Can you really substitute one theme park for another?

May 29, 2014, 10:16 AM · Is one theme park just as good as another?

The Disneyland Resort recently raised its ticket prices, leading to the typical online outrage, as well as at least one hilarious viral photo. The Orange County Register put the new $699 price of a Premium Annual Pass at Disneyland into perspective:

"For a bit less, others can choose to instead buy the highest-priced annual passes at Knott’s ($186), Universal ($199) and Six Flag[s], ($129.99), and still kick in for SeaWorld’s standard pass ($145)."

Disneyland's Sleeping Beauty Castle

That illustrates just how much more going to Disneyland can cost than going to Southern California's other theme parks. Economists often talk about "substitution" and its effect upon pricing. When a specific product starts to become too expensive for customers, they start looking for comparable, lower-priced substitutes. The classic example is the price of beef rising to the point where people start eating chicken for more dinners, instead.

But for year after year, Disneyland's raised its ticket prices... and its attendance continues to grow. Meanwhile, attendance at Southern California's other parks far lags the Disneyland parks. If there's a price point at which theme park fans simply will substitute other local parks for the Disneyland experience, clearly Disney hasn't reached that point with its past increases.

Maybe this is why — maybe the difference between the Disneyland parks and other theme parks isn't as minor as the difference between beef and chicken.

Truth is, almost all theme parks offer unique experiences. As vacation and entertainment destinations, they compete not just with other theme parks, but also with going to movies, national parks, cruises, Broadway shows, IndyCar races, and dozens of other out-of-home entertainment alternatives. But part of the value that theme parks deliver is an experience unlike those alternatives. The more unique the experience, the greater the potential value.

That's part of the reason why you see similar pricing among regional parks, many of which offer a somewhat similar lineup of flat rides and roller coasters. If you're looking for a thrill ride experience, you'd think twice about going to a Cedar Fair park that charged twice as much as a Six Flags park with a similar ride line-up, for example.

But theme park fans still see the differences in ride-line between various parks, and understand the unique experiences that they offer. Someone in northern Indiana who doesn't know theme parks might look at Raging Bull at Six Flags Great America and Millennium Force at Cedar Point, and say, "eh, what's the diff? They're just big roller coasters." But the people who actually end up buying tickets to parks are more likely to go online and engage in long, passionate debates over every real and imagined difference between those coasters. They see the uniqueness in each. And they're willing to pay to experience that.

So, to fans, Six Flags Magic Mountain and Disneyland are as different from one another as spending the day hiking in Joshua Tree or going to the California Speedway for a race. They're all excellent ways to spend a day having fun in Southern California. If your heart is set on going to Disneyland, you're going to go to Disneyland, and maybe adjust your entertainment spending elsewhere to afford that Disneyland trip. If you're simply looking to have fun out of the house for a day, or to go a family vacation, however, you'll price the Disneyland option versus all of those other options — theme parks and not — and go with the one that delivers the most value for your budget.

If Disneyland, or any other theme park, ever raises its prices to the point where people simply can't afford visiting anymore, those customers are going to "leak" all over the entertainment marketplace, and not simply flow to the nearest thing calling itself a "theme park." If a theme park wants to take market share directly from Disney, it's going to do that not simply by undercutting Disney on price, but by creating a visitor experience that's more like what people have come to expect from the Disney theme parks.

That's the formula that Universal is following in Orlando, and beginning to implement in Southern California, with richly themed environments such as The Wizarding World of Harry Potter and Springfield. That's why Knott's Berry Farm has been revamping its Calico Mine Train and Timber Mountain Log Ride, classic dark rides that inspired Disney's Imagineers, to bring those ride up to current Disney quality. These competitors are working to create something similar enough to Disney that people might actually consider their chicken to Disney's beef, if you will. (I'd suggest that Universal's ultimate goal is one-up Disney, with steak over plain ol' beef, but that's another post for another day.)

There's no simple formula for predicting a theme park's attendance. It's not as plain as saying, "price increases decrease attendance, and price cuts raise it." (Money is almost never that simple, in anything, in fact.) Theme parks offer unique experiences, each with their own unique value to individual visitors. And that's one of the reasons why we love them so much.

Replies (6)

May 29, 2014 at 2:51 PM · This is a great, great, great article! I just got my MBA and we were assigned many case studies that required us to use various frameworks (Porter's 5 Forces was always my go to) to analyze industry rivalry. I would have loved having Disney and the rest of the theme park industry as one of my cases. Robert, your article sets it up perfectly for this type of discussion. I could go on and on about why Disney is the clear market leader from economies of scale to barriers to entry, but you really hit the nail on the head with their core competency of providing their customers with a unique experience (along with brand equity and customer loyalty). In my opinion, Disney's unique experience lies within their ability to provide guests with an enveloping sense of a 'magical' environment in which guests can completely lose themselves in. Up until Universal's IOA and the addition of The Wizarding World of Harry Potter, Disney had the only parks with that level of attention to detail (logistics, architecture, staff, sight, sound, smell, etc). With that being said, I do think that Disney has left some market share on the table. I believe that the extreme crowds of late has left Disney Parks slightly haggard. I have been reading more and more comments about customer service not being what it used to, rides are down more frequently or getting dated, and attractions aren't as innovative as they should be. This leaves the door open for Universal to swoop in and steal customers especially if they create more environments like The Wizarding World of Harry Potter which (in my eyes) matches that core competency of a unique fully immersive experience. I very much look forward to your post discussing Universal's ultimate goal to one-up Disney.
May 29, 2014 at 7:32 PM · Well yes you can family in our first year in Orlando had Annual Passes for Disney. For the 3 years since we switched to Universal & SeaWorld with Aquatica passes.

We have since upgraded to Universal Premier Passes and only do the Disney's Spring Florida Resident for 3 days for $129 each.

Overall the option to have no blackout dates with better perks for a comparable venue made it compelling.

May 30, 2014 at 7:25 AM · Just read this article and had to mentioln that they are doing it at Paris as well. In one of Fridays daily papers in the UK ther is a story regarding the huge price difference between what french families pay and what uk families pay when they book through the respective versions of the disney site. Apparently the difference can be up to £500 pounds more that uk families get ripped off, sorry, charged for the same holiday. That being said, I personally havn't been to paris for a long time and now would not go back after reading this and also due to the less than good report from my sister who visited with her kids last easter, shabby, badly run/organised with rides that kept breaking down were the main points she made. The article is in The Sun, a british tabloid paper on 30/5/2014
May 30, 2014 at 11:05 AM · I think Disney World is walking on very thin ice, more then they realize. Team Disney Orlando has done a poor job keeping the parks new and vibrant. Everyone knows the Magic Kingdom will always be top dog, however I predict once Diagon Alley opens, followed by King Kong, follwed by the rumored Jarassic Park expansion, people will drop a day or two from DIsney. Disney World just seems to not be able to get projects off the gound and complete in a timly fashion. With nothing new added to the parks, (Fanasty Land--pretty, but lacking anything amazing) DIsney will lose attendance at the Studios, Animal Kingdom, and possibly EPCOT. The annual pass rates for Disney are expensive and they are getting to be just not enough bang for your buck (unless your a fan boy that thinks Disney can do no wrong.) Universal offers their annual pass members a good price point, giving them 15 to 20% on food and merchandise at EVERY location. The premium pass gets you free valet parking and a Halloween Horror nights ticket...Sorry DIsney, but my money is going elsewhere...
May 31, 2014 at 12:21 PM · Tourists, who visit Disney mostly for character meet and greets, are definitely locked into visiting Disney parks. But what about locals and tourists who visit Disney because they want to experience great rides in a themed environment? Knott's Berry Farm and Universal Studios could be great substitutes for this type of customer.

I can't understand why Knott's Berry Farm or Universal has not created their own versions of Space Mountain and Toy Story Midway Mania. People often wait hours to ride these attractions. There is a huge unsatisfied demand for these products. It appears that Disney would rather raise prices and lose some of these customers, instead of investing money to increase ride capacity.

June 3, 2014 at 7:53 AM · Very good article. The Theme Park industry is clearly ripe for a number of economics or MBA term papers, theses, or books.

Disney has demonstrated "pricing power" - they can raise their prices without a significant adverse impact on demand. Looking at Walt Disney World, it is interesting to observe how prices are discounted for multiday passes. A one day pass to the Magic Kingdom is $99, two days at Disney parks is $188, and three days is $274 (still over $90 per day). However, day 4 is $20 per day, day 5 and beyond are $10 per day. Basically, Disney feels it has pricing power until Day 3, then it has to discount steeply in order to generate additional park visits. At that point, many guests are presumably ready to check out the competition, find a non-theme park activity, or go home.

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