The benefits of Dynamic Pricing
17.05.24
There has been a lot of coverage about dynamic pricing in visitor attractions all over the world, seemingly the majority of it negative. This piece in the UK Times Newspaper blames the high prices within theme parks solely on dynamic pricing.
In their summary, they say “The introduction of surge-pricing at attractions like Alton Towers will make school holiday days out unaffordable for families”
But we disagree.
For us, dynamic pricing allows careful shoppers the chance to buy tickets at the lowest available price, if they are prepared to book ahead a little and book away from the super high popularity peak times.
The easiest way to understand how these systems work is to dig under the skin and look at the settings available for an operator. They generally have loads of settings for max/min price variability but also three main settings as follows:
1. Maximise profit
This is the setting that it seems the Times are accusing ALL operators of deploying. It aims to use surge pricing when there are early signs of higher demand for a specific date or session and drive the price up for that, whilst not dropping any of the prices for the less popular slots around it.
2. Maximise occupancy
This is the setting to try and max out the number of people waking through your doors, almost whatever the cost. It isn’t a setting that would be used often, as logic says any AI based system would go for deep discounting to achieve its aim.
We have found that maybe counter intuitively, when people arrive in the park having paid a very low price via say Wowcher or Groupon, they always have a worse time. They are also more likely to complain, leave bad reviews and spend very little on secondaries such as F&B and retail.
So, no one uses this setting.
3. Level out occupancy within a maximum occupancy limit
This is the Goldilocks setting for most parks. yes, it pushes the price up when demand is high, but at the same time, it discounts the price when demand is low.
In reality, this generally means that off-peak prices will be lower than before and peak prices a little higher. Customers will get better prices for booking early as they then take the risk of the weather being against them on the day and still being committed to visit. The ethical operators out there will NOT allow the top-end pricing to run away with itself.
The aim is to make the quieter, off-peak days more busy and the always popular (and easy to sell out) peak days, a little quieter than they would be otherwise.
When you come to book, if you can see that tomorrow or another day later in the month maybe one price and two days ahead is looking significantly cheaper, some will definitely make the switch and get the exact same experience at a much lower price.
In some research we completed a few years ago for a large zoo in the UK, we found that the reviews improved across the board by not allowing the absolute maximum number of visitors over a bank holiday weekend.
It’s better for the visitors to limit all three days to say 3,500 per day, rather than the max possible of 6,000 where no one has a great day, the animals and food outlets are all overwhelmed and run away and hide and even the queues for play areas and ice creams are too big.
What would have happened before this man-made limit was that you would have had one day when the weather wasn’t great, so you would see a 1,000 day, one where it was great and delivers a 6,000 day, and one where it maybe clashes with football or other sporting events that gives you a 3,000 day. With the limit in place, the numbers and the gate receipts all stay the same, but everyone has a better visit and you haven’t blocked every access road within a 20-mile radius.
And the MASSIVE secondary bonus on this is that your secondary spend will double as whilst you’re busy, you’re not too busy and people can buy food, coffee and ice creams without long queues.
Summary
Dynamic pricing is not a license to gouge your customers on every peak weekend and holiday.
But handled ethically, it is an incredibly good way to back fill your quiet days and find a price that everyone is happy to pay and ensure your busy days don’t get too busy. It actually makes attractions more accessible for many.
We’re big fans of it and are absolutely sure it’s here to stay.
