Case Study: The Cost of Visiting The Magic Kingdom Historically, the world’s theme park operators charged one standard admission price year-round. More recently, however, many theme parks have embraced versions of good-better-best pricing (G-B-B) and demand pricing.

G-B-B pricing can be traced back to when Alfred Sloan, the head of General Motors (GM), introduced the “price ladder” to differentiate the company’s cars. GM’s pricing structure began with the lowest priced line—the Chevrolet—and then escalated in quality, prestige, appearance, and cost with the Pontiac, Oldsmobile, Buick, and its most expensive offering, the Cadillac. As a result, GM had, in Sloan’s words, a “car for every purse and purpose.”

Today’s theme parks, such as Disney World, are adopting Sloan’s strategy for the sale of single-day tickets. The “good” tier sets the base price, single-day ticket for a single park. For an additional cost, visitors can purchase a “better” ticket with a park-hopper option, allowing them to visit any of Disney’s four major parks in the same day. At the “best” level is the Hopper Plus Option, which also permits visits to Disney’s two water parks, its two miniature golf courses, the ESPN Wide World of Sports Complex, and the Oak Trail Golf Course.

Disney’s four-park, multi-day tickets use dynamic or demand pricing. This practice—commonly used in the car rental, hotel, and airline businesses—bases prices on demand with the goal of evening out park attendance. “Whenever you get above a certain number of guests in the park, you’ve got diminishing returns,” explains Dennis Speigel, president of Cincinnati-based consulting firm International Theme Park Services. “Your guest experience declines because people are waiting longer in lines, they can’t get into restaurants, and they’re not buying merchandise because they’re spending too much time in line.” Avoiding congestion increases visitor satisfaction, much of which is determined by how many rides a visitor can experience.

Disney’s demand pricing differs from that used by airlines or hotels because it does not increase or “surge” prices due to heightened demand. Instead Disney uses historical research to predict the demand at the parks. Peak times occur over the summer vacation months as well as the Christmas holidays. The company’s four-park tickets also are divided into three tiers. Beginning with the “good” level (which runs after the Christmas season until the first of March), the “better” and “best” levels add days for an increased cost. None of these levels include admission to the park during highest peak periods. For those days, visitors can only buy single-day tickets.

Disney also uses similar pricing strategies with its two levels of annual passes. The “good” tier offers admission to all four theme parks on the same day with no blackout dates for a year. Purchasers also receive parking and discounts on dining and merchandise. The “best” tier adds two Disney water parks, the ESPN Wide World of Sports Complex, and the Oak Trail Golf Course.
1.Would using “surge” pricing for Disney’s multi-day tickets be a good idea? Explain your answer.

2.How would you determine if Disney’s multi-day ticket policies have increased their elasticity of demand?