Universal Orlando's lost summer
Written by Robert Niles
Take a look at theme parks' second-quarter financial results, and the contrast could not be more clear:Tweet
Disney offers huge discounts, spends aggressively to promote them, and maintains its attendance levels in the worst economy since the Great Depression. But it suffers a significant profit loss as a result.
Universal also offers some discounts, but cuts its promotion budget, trims costs throughout its properties, and its attendance tanks. But thanks to the cost cuts, it increases its profit.
Which company did the better job?
If you're a cold-eyed, myopic Wall Street analyst, you might select Universal. Theme park fans, who care more about price and service than profit, might opt for Disney.
It's a classic management dilemma confronting any business in a bad economy: Do you cut price and sacrifice profit for market share, or do you cut costs and risk market share to protect profits?
Disney and Universal seem to have picked opposing strategies. But upon a closer look, Universal's choice might not have been so intentional. Circumstances may have led Universal to see that it had no chance to build market share in 2009, forcing it to sacrifice a "lost summer," while trying to bank as much cash as it could for 2010.
Ad campaigns tend to one of three approaches:
The third approach is tough for destination theme park resorts. Vacations take too much planning to be a true impulse buy - like ordering a pizza at 10pm. Disney can do the second phenomenally well, but other theme parks tend to have less emotional connections with their audience. (Roller coasters resonate with a relatively limited percentage of the marketplace. SeaWorld's cute critters appeal to more. But Mickey and Disney's princesses tend to rule this category.)
That leaves the first option, which is what you see in so much theme and amusement park advertising. Universal hit the market big with its Super Bowl ads giving away 7-day tickets to the resort. But after that, what was Universal to promote?
Well, its new roller coaster at Universal Studios Florida, of course.
Hollywood Rip, Ride, Rockit didn't open as planned last spring. And as the summer season melts away, it still hasn't opened. With no new ride to promote, Universal instead opted to save the money it would have spent on ads, and bank the money for next year.
Why wouldn't Universal instead promote more discounts, like Disney did, and try to hold on to its market share in the summer of 2009?
I can answer that question in two words: "Harry Potter."
With the much-anticipated Wizarding World of Harry Potter opening at Islands of Adventure early next year, many theme park fans understandably have decided to wait until that new land opens before visiting Universal Orlando. Perhaps a new roller coaster at USF might have encouraged some of those fans to plan another trip to Universal this summer, but with HRRR not open, the decision to postpone a visit became easy for many.
Universal management understands that. So it punted, gave up on 2009, and, I suspect, is hoping that Harry Potter saves the year for Universal in 2010.
The boy wizard's batting 1.000 so far, with every book and movie from the series becoming a huge hit. But Universal got burned this year with an attraction opening that didn't come through. There's still no firm opening date for Universal's Harry Potter land, and the longer that Universal goes into the 2009 holiday season without announcing one, the more potential visitors the resort will lose as families make alternate vacation plans.
A business with pockets as deep as Universal's might be able to afford one lost summer of crumbling market share. I am sure that no one at Universal wants to see what would happen should they lose two.
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