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.)

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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:

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Queuing for the Supreme Court

The Supreme Court hears a major civil rights case today on same-sex marriage. As you might surmise, there are a lot of folks with a very personal stake in its outcome. Many of those people might want to actually witness history and be present when the case is argued before the court. As Slate tells it, that isn’t so easy (Not All Must Rise, Apr 27).

For many Americans, the arguments in the marriage equality cases will be the most important inflection of the court into the very core of their homes, their lives, and the status of their families. Many of those Americans started lining up Friday, four days before arguments that will take place on Tuesday morning, for a chance to witness one of the most important moments in Supreme Court history.

Many other Americans simply paid a line-standing service $50 an hour to secure a place for them.

Starting Friday, if you or your law firm had $6,000 to shell out, a paid proxy—a company such as LineStanding.com or Washington Express—would arrange to have someone hold your place in line. The fact that some of these line-standers appear to be either very poor or homeless and may have to stand in rain, snow, sleet, or hail so that you don’t have to irks at least some people who feel that thousands of dollars shouldn’t be the fee to bear witness to “Equal Justice Under the Law”—the words etched over the door to the Supreme Court building—in action.

The article goes on to note that because the court hearing room is small and various seats are reserved for guests of the justices, media types and so on only 70 or seats are available for the general public. Yesterday morning, Slate reports that 67 people were already in line and that many weren’t overly forthcoming when asked for whom they were waiting.

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What?! No Dessert?

I have a sweet tooth. I am rarely too full to pass on dessert. However, an article in Washingtonian magazine suggests that restaurants (at least those in metro DC) may inadvertently be saving people like me from ourselves by offering less attractive options for dessert or even foregoing offering dessert all together (Why DC Restaurants No Longer Care About Desserts, Feb 4). The interesting part of this is that the retreat from dessert is largely driven by economic and operational concerns.

In the post-crash economy, pastry chefs are no longer seen as essential employees but as pricey appendages.

“It’s not just saving the salary,” one restaurant owner told me. “It’s saving the space, too. To have a good pastry program, you need a designated area of the kitchen, you need a place to store the ingredients. The 10,000-square-foot restaurant has become the 7,000-square-foot restaurant. Everything’s smaller now. There isn’t the space.”

More and more, the task falls to chefs and line cooks who, lacking any background in baking, have contrived to fill their menus with simple, quick-fix solutions. Puddings, custards, panna cotta (an Italian term for what is essentially Jell-O made with cream) don’t require a lot of effort or expense; all can be made in the morning and stashed in the walk-in refrigerator.

Some restaurants have given up entirely. “More restaurants than you would think” are outsourcing their sweets to independent bakers, says Mark Bucher, who owns Medium Rare, with locations in Cleveland Park and Barracks Row. Bucher’s is among them. “You give them your recipes and they’ll make them for you. That way you can still say that they’re your desserts.”

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What happens when customers are given the option of jumping the queue at a call center?

If you live here in the States, you may never have heard of the telecommunications company EE. But they are a major player in the United Kingdom with brands like Orange and T-Mobile. According to their Wikipedia page, they have around 28 million customers. EE has a new service offering that I must admit is kind of intriguing. Here is how it is described on their web page.

Priority answer service

From 6 August 2014 we’re also introducing a priority answer service. It’s available to all customers on pay monthly and SIM only plans.

Our priority answer service gives you the choice to get support even faster for just 50p per call when you call 150 and want to speak to customer services. It’s always available so if there’s a queue, you can be moved towards the front – ideal if you’re in a hurry.

How much it costs

The charge for this is 50p. If you’re on a plan that includes standard charging for customer services at 25p, you’ll only be charged an extra 25p for priority answer – so the total for the call with priority is 50p.

The 50p charge applies regardless of how long the call lasts.

To save the Americans the trouble of Googling this, 50p works out to about 84¢. So what do you think happens when customers are given the chance to jump the queue for less than a buck?

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New dimensions in pricing package delivery

What should determine how much it costs to ship a box? Clearly the weight of the package matters as does the distance it travels. But what about its physical dimensions? Does it matter whether a one-pound object takes up a cubic foot of space or two cubic feet?

Apparently, FedEx thinks it matters and has announced that it will be tweaking its pricing policies accordingly (Web Shoppers Beware: FedEx to Charge by Package Size, Wall Street Journal, May 7).

Instead of charging by weight alone, all ground packages will now be priced according to size. In effect, that will mean a price increase on more than a third of its U.S. ground shipments. …

[The change] would likely greatly affect bulky but lighter weight items like toilet paper and diapers, which many people have delivered on a regular basis, as well as Zappos.com shoes, which ship for free, including free returns. Indeed, shoe shoppers are encouraged to buy multiple pairs, keep what fits and return the rest. Avid Web shoppers do the same with sweaters, dresses, and jackets at retailers like J. Crew, Banana Republic, and Macy’s.

This graphic gives an idea of the kind of price increases that are in play. Clearly items that are not very dense are going to be seeing a stiff price hike.

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Managing Black Friday

I have a long-standing interest in Black Friday — less because I want to go shopping but more because it poses some interesting questions on how firms compete and how they manage customers. The news this year is that Black Friday is creeping evermore into Thanksgiving proper as retailers keep moving up their opening times. So why are they doing that? Two posts on Businessweek.com put forward theories. The first posits that this is being driven by customer segmentation (The Game Theory Behind Macy’s Thanksgiving Opening, Oct 15).

Traditions are being trampled on by the Corporate Retail Complex! Of course, consumers don’t have to go. Some won’t, and that’s precisely what the strategy folks at Macy’s are betting on.

The purists scandalized by the thought of shopping on the holiday itself aren’t likely to avoid Macy’s altogether. And with the die-hard bargain-hunters swarming the stores on Thursday, Friday shopping will likely be much more pleasant for those who are a little less committed.

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Cafeterias, queues, & Goldman Sachs — yes, I said Goldman Sachs

In the basement of the Kellogg School, there is a cafe. It’s a busy cafe, which says more about the available alternatives than about its absolute quality. Because it gets busy and because a good number of its customers are polite enough to walk out of class five minutes early to beat the crowd, I and my colleagues have learned that it is a much better to plan to go down for a sandwich a little before noon than a little after noon. According to CNBC, Goldman Sachs faces similar issues with queuing in its cafeteria and it actively tries to manage the system (The creepy capital efficiency of Goldman’s cafeteria, Oct 17).

The most crowded time of the day to eat lunch is, naturally, during lunch time. For most people, this falls around noon. This creates the phenomenon of the lunchtime rush hour. You know this all too well if you’ve ever tried to stop in your local chopped salad place at, say, 12:30 in the afternoon.

Goldman didn’t like the idea of its people waiting on long lines to get their lunch. People are capital to Goldman. It wants to use its capital efficiently. Standing on line waiting for dumplings or salad or a burger is not an efficient use of Goldman’s capital. …

The cafeteria has a set of timed discounts. If you show up in the cafeteria before 11:30 or after 1:30, you get a 25 percent discount on your food. Goldman incentivizes employees to avoid the rush hour.

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Gamification and congestion

Congestion is a common problem in services. A large number of customers put demands on the system all at the same time and delays ensue. A few weeks ago we posted about GymFlow, an app that tries to address congestion at health clubs by providing better information. GymFlow doesn’t tell you can’t go to the gym at 5:30. It just points out that the gym is going to be a whole lot less crowded if you got 3:30.

Now the Wall Street Journal has an article on a different way to ease congestion by relying on games and lotteries (Gaming the System to Beat Rush-Hour Traffic, Aug 1). It reports on the work of Balaji Prabhakar, a Stanford Computer Science professor, who has tested out various systems to get commuters to tweak their travel habits. The article’s author discusses his approach here:

[audio http://podcast.mktw.net/wsj/audio/20130801/pod-wsjwnwesselcapital/pod-wsjwnwesselcapital.mp3]

Here is a summary of one of Prabhakar’s at his place of employ.

His team recently brought the technique home with a federally funded experiment to help Stanford keep its promise to Santa Clara County to alleviate rush-hour traffic. The 3,900 participants—a significant share of the relevant pool of 8,000 parking-permit holders—installed devices on their cars (soon to be replaced with a smartphone app) and got points for arriving and leaving an hour before or after the rush hour.

The popularity of the Chutes & Ladders-like game stunned Stanford’s director of parking and transportation, Brodie Hamilton. He doubted people would take the time to spin the electronic dice to play it, and insisted that Mr. Prabhakar include an auto-play feature. But, Mr. Hamilton says, “I have people on my staff who play it regularly. People are really into it. Balaji was right!”

About 15% of the trips taken by participants have shifted away from rush hour. Students tend to come and leave later; staff tend to come and leave earlier. Smartphones make all this easier to implement: A new mobile app tracks bikers and walkers and gives them points, too.

Those who commuted off-peak got points to play in the on-line game with a chance to win cash. We are not exactly talking a year’s tuition here. The program’s website touts “random cash rewards from $2 to $50.”

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Should airlines show you all available seats on a flight?

Check out these two images from the Wall Street Journal (Airline Seats Available for Elite Fliers Only, July 12). Both show available seats on an American Airline flight from LA to New York. The first shows what’s available if you lack any status in American’s frequent flyer program. The second shows what seats are offered to a flyer with sufficient status in the frequent flyer program.

To be clear, these seating charts are for the same flight at the same time — all that differs in one’s frequent flyer status. Further, while this example comes from American, other airlines play similar games.

Unlike American, Delta Air Lines shows the Preferred seats it has held back for elite customers, but doesn’t allow regular customers to book them until 24 hours before departure. At that time, Preferred seats are offered for a fee to nonelite-level customers.

US Airways also blocks seats for elite-level customers and labels them Preferred. The airline sells what it calls Choice seats in rows near the front of the cabin for $5 to $99 one-way that don’t have extra legroom but do have early boarding privileges. On the whole, US Airways says 9.5% of its coach seats are labeled Choice. Preferred, Choice and exit-row seating, which is sometimes sold for a fee, account for an average of 30% of coach seats on the airline’s planes.

Those seats open up to customers without seat assignments who don’t want to pay starting 24 hours before departure, US Airways said.

Not to surprisingly, a lot of customers find these games rather annoying. In the American example, there is one seat to be had for free for a non-elite flyer in what can only be described as a crappy location. The article has this wonderful quote “American says it doesn’t think blocking open seats from view pressures customers into paying for extra-legroom or Preferred seats.” which makes you wonder whether the folks at American are naive or dishonest.

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