Thursday, March 3, 2016

Mickey or Harry @ Peak Time = Surge Pricing

If it's good enough for Uber and Major League Baseball, not to mention the world's airlines, it's good enough for Disney and Universal Studios: Surge pricing comes to theme parks.

Disney announced via blog that its parks are raising one-day prices by as much as 20% during seasonal periods of peak demand. An excerpt from the blog post: "Each month is divided into value, regular and peak days with an 8-11 month calendar available for viewing online. Here’s an example, if guests plan their visit for September, they’ll have a variety of options, including many days in the value period, which will give them the opportunity to pay less for a 1-Day ticket."  

The idea of using pricing to manage demand is a basic economic principle. Movie theaters have done it for years, charging low prices for daytime movies and higher prices for evening movies. Some customer segments are willing to switch from peak to non-peak visits to save money, which frees up availability for peak visitors who can't come at other times. And that's why visiting Mickey Mouse will cost more during, say, periods when schools are on vacation and families have a few days to visit a Disney theme park. At Disney, days when demand is lowest are non-weekends, so many one-day passes for Monday-Thursday visits are "value price." Weekends are generally "regular price" and holidays are often "peak price."

Universal Studios in Orlando previously announced its use of surge pricing to manage demand this year. Its Harry Potter attractions are expected to draw crowds, and the new peak-period pricing is one way to spread out demand.

Sure, airlines have used demand-based pricing to set prices for years. That's why one passenger might pay $120 while a second passenger might pay $140 (or more) for a seat on the same plane. It's a matter of supply and demand. If there's no way to increase supply, marketers have to manage demand--and pricing is an effective way of doing just that.

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