International Journal of Hospitality Management 28 (2009) 446453

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International Journal of Hospitality Management

journal homepage: www.elsevier.com/locate/ijhosman

Application of revenue management practices to the theme park industry

Cindy Yoonjoung Heo a,*, Seoki Lee b
a
b

School of Tourism and Hospitality Management, Temple University, 1700 N. Broad Street, Suite 201, 215-204-5612, United States
School of Tourism and Hospitality Management, Temple University, 1700 N. Broad Street, Suite 201-F, 215-204-0543, United States

A R T I C L E I N F O

A B S T R A C T

Keywords:
Revenue management
Yield management
Theme park
Pricing

Revenue management (RM) has been an essential strategy to maximize revenue for many capacitylimited service industries. Considering the common industry characteristics of traditional RM industries,
the nature of the theme park industry suggests potential for enhancing revenue by exercising a variety of
RM techniques. This study suggests practices for theme park operators for successful RM application. In
addition, this study examines how customers perceive RM practice in the theme park industry compared
to a traditional RM industry, hotel industry. The ndings indicate that customers seem to perceive RM
practice in the theme park industry as relatively fair practices as similarly perceived for the hotel
industry. The ndings are encouraging for the theme park industry because a relatively similar level of its
customers perceived fairness of the RM practice compared to the hotel industry suggests that adoption
and implementation of the RM practice has great potential to become successful as it has been in
traditional RM industries, such as hotels.
2009 Elsevier Ltd. All rights reserved.

1. Introduction
Revenue management (RM), or yield management, is an
accepted, essential strategy to maximize revenue for many
capacity-limited service industries (Cross, 1997; Berman, 2005;
Chiang et al., 2007). RM is a demand-based pricing strategy to
control for optimal inventory levels and to forecast real-time
demand (Choi and Mattila, 2006). The airline industry successfully
invented, implemented and practiced RM after deregulation in
1978, and ever since, more service industries, such as hotels, rental
car agencies, and restaurants, began adopting the practices. Airline,
hotel, and rental car industries represent traditional RM applications because they share similar characteristics (e.g., perishable
service or product, xed capacity, distinct customer segmentation,
and price differentiation) (Chiang et al., 2007) and abundant
published research considers various RM issues for such industries
(Weatherford and Bodily, 1992; Kimes et al., 2002; Kimes and
Wirtz, 2003; Kimes, 2004, 2005; Kimes and Thompson, 2004;
Susskind et al., 2004; Berman, 2005).
Considering the common industry characteristics of traditional
RM industries, the nature of the theme park industry certainly
suggests potential for enhancing revenue by exercising a variety of
RM techniques. Similar to other industries already practicing RM,
the theme park industry also has perishable inventory, high xed

* Corresponding author. Tel.: +1 215 204 5612.

E-mail addresses: yheo@temple.edu (C.Y. Heo), seokilee@temple.edu (S. Lee).
0278-4319/$ see front matter 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ijhm.2009.02.001

and low variable costs, variable demands and segmentable

markets. However, RM strategies, for the theme park industry,
must be carefully developed, taking into additional consideration
unique characteristics. For instance, a theme parks capacity is
relatively more exible than that of hotel or airline industries. Also,
in general, visitors do not make reservations in advance for theme
park admission.
While the theme park industry has potential for applying RM
strategies, research on RM issues in theme park industry is scarce
and the current study attempts to ll that gap; therefore the purpose
of this study is to suggest RM strategies suited to the theme park
industry. To establish a basis for discussion, a delineation of the basic
attributes of the theme park industry and examination of current
pricing strategies are necessary rst steps. Then RM application for
the theme park industry will be developed by incorporating two
different types of characteristics: commonly shared characteristics
with traditional RM industries and unique characteristics of the
theme park industry. In addition, customers perceptions of RM in
the theme park industry will be examined and discussed compared
to a successful RM industry (i.e., hotel industry) because such
perceptions are as important as industrys characteristics for
successful implementation of RM (Chiang et al., 2007); If a customer
views RM practice as unfair, the increased revenues resulting from
RM may be temporary (Kimes, 2002). In summary, by proposing
potential applications of RM for the theme park industry and
empirically comparing customers perceived fairness on RM
between the theme park and hotel industry, this study will provide
theme park industry practitioners with practical insights and tools.

C.Y. Heo, S. Lee / International Journal of Hospitality Management 28 (2009) 446453

2. Literature review
2.1. Theme park industry
The literature on theme parks is limited and only few proposed
denitions of theme parks can be found. Pearce (1988) described a
theme park as extreme examples of capital intensive, highly
developed, user-oriented, man-modied, recreational environments. This study denes theme park as an aggregation of themed
attractions, including architecture, landscape, rides, shows, food
services, costumed personnel, and retail shops. Theme parks, in
general, apply themes to provide visitors with interesting
experiences different from daily life. The earliest theme parks in
the US began operation in the last half of the 19th Century (Graft,
1986). The rst American amusement park was the World
Columbian Exposition, held in Chicago in the 1893 (Weinstein,
1992). In 1897, Steeplechase Park, the rst of three signicant
amusement parks opened on Coney Island in Brooklyn, New York
(Weinstein, 1992). Disneyland, introduced in the mid-1950s in
Anaheim, California as a safe, clean, aesthetically appealing,
imaginative entertainment facility, had a design specically
catering to both children and adults (Milman, 1991). Theme parks,
especially regional parks, spread endemically across the US in the
late 1960s and 1970s. Since then, in the 1980s and into the 1990s,
most parks were developed to be destination parks (Economics
Research Associates, 1998a,b). However, the theme park industry
in the US is no longer experiencing high growth in terms of new
development. Because major theme park operators have few
signicant opportunities for new development in the US market,
they do not have new development plans in the US (Mitrasinovic,
2006).
The attendance at theme parks increased steadily during the
1980s (Braun and Soskin, 1998) and the growth continued,
averaging 35% throughout the 1990s, even during the 1990
1991 economic slump (Mintel Market Research Reports, 2006).
However during the recession of 2001, year-on-year growth rates
slowed to less than 1% and the theme park market growth was
below the 1990s average by 2002 (Mintel Market Research
Reports, 2006). But after a short struggle, caused by poor economic
conditions, US theme park attendance increased by 1.8% in 2004 to
reach 328 million (Mintel Market Research Reports, 2006).
Worldwide theme park attendance climbed by 2.2% in 2006,
showing stable to moderate growth. Total visits to the top 20 parks
in North America in 2006 increased 1.5% from the previous year;
this gure is a far slower growth pace than achieved in the past.
Although the theme park industry has enjoyed steady attendance
growth in the past several decades (Milman, 2001), the US theme
park market has entered a mature stage (Formica and Olsen, 1998;
Wong and Cheung, 1999). The attendance growth rate in the US
between 2000 and 2005 was the slowest compared to other
regions of the world, as Table 1 illustrates. The mature theme park
business became highly dependent on a higher proportion of
return visitors and faced new competition from other leisure and

447

tourism products, such as video games and online entertainment

(Braun and Soskin, 1998).
Several research areas, one of which is the cultural and social
aspects of theme parks, have been examined in the theme park
literature over the past two decades. Moscardo and Pearce (1986)
considered the potential role of historic theme parks in providing
domestic tourists with an authentic insight into their history and
culture. Supporting this notion is that Australians, traveling
domestically, perceive the historic theme park experience as an
essential aspect of the motive for visiting theme parks. Also
research showed that perceived authenticity is an important
element for satisfaction with the historic theme park experience
(Moscardo and Pearce, 1986). Mills (1990) analyzed the cultural
signicance of the growth of theme parks in the US and Europe.
Milman (1991) investigated residents attitudes toward and
participation patterns in local theme parks as a leisure activity
through data from central Florida residents.
In one of several research projects considering trends in and the
future of the theme park industry, Graft (1986) argued that the
entertainment business should keep itself fresh, exciting and
imaginative in order to avoid losing its appeal. Thus, the theme
park industry needs to continue to change by adapting to new
realities. Theme park operators have to remain mindful of the
futures impact which results from changes in demographics,
technology, governmental policy and social and economic conditions (Graft, 1986). Formica and Olsen (1998) suggested current
and future trends in the theme park industry and how to manage
the threats and opportunities caused by the environmental
changes of the 1990s.
Other studies also provided ndings from strategic and
marketing perspectives. Roest et al. (1997) investigated the role
of cost and benet in customers satisfaction and dissatisfaction
with theme park operation, and also tested differences in costs
and benets among theme parks and among visitor segments.
The results indicated that families with young children differed
from singles in desired search benet. Milman (1991) examined
marketing implications such as market identication and
segmentation, and McClung (1991) addressed multi-segmentation strategies. Ford and Milman (2001) demonstrated service
management concepts that have been applied by George C.
Tilyou, who opened Steeple Chase Park. Tilyou has been called
the father and king of the American amusement park, and his
management concept still guides operators of theme parks today
(Ford and Milman, 2000). Despite all this research, to date,
empirical research is lacking for pricing strategies for the theme
park industry.
Although the theme park industry has a long history of
extensive research, few investigations addressed RM concepts and
practices for this specic industry. Berman (2005) stated that
theme parks are one of the potential service industries for which
RM principles may be successfully applied, but specic development of an RM application for the theme park industry is yet to be
forthcoming.

Table 1
Attendance at theme parks worldwide, by region, 20002005 (in millions).
2000

2001

2002

2003

2004

2005

Change 20002005

US
Asia-Pacic
Europe, the Middle East and Africa
Latin America
Canada

317
210
121
30.0
12.4

319
223
123
30.5
12.6

324
235
129
31.3
12.8

322
232
128
30.6
12.5

328
236
131
31.0
13.6

334
243
134
31.6
13.9

+5.4%
+15.7%
+10.7%
+5.3%
+12.1%

Total

690.4

708.1

732.1

725.1

739.6

756.5

+9.6%

Note: Figures are from PricewaterhouseCoopers Global Entertainment and Media Outlook: 20052009, US Census Bureau, International Database, Theme Park Tourism
International.

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C.Y. Heo, S. Lee / International Journal of Hospitality Management 28 (2009) 446453

2.2. Revenue management

RM refers to selling perishable service products to the most
protable mix of customers to maximize revenue (Cross, 1997).
These strategic processes contain rational pricing for controlling
perishable assets across market segments to maximize revenues
(Cross, 1997; Baker and Murthy, 2002). As exemplied by
American Airlines, reporting an approximate 45% increase ($1.4
billion over 3 years) in revenue (Cook, 1998), and Hertz car rental,
reporting increased average revenue per rental by 5% (Carroll and
Grimes, 1995) from employing RM, research showed, in general,
RM increases a companys protability (Hanks et al., 1992; Smith
et al., 1992).
RM originated in the airline industry in the 1970s, and
subsequently has had wide application in travel and hospitality
industries such as hotel and rental car businesses. Extensive
research of the use of RM in various other industries have included
restaurants (Kimes et al., 1998, 2002; Kimes, 1999), casinos
(Hendler and Hendler, 2004), golf courses (Kimes, 2000; Kimes and
Schruben, 2002), resorts (Kasikci, 2006; Pinchuk, 2006), cruise
lines (Hosean, 2000), hospitals and health care providers (Lieberman, 2004).
RM traditionally involves segmenting customers, setting prices,
and controlling capacities to maximize the revenue generated from
a xed capacity (Kimes, 1989). Kimes (1989) identied a number of
preconditions for successfully using RM and factors for the
effective operation of RM in practice. In general, RM suits service
industries with xed capacity, variable demand and a segmentable
market (Kimes, 1989). In addition, advanced booking also needs to
be considered as another prerequisite for RM to be successful.
Reservation systems can help manage demand forecasting because
such systems can calculate inventory units in advance of
consumption. As Kimes (1989) stated, RM is basically a form of
price discrimination and market segmentation. Price discrimination helps a company to increase revenues in two ways: By
charging premium prices to the less price-sensitive market
segments, the company can gain greater revenue, and at the same
time charging discounted prices to a price-sensitive market
segment to encourage increased sales of the service that offset
the price reduction. For example, in the hotel industry, business
travelers are a recognizable, price-insensitive, market segment and
leisure travelers are known as the price-sensitive market segment.
Therefore, successful application of RM concepts requires distinct
market segments or particular market demands which appropriately lead to differential pricing.
However, customers perceptions of RM should be considered
along with industries characteristics for successful implementation of RM because customers perceptions and acceptance lead to
their behaviors that have a direct inuence on the performance of
RM (Chiang et al., 2007). Most companies set prices for their
products or services based on the cost of producing, selling, and
delivering them. However customers assign a certain value to
goods and services based on their own unique needs and desires,
not on cost for the products or services (Cross, 1997). A customers
perception of the value of the product depends mainly on
availability of alternatives, amount of disposable income, and
the urgency or need for the product or service (Zeithaml, 1988).
Only when the value perceived by customer matches or exceeds
the price, do customers execute a purchase (Cross, 1997). Core
principles of RM are based on customers perceived value for a
service or a product, not on cost. A product may be priced higher
than its cost if customers perceptions dictate the desired item or
service is worth the price.
Perceived fairness has been studied extensively as a measure of
price acceptability in marketing literature (Lichtenstein et al.,
1988; Campbell, 1999; Thaler, 1985; Maxwell, 2002). Perceived

fairness is found to be an important aspect for sustaining customer

satisfaction, loyalty, and long-term protability (Kimes and Wirtz,
2003). Campbells study (1999) showed that perceived unfairness
has a negative inuence on customers shopping behavior. The
knowledge of how a price has been determined has a signicant
effect on perceptions of pricing fairness, and consequently,
willingness to purchase (Maxwell, 2002). As Kimes (2002) pointed
out, RM practices have potential for the theme park industry as
long as customers view such practices as being fair. If customers
regard RM practice as representing unfair policies, RM practice
may lead to customers dissatisfaction, and therefore, the increased
revenues resulting from RM may not be long-term (Wirtz et al.,
2003).
The core of RM for the theme park industry is the concept of
demand-based pricing and optimal attendance level strategies.
This study discusses the applicability of RM prerequisites to the
theme park industry and examines customers perceptions of RM
in the theme park industry as compared to the hotel industry.
3. Application of revenue management to the theme park
industry
The theme park industry shares several common characteristics, such as relatively variable demand, perishable inventory and
cost structures with industries traditionally employing RM. And
thus, theme parks, generally, display the essential conditions for
applying RM effectively. However the theme park industry also has
unique characteristics distinguishing it from traditional RM
employing industries. For example, theme parks have relatively
exible capacity and advance-purchase reservations are not usual.
Therefore, successful application of the RM for the theme park
industry requires modications which consider both theme parks
similar characteristics with traditional RM industries and its
uniqueness. Table 2 presents a comparison of characteristics
between industries traditionally employing RM and the theme
park industry. Subsequent sections discuss these characteristics in
details.
3.1. Perishable inventory
Theme parks operating revenues originate primarily from sales
of admission tickets, with sales of food, beverages, and merchandise providing additional income. For example, Six Flags generated
approximately 54% of its revenue from sales of admission tickets in
2006 (Business Week, 2007) and 52.4% in 2007 (Six Flags 10-K,
2008). Other revenue sources such as food, beverage and
merchandise sales strongly related to admission ticket sales,
making this revenue source a determinant of total revenue.
Potential admission tickets sales for a specic day cannot be stored
for other days, and thus, unsold tickets have no value beyond a
particular day. Unsold tickets represent lost revenue; therefore
theme parks must strive to minimize unsold tickets and sell the
greatest number of admission tickets in a given time period to
maximize revenue. RM is one of the effective techniques to solve
this challenge. For example, the theme park industry can attract
price-sensitive customers and stimulate market growth by offering
discounts during the low attendance season, a typical RM practice.
RM practice also can help reduce unsold tickets, thereby
generating more revenue.
3.2. Cost structure
Developing a theme park requires substantial capital investment in terms of land and equipment (Formica and Olsen, 1998).
Furthermore, each year parks need signicant investment to add
new attractions to entice the required level of attendance,

C.Y. Heo, S. Lee / International Journal of Hospitality Management 28 (2009) 446453

449

Table 2
Comparison of characteristics between traditional RM industries and the theme park industry.
Characteristics

Ideal applications of RM

Theme park

Degree of
common feature

Perishable inventory
Cost structure

- Inventory is perishable
- Low cost of marginal sales in comparison
to marginal revenues
- High xed cost
- Variation in demand is signicant
- Demand is somewhat predictable
- Market is capable of being segmented
- Signicant differences in price elasticity
by market segment
- Capacity is xed
- Service providers have excess capacity at certain
times and excess demand at other times

- Inventory is perishable
- Low cost of marginal sales in comparison
to marginal revenues
- High xed cost
- Variation in demand is signicant
- Demand is somewhat predictable
- Market is cable of being segmented
- Differences in price elasticity by market segment

Similar

Demand
Segmentable market

Capacity limit

Reservations
made in advance

- Service is reserved by customers in different

time periods
- Uncertainty of actual usage despite reservations
creates possibility of unsold seats

especially repeat visitors (Dietvorst, 1995). Fixed costs do not vary

with the number of attendees, and will be incurred even during
slow seasons. On the other hand, the theme park industry
experiences a very low marginal cost increase for serving
additional customers. The theme park industry, characteristically,
encounters high xed costs and comparatively low variable costs.
Every attendee represents prot once the park reaches the
breakeven point and the costs per visitor in the slow seasons
are much higher than in the highly active seasons. This cost
structure explains why the theme park industry should adopt RM
practices to increase operational efciency because the low
marginal cost of sales allows for the exibility of discounting
during slow seasons, and price is the most exible element of
strategy in that pricing decisions can be made relatively promptly
and at low cost when compared to other elements of marketing
strategies (Avlonitis and Indounas, 2005).
3.3. Variable, but predictable demand
Seasonality is one of the unique, indeed a major problem, that
tourism industry has to face (Jang, 2004). Bar-On (1976)
investigated seasonality and suggested that the main causes of
seasonality are natural and institutional. Natural factors originate
from regular uctuations of the weather, and institutional factors
are related to several human activities like vacations. Nadal et al.
(2004) addressed two basic elements that cause seasonality in
tourism. The rst element relates to temporal variations in natural
phenomena, particularly those associated with climate and season
of the year. The second element, seasonal demand, depends on
social factors and policies concerning: specic customers, legislated holidays, school schedules, industrial and public holidays,
festivals, and other events that are usually based on historic
conventions (Nadal et al., 2004).
These two elements are also applicable to the theme park
market which is a part of tourism industry. Theme park operations
are highly seasonal like other hospitality and tourism industries.
For example, Six Flags normally generates more than 85% of its
revenues during the second and third quarters of a calendar year
(Business Week, 2007) with the most active period being between
Memorial Day in May and Labor Day in September (Six Flags 10-K,
2008). In addition, variation in demand is signicant by the season,
day of the week, and time of day (Ahmadi, 1997). For example,
most theme park visits occur on weekends rather then weekdays,
and visitors usually arrive early in the morning. The success of RM
relies on an accurate demand forecast. Although the demand for
theme park entertainment uctuates, customers demand for

- Capacity is relatively exible

- Theme parks have excess capacity during
low-demand seasons and excess demand at
high-demand seasons or on weekends
- Small percentage of or no reservations are
made in advance
Different

theme parks is predictable based on the previously identied basic

elements of seasonality. In addition theme park operators can use
attendance history observations to forecast demand accurately.
3.4. Segmentable market
The fundamental objective of RM strategies is to increase
revenue by adjusting prices to ll all available capacity (Berman,
2005). This price differentiating strategy is applicable to service
industries because of customer heterogeneity, which allows the
identical product to be sold to customers at a variety of prices
depending on their price elasticity (Tellis, 1986). Undoubtedly the
customer base includes those who are willing to pay a premium for
the convenience of the high-demand season, and others who prefer
to change the day of a visit to save some money.
The airline industry segments customers on each route into
various groups and sets a different price for each group. The
allocation of seats per class and the ticket price per class are the
keys to maximizing airlines yields. For example, segmenting
theme park customers can be according to demographics,
geography, ethnics or behavior: local residents are apt to visit a
park in the afternoon, and seniors are not constrained to theme
park visits during holidays. Additional divisions are also possible:
an individual whose profession requires shift- or weekend work
generally has free time during weekdays and is thus a potential
weekday theme park visitor. Theme park operators need to
discover each markets perceived value for a visit based on the
season of the year, the day of the week and the time of the day. The
key to this segmentation is the fact that customers are willing to
pay variable prices to visit during a specic time. The theme park
industry should distinguish between time-sensitive and pricesensitive types of customers, know the requirements of each, and
develop different pricing strategies to accommodate various types
of customers. Some theme parks use several RM practices such as
discount prices for children, groups and joint-entry tickets;
however application of discount promotions to attract a specic
segment has so far been mostly tactical.
3.5. Capacity limit
While industries traditionally using RM practices have xed
capacity, such as seats on an airplane and rooms in hotel, capacity
for theme parks is relatively exible. However, capacity control is a
critical issue for theme park operators. Excessive numbers of
attendees over an optimal capacity during the high-activity season
or the high-activity time of day cause problems. When a signicant

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C.Y. Heo, S. Lee / International Journal of Hospitality Management 28 (2009) 446453

number of attendees arrive at the same time in the morning at the

entrance of the park, congestion is the result, and waiting
customers become frustrated. During the periods of greatest
activity, the more popular rides experience queues of waiting
customers, which can compound dissatisfaction. Guests in-park
per capita spending likely decreases if excessive numbers of
attendees clog the park. Overuse of facilities increases maintenance costs, and congestion raises safety issues and decreases
attendees satisfaction.
Theme park operators introduced special pass programs for
efcient queue management, expecting to reduce customers
dissatisfaction resulting from long-wait lines. For example, Disney
provides FastPass an advance-booking system, that allows a
limited number of customers reservations for one attraction at a
time, and Universal Studios offers Express Plus Pass that allows
customers to skip the regular lines at participating rides and
attractions. And several Six Flags Parks sell the Flash Pass to
customers who want to avoid standing in lines. The prices for those
services vary, depending on date, level of service, or number of
riders. Those programs cut waiting times for customers who
purchase special passes and facilitate customers ow in the theme
parks. However the theme park operators do not limit the number
of special tickets. If the total number of attendees exceeds the
optimal capacity, congestion and long-wait line are inevitable.
Therefore, theme park operators need to restrict the number of
attendees during the high-demand seasons to avoid customer
dissatisfaction. By charging premium prices to the time-sensitive
target market, price-sensitive customers may make a reservation
early or change their visitation schedule. Capacity limitation will
help theme park industry attain not only capacity utilization but
also added protability. Price-sensitive customers may be charged
a low price, while customers who are willing to pay a higher price
will be levied such a price (Avlonitis and Indounas, 2005). In
addition, with limited product inventory, capacity or limited
service, customers tend to perceive higher value for the scarce
commodity. Accordingly, attendees willingness to pay a price
premium increases. A theme park is able to increase revenue per
capita and total revenue, and reduce maintenance costs by
practicing RM strategies.
3.6. Advance-purchase reservations
Today, information technologies (IT) such as Internet and ecommerce have become crucial factors for business success for
industries traditionally practicing RM, and these IT trends will
continue for the predictable future (Chiang et al., 2007). RM
practicing industries use computerized reservation systems to
forecast demand and to calculate inventory; however, theme park
customers do not generally use reservation systems. Theme park
customers can buy admission tickets, online, in advance. But online
ticket purchases do not include choosing the date to visit.
Accordingly, pre-sold tickets do not help theme park operators
to forecast demand. Also, customers do not need to buy admission
tickets in advance for pricing purposes because the option of
advance-purchase tickets does not impact the ticket price at all
(i.e., there is no discount for an early purchase).
Theme park operators should initiate RM practices involving
reservation systems which allow forecasting demand accurately,
calculating available capacities, limiting the number of attendees
for specic times, and increasing operational efciencies. The
accuracy of forecasting has a direct impact on the performance of
RM (Chiang et al., 2007). Polt (1998) estimated that a 20% decrease
in forecasting error can increase the incremental revenue
generated from an RM system by 1%. An established reservation
system for a theme park would help more accurate prediction of
attendance. Theme park operators can control the availability of

discounts or premium admissions using statistical forecasting

techniques and mathematical optimization methods. In addition,
IT-based reservation systems can increase customers convenience
and satisfaction, when customers do not need to waste their
entertainment time by queuing at admission ticket windows.
Theme park managers also accrue benets from IT-based
reservations systems through improvement of operational efciency in terms of staff planning and facility maintenance.
Furthermore many traditional RM industries use sophisticated
pricing systems, called revenue management systems or yield
management system, which interact with reservation system and
employ techniques such as discounting early purchase, limiting
early sales at these discounted prices, and overbooking capacity
(Kimes, 1989; Lieberman, 1993). Complicated revenue management systems adjust prices according to the number of early
bookings and usually terminate reservations after exceeding the
available capacity (Desiraju and Shugan, 1999). Revenue management systems for the theme park industry provide analytical
insights that can drive revenue maximizing decisions for how
many admission tickets should be sold and at what price.
4. Customers perception of revenue management practice in
the theme park industry
RM has been extensively practiced in the traditional RM
industry, such as airline and hotel industry, and customers seem to
accept the application of RM in those industries (Kimes, 2002).
Therefore, this study compares customers perceived fairness of
RM practice in general as a demand-based pricing policy and four
particular RM practices in theme park industry with those of in
hotel industry. To collect data of the perceived fairness in the both
theme park and hotel industry, an online based survey method was
used. An invitation for participating in the survey was sent out
through email to students of a University in east coast of the U.S.
and 523 usable surveys were collected. The respondents were
asked to evaluate the fairness of demand-based pricing policy in
the hotel and theme park industry on a scale from 1 (extremely
unfair) to 7 (extremely fair), adopted from the perceived price
fairness scale used by Campbell (1999). In addition, they were
asked to evaluate how fair four pricing practices are on a 7-point
Likert scale; charging different price based on (1) timing of
reservation, (2) time of the day, (3) day of the week, and (4) season
of the year. Ahmadi (1997) mentioned that theme park attendance
levels uctuate signicantly according to the time of day, day of the
week, and season of the year. Therefore, theme parks can set
different pricing policies based on these uctuations in customers
demands. In addition, different pricing based on timing of
reservations is added to the survey, since this policy is a common
RM practice in traditional RM industries. Theme parks, as do hotels,
can charge lower prices for customers who make reservations well
in advance, and price increases as the target day comes closer.
Finally, demographic background variables (gender, age and
ethnicity) were measured.
Out of 523 respondents, male respondents were 25.4% (n = 133)
while 74.6% (n = 390) were females. Gender difference was not
found in all ve questions. The study next compares the two
industries in terms of customers perceived fairness of the ve RM
related questions, and Table 3 presents the results. In general, RM
practice as a demand-based pricing policy in both industries was
considered to be slightly fair. The mean for the hotel industry was
4.10 and for the theme park industry was 4.06 where the study
found no statistical difference between the two industries (tvalue = 0.39, p-value = 0.7). Respondents rated the fairness of the
variable pricing practice based on timing of reservation as 4.28 for
the hotel industry, and 4.01 for the theme park industry. The
difference between the two industries was statistically signicant

C.Y. Heo, S. Lee / International Journal of Hospitality Management 28 (2009) 446453

Table 3
Comparison of perceived fairness of RM practice in the hotel and theme park
industry.

Demand-based
pricing policy

Industry

Mean

t-statisticy

Hotel

515

4.10

0.39

0.70

2.53

0.01

p-value

Theme park

514

4.06

Hotel

511

4.28

Theme park

509

4.01

Season of the year

Hotel
Theme park

517
515

4.12
4.57

4.00

<0.01

Day of the week

Hotel
Theme park

509
507

4.04
4.22

1.62

0.11

Timing of
reservation

t-test assumes equal variances for the two samples.

(p-value = 0.01). This nding is not surprising because the theme

park industry does not extensively utilize the reservation system
whereas the opposite is true for the hotel industry. Variable pricing
practice based on season of the year was rated more fair in the
theme park industry (mean value = 4.57) than hotel industry
(mean value = 4.12); the difference was statistically signicant (pvalue = 0.00). For the variable pricing practice based on day of the
week, the perceived fairness was higher in the theme park
industry, but the difference between the hotel and theme park
industry was not statistically signicant (t-value = 1.62; pvalue = 0.11). While the pricing practice based on the time of
day is applicable to the theme parks, the practice seems not
realistic for the hotel industry. Therefore, t-test was not performed
to compare the two industries for this practice. For the theme park
industry, the practice based on time of the day is found to be
perceived as fair as the other pricing policies (mean value = 4.06).
The ndings indicate that customers seem to perceive RM
practice of the theme park industry as relatively fair practices as of
the hotel industry. The ndings are encouraging for the theme park
industry because a relatively similar level of its customers
perceived fairness of the RM practice compared to the hotel
industry suggests that its adoption and implementation of the RM
practice has great potential to become successful as it has been in
the traditional RM industry such as the hotel industry.
5. Implications
5.1. Implications from the empirical analysis
This study has presented two main themes: (1) proposing
applications of RM to the theme park industry, and (2) conducting
an empirical analysis comparing customers perceived fairness of
RM between the theme park and the hotel industry. Although the
study did not empirically examine all of the proposed applications
of RM to the theme park, investigating customers perceived
fairness on RM practices reinforces potential of a successful
implementation of RM practice in the theme park industry.

451

Customers perceived fairness of general RM concept in the hotel

and theme park industry appears to be similar to each other.
Surprisingly, customers perceived that RM practices based on
season of the year and time of the day are even fairer in the theme
park industry than in the hotel industry, although most US theme
parks, including Disneyland and Six Flags, adopt at-rate admission all around the year. Thus, the theme park industry may
consider implementing RM practices based on season of the year
and even day of the week as basic rate fences.
Along with the variable admission pricing policy, this study
proposes that the theme park industry should apply dynamic
pricing strategies in which operators charge different prices based
on the timing of a purchase, just as airlines or hotels currently
practice. However, survey ndings suggest that customers
perceive RM based on timing of reservation in theme park is not
as fair as in the hotel industry. Based on the nding, theme park
operators should nd a way to change customers perception about
the timing of reservation. However, once theme parks start
implementing an advance-purchase reservation system as proposed by this study and as more customers become familiar with
the practice, the perception will likely change accordingly.
5.2. Implications from the proposed applications of RM
Table 4 summarizes suggested practices for theme park
operators for successful RM application. Strategically applied,
RM should comprise considerations of not only increased revenue
for the company but also greater satisfaction for the customer
(Kimes and Wirtz, 2003) because customers satisfaction is
ultimately the key to long-term success (Roest et al., 1997).
Customer dissatisfaction rates have a signicant relationship to
long waiting times and congestion; thus maintaining the optimum
level of attendance in a park becomes a critical task for the theme
parks operator. To accomplish this goal, the suggestion is that
theme park operators limit the number of attendees during the
popular seasons. This practice will enable theme park operators to
increase operational efciency with shorter waiting times and less
congestion. Also, the practice will help the operators not overuse
facilities and rides, and therefore, reduce maintenance costs along
with possibly extending intervals between renovations. Consequently, the overall level of customer satisfaction will improve.
Some parks in Asia currently practice an attendee limitation policy.
For example, Caribbean Bay of Samsung Everland, a water park in
South Korea, limits the number of attendees during the highdemand season to maintain attendees quality of experience and
safety. Since theme park attendees are aware of the attendee
limitation policy, they make reservations for attending Caribbean
Bay just as they would for concert tickets. This attendee limitation
strategy helps Caribbean Bay to position itself as a premium park in
South Korea. Tokyo Disney is another theme park that limits the
admission occasionally during high-demand periods.
The second point of signicance is that theme parks should
create variable admission price policies based on customers
demand. In general, theme parks in US charge a at-rate admission

Table 4
Suggested practice for successful RM application in the theme park industry.
Current practice

Suggested practice

Capacity control

- Queue management in parks

- No capacity limit

- Control demand with variable price

- Limit number of attendees during high-demand seasons and/or times

Pricing policy

- Flat admission rate all though the year

- Discount for specic target
- Seasonal pricing promotion

- Time-based pricing policy (pre-xed)

- Demand-based dynamic pricing strategy (variable)

Reservation system

- Presale of admission tickets through online resources

- Operate online reservation system connected with revenue management system

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C.Y. Heo, S. Lee / International Journal of Hospitality Management 28 (2009) 446453

all through the year. They have several discount policies for specic
targets, such as children, seniors, groups, and local residents and
have annual pass programs that allow members to revisit the
theme park at no additional charge for one year. If theme parks
operators have more than two parks, they also can initiate joint
park admission tickets and package programs combined with
accommodations. Theme parks can apply discounts for multiple
day tickets, such as Disneys Magic Your Way, to encourage
customers to stay longer. Furthermore, during slow seasons theme
park operators often issue discount coupons to temporarily attract
customers. However, those policies do not fully consider the
possibility of more varied price ranges to accommodate a wider
variety of customers demand levels, such as premium pricing
during high-demand seasons. By setting different pricing for each
season of the year, day of the week, and time of day (i.e.,
implementing variable admission price policies based on customers demands), theme park operators can charge appropriate
prices reecting demand differentials that maximize revenue.
Because customers do not generally make a reservation for the
theme park, they are not familiar with the RM practice in theme
park. Therefore practitioners in the theme park need to make an
effort to get customers familiar with reservation for the theme
park. By implementing the dynamic pricing strategy, the operators
can optimize capacity availability by offering appropriate discounts at the right times to stimulate demand without losing
revenues. In addition, the strategy may alleviate customers
dissatisfaction levels. Some customers may think the variable
pricing policy of the theme park is not fair which may create a
negative perception of RM; however, customers would be more
accepting of RM practices, if they perceive a certain controls over
pricing. For instance, a customer may be able to purchase a ticket
for a lower price than the price level pre-set by the theme park
operators if the customer purchases the ticket a half year ahead of
the visit. The admission ticket price will rise to full-price as the visit
date approaches. Before adopting dynamic pricing policies, theme
park operators need to determine the precise conditions for early
purchase discount and have sophisticated pricing models that
suggest appropriate prices depending on available capacity.
Therefore, to make dynamic pricing strategy work properly, ITbased reservation systems and revenue management systems are
essential. IT-based reservation systems will provide theme park
operators with information of customer demand and enable the
operators to set the best price, for a given demand level, at an
appropriate time interval between the purchase and actual visit.
Mielke et al. (1998) suggested that theme park managers
should control in-park revenue, operating cost and customer waittime as performance measures for efcient operation. Customer
wait-time is particularly important because it is a measure of the
perceived quality of service experienced by customers. RM may
help optimize all three performance measures: Properly allocating
customer demand can reduce the labor cost and customer waittime, while time-based pricing policies and demand-based
dynamic pricing strategies will increase total revenue.
6. Future research
This paper presents RM application for the theme park industry
based on the industrys characteristics and examination of its
customers perceived fairness of RM practices. Studies of customers perceived value for a theme park experience during different
seasons or times should be examined as a next step. The ndings
will help theme park operators to create time-based pricing
policies. For the future research, customers perceived value of
experience should be investigated to build a proper rate fence that
determines who pays which price. Besides timing of visitation, rate
fences for the theme park industry might include customer

characteristics (e.g., frequent customers receive a discount) and

transaction characteristics (e.g., customers who book the ticket
early receive a discount). Since theme park customers can be
segmented in various ways, research into price elasticity of
different market segments is also suggested. Last, a comparison of
different segments of the hospitality and tourism industry (e.g.,
restaurant, theme park, golf-club, gallery and museum) in terms of
customers perceived fairness of the RM practice may be
encouraged to provide a more comprehensive picture of the RM
practice in the hospitality and tourism industry as a whole.
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