Six Flags Discovery Kingdom Revenue Management

¶ … Flags Discovery Kingdom in Vallejo, California wants to implement a new revenue management system, maximizing revenue per customer, per visit and improving overall revenue. There are several tactics that can be utilized to extract the maximum revenue from customers. Some of these will be discussed in this paper. The nature of the business is important here, because amusement parks deal in a perishable good (park capacity).

There are many different revenue streams within the park as well, so revenue management policies affect an entire suite of products and services, rather than a single good (No author, 2013). One revenue management strategy is to foster repeat visits. While some customers travel to visit the park, there is a market of local consumers who might visit the park. Converting occasional visitors from this group into regular visitors can increase revenue substantially.

Heo and Lee (2009) note that consumers find revenue management at theme parks to be acceptable, and view it as being similar to how the hotel industry works. The revenue manager faces an interesting decision here, because offering discounts to entice repeat visits means forgoing some income on the gamble that more income will accrue as the result of that decision (Walls, 2013). This is entirely possible for the theme park, because the entrance ticket is only one revenue stream -- most of the other streams come inside the park.

Thus, offering discounts to encourage repeat visits from locals is sound revenue management practice. Theme parks in the Orlando area do this for Florida residents to entice them to utilize the parks sporadically throughout the year. The trade-off with the entrance fees plays itself out with other forms of discounts as well.

For Six Flags, the company should have gathered data that tells breaks down revenue, and allows for estimates of how much of a discount will entice visitors, and how much additional revenue the park will gain from attracting those visitors. If there are to be discounts, what type and to whom? Discounts can be for families, because cheaper tickets will encourage families to visit more frequently. Discounts for seniors might encourage grandparents to bring their grandchildren. Discounts for frequent visitors encourages multiple visits.

In all of these cases, management of Six Flags must understand the tradeoffs that they are making with respect to the guaranteed up-front revenue at the gate vs. The ancillary revenue from rides, food, parking and other streams that are dependent on the initial gate revenue. Revenue management also means taking a look at these ancillary revenue sources. While admissions make up the bulk of revenue, other sources also contribute, and the degree to which the park can increase these other sources will have two positive impacts (Milman & Kaak, 2013).

The first is that more discounts on admission, the headline cost number for a theme park, can be offered, knowing that ancillary revenues are improving. The second is that ancillary revenues are positive in their own right, because it means the park is being creative and offering more value to its customers. For Six Flags, finding other ways to earn revenue on its space is important. A dummy approach is to charge for parking, but there are more sophisticated.