Jumping theme park lines

How much would you spend to skip a line at a theme park? At Universal Studios Hollywood at least some people are willing to pony up a lot (At Theme Parks, a V.I.P. Ticket to Ride, New York Times, Jun 10).

As stratification becomes more pronounced in all corners of America, from air travel to Broadway shows to health care, theme parks in recent years have been adopting a similarly tiered model, with special access and perks for those willing to pay.

Now Universal Studios Hollywood has pushed the practice to a new level.

It has introduced a $299 V.I.P. ticket, just in time for the summer high season, that comes with valet parking, breakfast in a luxury lounge, special access to Universal’s back lot, unlimited line-skipping and a fancy lunch. …

Universal upgraded its V.I.P. Experience — and raised the price by 50 percent — after realizing that the old one, which did not include lunch, the lounge or other perks, “was selling out more and more frequently,” Ms. Wiley said.

So why would Universal go in for such a scheme? As the article points out, relative to building new rides and other attractions, offering a premium service is cheap way to bring in new revenue. Hiring a few extra tour guides and finding space for a lounge should be peanuts in comparison to building a new monster roller coaster.

The article features some hand-wringing on how priority services undercut the “melting pot” aspect of theme parks (something we touched on before). However, there are two other points brought up that I think in some ways are more interesting. The first is a quote from a chief executive type that he wouldn’t visit the park without the V.I.P. option. That raises the question of to what extent these offerings expand the number of people who visit the park or whether they just serve to segment an existing pool of customers. The distinction matters since drawing in more high priority customers increases the load on the system and increases congestion. That really matters for those the back of the line.

Those who are unwilling or unable to pay for premium service are going to be made worse off if priorities are used instead of  handling customers first come, first served even if no extra customers now patronize the park. But things are going to be really bad if the service attracts additional high priority patrons.

So at what point does Universal risk losing so many low priority customers that the V.I.P. program is money loser? A basic ticket cost $80 but does not include lunch, parking etc. It is easy to imagine that additional in-park spending bumps the value of a regular customer to $100. Also, the V.I.P. bundle may include enough goodies that those customers don’t spend a whole lot more in the park. That would imply that each V.I.P. is worth three regular customers. But that may not be a fair trade-off if either group is inclined to visit multiple times in a season. If regular customers are more likely to visit multiple times, then the premium on V.I.P. customers may not be as high as it seems.

The other point that the article makes is that Disney does not really have a comparable program. Disney offers V.I.P. tours at Disney World but those start at $315 per hour with a six-hour minimum. So you are committing to almost two grand and don’t get the perks of lunch and free parking. Thus, for the most part, Disney is opting for a more egalitarian approach to queuing. How does this play out in the long run? Assuming that theme park patrons are generally indifferent to the attractions offered by Universal and Disney so customers are choosing mostly based on waiting time (and that may be a big assumption), Disney should be attracting the more patient customers while Universal gets an impatient clientele.  It is unclear about which group would be more profitable to serve. Universal is getting people who have the cash to avoid waiting but is also bundling a lot of extras in their package. Disney customers may not be willing to pay for priority service but may generate more in park spending.