT included.

Holiday World & 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 Today magazine. A general admission one day ticket in 2008 costs $39.95, almost as much as Cedar Point. While 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, free parking, and the biggie: free 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 of the best amusement park rides in the world, Cedar Point is also home to some of the highest food prices in the industry. The majority of the food venues are very fast-food oriented, with limited menus, and prices geared for a semi-captive market of visitors unwilling to endure the time-consuming hassle of driving the causeway back to the city just to get a cheaper meal. At Cedar Point during the 2008 season it’s $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 large 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 for a dollar in most vending machines is $3.50 at Cedar Point. Two entrees at Panda Express are $8.99 compared to the local mall price 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 visit, the service at various counter locations can be described as “glacial, not friendly and pathetic.” Here’s the deal with the food: A good $2 hamburger is a good $2 hamburger. Part of the problem is that a good $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 pay $2 for it, they would probably think it pretty darned good. That’s what value is all about. The prices at Cedar Point are too high when judged in comparison to the quality of the food (with park-specific locations) and when judged against the equivalent choice outside the park (Subway example).

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

How high can the prices of food go? Until the per-caps (spending per person in the park) actually drops or attendance significantly drops, there’s not going to be 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 of food items inside the park by a dollar or two. The only catch is that people might just complain about the price to get in and not come in the first place.

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