Paying for a place in line at Disney

For a long time, one of my favorite service examples to discuss in class has been Disney’s FastPass system. In a nutshell, the program allowed guests to wait in a virtual line for a ride as opposed to having to stand in physical queue. When getting to a ride, guests would be quoted an expected wait for the regular queue as well as a time when they can come back to get in a short queue. That is, a family could decide whether they wanted to wait an hour in a line or come back in 90 minutes for a ride. I once had one of the engineers involved in launching the system as a student and he gave me all sorts of fun details (e.g., Euro Disney posed a challenge because the system had to be explained in so many languages). One of the most amazing things about FastPass was that it was free. That’s right: Disney was giving something patrons would value away for nothing.

Not surprisingly, that has come to an end.

The New York Times reports that Disney is implementing a new system that offers some free features (e.g., creating an itinerary in an app that updates automatically based on congestion) but essentially replaces the free FastPass program with one that requires a fee (To Skip the Line at Disney, Get Ready to Pay a Genie, Aug 18, 2021).

Here is Disney’s (hyperventilating) pitch for their new system:

The Old Gray Lady is a little less cheerleading. The “Lightning Lane” is essentially what until recently was the FastPass line.

Every ride at the resorts will continue to have a traditional standby queue. For those willing to pay $15 per person at Disney World and $20 per person at Disneyland, there will be Genie+. The upgrade, charged per day, allows visitors to choose the next available time to use the Lightning Lane at a variety of rides, including classics like the Haunted Mansion and newer favorites like Millennium Falcon: Smugglers Run. One of these selections can be made at a time, with the ultimate number of fast boardings that people can squeeze into a day depending on length of stay and overall attendance. (In other words, no stockpiling.)

However, some popular rides will not be available for Genie+ selection. For its most-mobbed attractions, Disney will offer Lightning Lane access à la carte — and the price will fluctuate based on date, attraction and park. (A bit like surge pricing for Uber.) Guests will be limited to two of these upgrades in a day.

The Times also opines that “Consumers have become increasingly accustomed to paying surcharges for special access and perks, many of which used to be included in the base price. The airlines have led the stratification.”

There are a couple of things to think about here. First, this gets fairly pricey, fairly fast. If you are at Disney World by yourself, it’s just fifteen bucks but if you are there with the family, $15 per person per day adds up. That says nothing about the rides they hold out of Genie+. They are looking at dynamically pricing these queues. There are some certainly interesting questions on how to do this. One thought is that you charge a high price for the Lightning Lane early in the day before the park is super busy. Intuitively, if your goal is to wring every nickel out customers, you want the regular free line to be kinda miserable by the time the main crowd is there. Starting the day with a high price on the Lightning Lane assures more customers pile into the standard lane early so that wait skyrockets before the park is at a peak load. (See this paper if you want to see where this idea comes from.)

Another issue is how Disney allocates capacity between premium and regular customers.

The calculus for families could come down to the value of paying for the ability to skip lines — and that will depend on ride capacity. People with Genie+ reservations will have priority over people in the regular stand-by line. If Disney chooses to allow up to 70% of a ride’s capacity to be set aside for Genie+, that could make it a better value, since that would means longer stand-by lines. (The company said that how the capacity divvies up will be similar to what was in place with the previous FastPass programs.)

“This shouldn’t be that bad because fewer people are going to use paid Fast Pass than they would free Fast Pass,” Testa said. “If they charge $20 per FastPass, relatively few people are going to buy that. So, it won’t impact the standby line as much.”

Disney is eliminating a beloved free perk at its U.S. theme parks, MarketWatch, Aug 18

Suppose Disney does not allocate very much capacity to the Lightning Lane, then the regular line moves fairly quickly and there is little or no reason to upgrade. Conversely, if you allocate a lot of capacity to Lightning Lane, the regular line is long and there is a strong incentive to spring for Genie+. The company can say they are going to be using a scheme similar to the old FastPass allocation but they have an incentive to starve the regular line of capacity.

And finally, do these schemes benefit customers? What I’ve always liked about the old FastPass is that this clearly worked for both customers and Disney. Customers spent less time in lines. What did they do with that time? They went on more rides (Disney reported greater ridership on “secondary” attractions) and saw more value from the experience. They also spent more in shops and restaurants. So Disney got both higher revenue from selling sodas and mouse ears while getting customers on more rides without laying out more capital.

How does that change when they charge for the service? It’s hard to see how this makes things better for visitors. If the same or fewer customers pay for the privilege, then customers who would have used the free service are stuck in the line and that’s a loss for both them and the firm. On the other hand, if they manipulate capacity allocation so that ponying up is the only way to get on lots of rides, more customers are forced into the system and don’t have that much to show for it since the Lightning Lanes are all jammed up.

I should acknowledge here that there is a counter argument here that says that giving away FastPass access is inefficient. If FastPass is free, even customers who have a low cost of waiting will exercise the privilege — squeezing out customers who a high cost of waiting. That potentially may hold but I am a bit dubious. If one looks at a standard queue (i.e., one where customers enter, are served and leave as opposed to an amusement park where customers move from attraction to attraction), combining pricing and priority queues often lowers overall consumer surplus even as it assures that the “right” customers get short waits. (See here: Gratuitous Self-Citation.)

Waiting on the water

One of the evolving stories of the operational impacts of the pandemic has been port congestion. We (collectively) have been ordering more stuff — shifting consumption from services to goods — and that has meant more work flowing through the nation’s port. This is particularly true for the ports of Los Angeles and Long Beach. That has meant that there is a long, floating queue of cargo ships waiting to unload — as this WSJ video explains.

An interesting side bit here is the impact of the ever-increasing size of container ships. Oversized boats played a role in the Ever Given saga in the Suez Canal. The relevance here is that bigger boats take longer to unload. That is, wicked big boats are efficient at schlepping containers across open water but make life hard when they hit a port.

Stuck in the middle of a canal

One of the biggest supply chain stories of the past week has been the saga of the Ever Given, the ginormous container ship blocking the Suez Canal. Bloomberg has a nice podcast interviewing the head of a global shipping line about the crisis (Baystate Business: Laurence Odfjell, Mar 30).

There are two interesting part to this. First, he gets into some of the physics that likely contributed to how the ship got stuck. Second, he talks about the challenges his firm faced — particularly with ships on the way to the canal and whether those should be sent to a different route.

The Wall Street Journal also has had some interesting reporting — emphasizing the knock on effects of the delays (Suez Canal Traffic Resumes Slowly as Some Ships Weigh Anchor, Others Wait, Mar 30):

Logistics experts were forecasting port congestion in Asia and Europe as some of these diverted vessels arrive at ports around the same time as the delayed vessels now making their way slowly through the canal. That is on top of regularly scheduled traffic.

“This backup risks leading to a concentration of volume,” said Luigi Bruzzone, an analyst for the port of Genoa, one of Italy’s busiest. “What we were expecting to come throughout April will now be concentrated in the last two weeks of the month.”

In short, while the grounding of the Ever Given has been a very visible event, its impact is going to be last for months and likely much less visible to those not in the industry.

What’s that “EOQ solution” (prescription) for sourcing, batching and inventory management? (4min)

I just created a review video of the celebrated Economic Order Quantity (EOQ). This video considers two key decisions in inventory management: how much and when to order? Starting from real data, we build a model to optimize the total cost, which is the sum of the setup (order + transport + receiving) cost and holding cost. The solution is the celebrated Economic Order Quantity. All in just 4min :). Please put any comments or questions in the YouTube comment section which I periodically check.

What’s that “Newsvendor solution” for inventory and capacity planning?

While discussing strategic capacity planning in class this morning there was a request to review the celebrated #Newsvendor model for #inventory and #capacity planning. So I figured: let’s make this 6min video for everybody who wants to review this simple, yet powerful decision model 🙂 What do you think?

What’s a Control Tower (in 2min) in digital operations and supply chains (in 3min)

Happy new year to all! I have just published a 3min video that explains what digital operations is, how to implement it, and what the benefits are. This video then directly connects to my next video on digital Control Towers for your operational network and supply chain. Please add any suggestions or questions in the comment section on YouTube.

Thanks for watching & subscribing to help the channel get to Youtube Partner status (> 1000 subscribers and > 4000 hrs watched).

What is Takt Time and how use it? What is Cycle Time and why do I not use it?

Takt time is a key concept to plan and run an operation. In this video I explain what takt time is and how to calculate and use it. There are many other “times” used in operations and, in contrast to takt time, some of those other times can be confusing and have different meanings at different organizations. Cycle Time is one such example. In theory, the word takt means cycle or beat, but in practice, cycle time would better be called unit workload. Watch why 🙂

Please let me know in the YouTube comments if you have any other topic or question you would like me to address in a future video. I remain curious whether this type of #operationsmanagement content can ever get the “4,000 viewed hrs in 12 months and 1,000 subscribers” to pass YouTube requirements 🙂

The times they are a-changin’: Who’s Next? When waiting in a single line is better

The Corona crisis brings changes, including (or especially?) to academics. Marty wrote a blog again. And I got myself re-engaged in producing Youtube videos on operations. I must give credit to INFORMS: our annual international conference went virtual and all speakers were asked to record and upload their 15min video presentation. This made me rediscover the creative challenges of educational video production and I figured I may as well share my presentation on my YouTube channel.

There is joy in creativity and continuous improvement. I quickly realized that 15min videos are often too long and so I have embarked on the endless path of continuous improvement to make better videos. Let’s see how long I stick to that path; feedback and pace of improvement will matter. When you have time, check them out and leave some comments below the video. And if you like them subscribe to the channel and hit “the bell” so you receive an announcement when I upload a new video. (YouTube tracks number of subscribers and number of hours watched. Hence “YouTubers” ask you to subscribe. As we teach: metrics drive behavior 🙂

In this video I discuss why and when waiting in a single line at airport checkin, at the bank, at the supermarket is better. I explain the intuition but also quantify how much better a single queue is over service systems with two separate queues. The largest improvement stems from sharing queue length information (which leads to Join-Shortest-Queue JSQ); the second smaller improvement comes from postponing server choice (which is equivalent to allowing customers to jockey among queues).

The fine legal print: The video addresses “80% of what is important to 80% of viewers” :). It also focuses on customers waiting in line. For the mathematically inclined: The graphs consider simple M/M/1 and M/M/2 queues. There is a deep theory behind “resource pooling in heavy traffic” that shows that the insights in this video extend to Gi/G/N, but notice the required i : we must have independent inter arrival times which is fairly reasonable for customers arriving for service, but not for data network switches…

What service discipline is best for testing queues?

First in, first out (FIFO) is the service discipline that we are all most familiar with. If I get in line at the cafe before you do, I get to place my order first. Simple. Fair. But is that the best scheme for running the queue for covid tests?

That’s basically the question asked by a recent post on Marginal Revolution (Stack-Push-Pop COVID Testing, Aug 7). The basic complaint is that delayed test results are useless test results. Hence, there should be an emphasis on turning around results quickly while not wasting resources on past-due samples. Deviating from FIFO is one way of achieving this.

One way of thinking about this is to use a stack or last-in first-out (LIFO) model for testing. In a stack model the newest test request is pushed onto the top of the stack and the next test to be processed is popped off the top of the stack. One disadvantage of this model is that some test requests will never be processed (they should be removed from the bottom of the stack and returned as null results). Some people will be angry.

But the stack model of testing has a huge advantage over first-come, first-served. Namely, just as many tests will be completed as under the current model but the tests results will all come back faster and be much more useful.

Managing pricing without data

Take a moment to appreciate the conundrum airline pricing managers currently find themselves in. In normal times, the main task of pricing managers and the revenue management systems they oversee is to make sure that there are enough — but not too many — seats left in the days before a flight for those flyers willing to pony up big bucks. Again, in normal times, anyone could fill up a plane going between Chicago and LA at $300 per seat. The magic is selling some seats at $300 early while making sure there are seats to sell at $2,000 later.

Of course, these are not normal times. Demand has collapsed across pretty much all markets making pricing and saving seats for later irrelevant. But that shouldn’t last forever, right? And then airlines should be able to get back to business as usual. But there is a hitch. As discussed in the Wall Street Journal, revenue management systems base decisions on historical data but past data is pretty useless for the current situation and the data being collected right now is likely irrelevant for when the market recovers (Coronavirus Has Upended Everything Airlines Know About Pricing, Aug 5).

You can hear the author discuss his finding here: