Sie sind auf Seite 1von 8

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY

UTKU YILDIRIM
Prorize, LLC, Atlanta, Georgia

The amusement park is a well-known concept that describes a highly capitalized recreational environment consisting of rides, attractions, and facilities aimed toward family-oriented entertainment. Although the concept of amusement park is regarded as an American invention, the worlds oldest operating amusement park, Bakken, dates back to 1583 and is located in Klampenborg, Denmark [1]. The rst amusement park built in the United States, which is still in operation, is Lake Compounce in Bristol, Connecticut, which was opened in 1846 [2]. In 1955, Disneyland was introduced as a new amusement park concept that puts emphasis on several themes by combining architectural elements with costumed personnel, restaurants, and retail shops. In the latter part of the twentieth century, theme parks have turned into one of most visited tourist destinations. Currently, there are more than 400 amusement and theme parks in the United States. According to International Association of Amusement Parks and Attractions (IAAPA), 341 million people visited amusement and theme parks in the United States in 2007 and enjoyed more than 1.5 billion rides [2]. Number of visitors and revenue increased 14% and 42%, respectively, from 1997 to 2007. In the same time frame, amusement parks and theme parks in the United States generated $12 billion in revenues [2]. Amusement parks face increasing competition as the number of amusement parks increases and new entertainment technologies emerge. In order to attract new customers and increase repeat visits of loyal customers, theme park management needs to understand and manage customer expectations.

To that end, theme parks are collecting more information about their customers, including but not limited to ride selection, food and beverage choice, and shopping habits through the use of cutting edge technology. Operations research is uniquely positioned to take advantage of this explosion of data. Customer behavior inside the park can be tracked and modeled with the goal of improving customer experience by reducing the wait time at attractions or supporting facilities (such as food and beverage locations). Optimizing the throughput of each facility based on the level of demand can also serve to improve operational efciency. Lastly, pricing and revenue management techniques can be used to match customer demand segments with revenue-maximizing ticket prices. The main purpose of this article is to provide a review of operations research models applied to the amusement park industry. Although there is a long history of research on the marketing and strategic management of theme parks, literature on applications of operations research to the amusement park industry is limited. The remainder of the article is organized as follows: First, we give an overview of simulation techniques used in the design of rides and management of the wait time associated with rides. Then we concern ourselves with the intelligent management of park resources to increase visitor satisfaction via utilization of optimization techniques. The next two sections provide an overview of revenue management tactics that can be applied to pricing tickets effectively to prevent revenue leakage and to ancillary revenue sources. Since theme park and amusement park possess similar characteristics except the concept of theming used in theme parks, these terms are used interchangeably in the article. RIDE DESIGN AND MANAGEMENT In a survey completed by IAAPA, rides are listed as the number one factor that attracts

Wiley Encyclopedia of Operations Research and Management Science, edited by James J. Cochran Copyright 2010 John Wiley & Sons, Inc.

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY

visitors to theme parks, and 46% of people put the roller coasters as their favorite ride [1]. Visitors frequently attempt to take as many rides as possible to get the most enjoyment out of their park visits. Unpleasant consequences of high participation, such as long lines and high wait time, can be avoided by increasing the park capacity. On the other hand, construction of new rides and renovation of existing rides make up the biggest portion of the theme parks capital investment. OBrien reported that investment required for a new roller coaster is between $3 and $26 million dollar per ride [3]. Signature attractions such as Walt Disney Worlds Mission: Space can cost up to $150 million [4]. The cost of increasing an existing rides capacity can also cost millions. For example, the renovation of the Finding Nemo ride cost Disney nearly $100 million [4]. Hence, a ride designed to handle maximum expected demand and avoid long lines requires a massive initial investment that may lead to wasted/idle capacity. Theme park management can utilize Operations research models to address this problem. The rst step in this process is to estimate the number of customers who will attend the park each day of the year. Since these numbers are highly variable and seasonal, a design day concept is utilized to summarize this information. A design day is a hypothetical day that possesses a specic characteristic dened by the targets of a theme park: i.e., forecasted demand for the design day has to be greater than forecasted demand for 95% of days across year. Finally, design day is employed to identify the optimal capacity of rides, facilities, and other supporting elements that balance the initial cost and customer experience. Estimation of the capacity of a ride due to complex safety regulations, theme-specic requirements, and customer mix arrival pattern is challenging. The realized ride capacity is a combination of theoretical ride capacity and throughput rate of the ride. Ahmadi reports high variability of the throughput rate due to individual visitors and families who wish to ride together [5,6]. For instance, take a ride that consists of operating units, such as cars or trains, with four seats. When a

family of three is seated in an operating unit and there are no individuals in the queue to ll the last spot, throughput is 75% of the theoretical ride capacity. Ahmadi used a neural network approach to reveal the relationship between group size mixture, queue length, and throughput of the ride [7]. Desai and Hunsucker [8] proposed a simulation-based tool to estimate the capacity of a ride when one or more operational variables is altered during the design or renovation of a ride. Three existing rides are selected to develop this tool. Common operational characteristics for these rides consist of xed ride time and capacity, loading/unloading method, and restraint checking process. Common activities, and hence operational variables, are dened and calculated on the basis of collected data and common operational characteristics of these rides. Real-life data is organized in three groups: (i) operational variables such as loading time (time required to load customers), storage time (time required for customers to store their personal items), restraint checking time, signal ok time (time required to complete safety checks), and unloading time(time required to unload customers); (ii) ride congurationrelated variables such as number of cars, number of seats per car, and ride time; (iii) customer-related variables such as arrival pattern and group sizes. In order to generalize the model, ride speed is adjusted while track length is xed to accommodate different ride times, and triangular distribution is used to t all random variables. Desai and Hunsucker compared the throughput of the nal model to empirical observations to validate their model. They reported that the difference between the theoretical model and the empirical results is not statistically signicant. Furthermore, they designed an experiment in which they changed the parameters of each random and xed variable to see the changes in the hourly and daily ride capacity. The results of the experiment illustrated that reduction in time spent during storage, restraint checking, and signal ok activities appeared to generate the greatest improvement in capacity. Other variables such as unloading time and number of parallel queues showed

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY

no signicant impact on capacity. Although the experiment does not consider whether the parameters are achievable in real life, it demonstrates how a decision maker can utilize this tool: (i) to estimate the increase in throughput if number of employees is increased, restraining time is reduced or extra cars are added, and (ii) to identify the optimal operating environment when demand is less than maximum capacity. This tool can also be used in the design and analysis of new rides by using design parameters for the new ride (when available) along with operational data associated with existing rides that are similar in characteristics. Also see Tibben-Lembke [6] where closed queueing models are used rather than simulation under similar settings. Despite all the efforts, waiting lines are unavoidable. One way to boost the customer satisfaction is to improve the quality of the time spent in the line. Theme parks often attempt to ensure that their visitors are occupied with theming, shows, or TV monitors while they are waiting. Parks also manage customers expectation by posting estimated wait times. However, Dickson et al. report that wait time is still a major contributor to customer dissatisfaction [9]. Disney introduced the concept of a virtual queue, called Fastpass, at Walt Disney World. The main promise behind the concept is that visitors are assigned to a virtual location in the line and their physical attendance is not required until it is their turn in the line. As a consequence, average time spent waiting is reduced while average spending per person is increased [9]. Currently, several paid and unpaid versions of Disneys Fastpass are used in the market. The success of such an implementation depends on the number and timing of the Fastpass distribution during the day. Operations research models can be used to identify the optimal distribution that minimizes the overall wait time of visitors while considering the decision-making process of visitors (i.e., when the waiting time at the physical line is 30 min, would a visitor immediately join the line or return in an hour later?). Simulation, Kalman ltering, and queueing theory based models are proposed solve the problem

[7,10,11]. Note that virtual queues and their implementation should also be incorporated in the simulation models described earlier in this section.

PARK CAPACITY MANAGEMENT As mentioned in the previous section, customers generally strive to maximize the number of rides they take during their visit to a theme park. One of the main factors that impacts customer ows in the park is the wait time for these rides. As the wait time for a ride increases, the customers are tempted to try other rides with shorter wait times to benet from their limited time in the park; else they leave the park early and unsatised. Hence, it is crucial to understand and direct the ow of visitors in the park in order to improve service quality and customer satisfaction. Ahmadi [5] used real data provided by a major theme park and analyzed how visitors ow can be managed. The real data used in the analysis consists of survey data that tracks visitors transition from one ride to another, operational data such as park opening and closing hours, ride capacities, and historical daily demand. Conceptualization of a visitor ow model consists of the destination of the visitors and the time that they spent at each destination. Once the transition probabilities are estimated via the survey answers, the remaining issue to be addressed is determining how much time the visitors are spending on rides. Intending to produce the desired result, one of the models described in the previous section can be utilized to estimate the throughput of each ride. Ahmadi provides two different optimization models that maximize minimumweighted number of rides given any period of time during the day [5]. The author uses a weighted average rather than the average number of rides per person per day (which is a standard metric in the industry due to fact that all rides are not equally desired). The rst optimization model utilizes the actual transition probabilities and determines optimal ride capacities but ignores the ow management problem. Second optimization

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY

model imposes actual transition probabilities when they are zero and determines the minimum ride capacity as well as guidelines for transition probabilities. The author reports substantial gains when visitor transition probabilities are inuenced by the theme park management along with the ride capacity optimization. An emerging trend in the research is the utilization of multiagent systems to model complex social structures. Kawamura et al. [12] implemented this concept to the theme park industry. The main requirement behind the model is utilization of some type of communication device that provides information on rides to visitors. The model is designed to control the ow of the visitors via the communication device in order to reduce congestion and increase visitor satisfaction using their preferences. Although it seems straightforward to conceptualize the problem, it is very difcult to nd the optimal solution. Hence, authors developed several approximations that maximize the social welfare of the all visitors. At this point the question is: What is required to implement a successful park capacity management solution? One key aspect is the workforce scheduling. Workforce has to be managed carefully to achieve optimal ride capacity while reducing the cost as well as considering demand variability and business requirements such as minimum customer satisfaction level. Work force of a theme park consists of part-time, seasonal, and full-time employees. To better utilize the exibility provided by the part-time employees, number of visitors arriving every hour and how those visitors ow in the park have to be tracked. Operations research techniques, such as resource allocation models, can then be utilized to determine the number and mix of employees as well as their schedule during the day.

TICKET PRICING As mentioned in Formica and Olsen [13], the theme park industry requires substantial capital investment not only to facilitate the design and development of the initial

establishment but also to update existing attractions and build new attractions. Compared to the upfront high xed cost, the impact of additional customers on the variable operating cost is minimal [14]. On the other hand, the unused capacity (or unsold tickets) at the end of each day represents wasted opportunity cost. Characteristics of the theme park business, such as high xed cost, low variable cost, seasonal demand, and the perishability of the inventory, are similar to those faced by other resemble industries (e.g., airline) in which revenue management tactics are implemented effectively. Similar to those industries, the theme park industry also seeks high utilization via price differentiation and increased repeat customers. Differential pricing and promotional strategies are used to increase the number of visitors during the low season and to control the surplus demand during the peak season. To that end, several ticket types and bundles are introduced to accommodate different customer segments such as locals, frequent visitors, corporate afliates, and free travelers. Introduction of annual passes is one example of how demand is stimulated during the low season by providing visitors full year access at a deeply discounted price. As one would expect, this deep discount comes with restrictions. Restrictions such as number and timing of block-out days that an annual pass holder cannot access the park determines the price tag and purchase likelihood of each annual pass. Several annual pass packages are introduced on the basis of add-on features such as free parking and restrictions in order to segment locals and domestic visitors. On local bases, short-term marketing campaigns such as three day resident packages are frequently used to stimulate local demand during periods when demand is expected to be lower than usual. Additionally, several discount levels are made available to corporate afliates and multiday visitors. Although the main portion of a theme parks revenue comes from admission fees, a number of theme parks generate additional revenue through hotel reservations, merchandise, and food and beverage sales. Additional services provide an advantage and

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY

exibility in pricing by allowing park tickets to be bundled with hotel rooms and/or food and beverage credit to attract families. The key problem that the decision maker faces is determining the mix of the customer segments in order to maximize the admission revenue of the theme park. Heo and Lee [14] reviewed the current ticket pricing practice in the theme park industry. Based on their ndings, they proposed implementing the traditional revenue management tactics used in hospitality and travel industry such as pricing based on season, day of week, demand level, and ticket purchase time. Next, an example is provided to illustrate how pricing based on purchase time is used in the hospitality industry to separate customer segments. Airlines as well as hotels provide discounted fares if customers make reservations 14 days ahead of their actual travel dates. Unlike most business trips, leisure trips can be planned in advance; hence leisure customers readily take advantage of the low fares by reserving hotel rooms and/or plane tickets early. Heo and Lee tested the perceived fairness of the proposed strategies and compared these with the hospitality industry where the customers are well aware of the implementation of revenue management tactics. As a result of their survey, they concluded that customers perceived pricing based on season and day of week in the theme park industry to be fairer than a similar strategy implemented in the hospitality industry. Although most of the US theme parks currently implement at-rate admission fees and try to achieve these authors suggestions through seasonal promotions and discounting programs, the authors propose a more dynamic pricing strategy based on the season and the day of week. One should also note that implementation of such a strategy in the theme park industry is costly and not straightforward. The name of the customer has to be printed on the tickets and validated while accessing the parks to prevent revenue leakages that can occur due to secondary markets. While Heo and Lee do not provide details on how the suggested strategies might be operationalized, one might surmise that a successful implementation of a disciplined

pricing strategy requires understanding and anticipation; in other words, forecasts of daily demand for each customer segment and estimates of seasonal demandprice relationship. The forecasts then have to be fed into some type of optimization or heuristic algorithm to develop ticket prices while considering business constraints. In a manner similar to travel and hospitality industries, one solution may be to rely on an algorithm that generates a minimum ticket price (bid price) for each day and then blocks all discount levels below the minimum ticket price. At rst, this solution might appear easily implementable, but the problem with implementation of this strategy is twofold: First, it is very difcult to associate a daily ticket value with an annual pass. Second, annual pass demand blocked during the peak season will impact the demand for the low season. As the number of dates that are blocked during peak season increases, the volume of the annual pass sales decreases as well as the business that annual pass holders bring during the low season. An alternative to this approach is building a simulation model that gives the decision maker exibility to test different parameters and strategies easily. Advantages and disadvantages of each approach can then be determined before making the nal decision. OTHER REVENUE SOURCES Although the main portion of a theme parks revenue comes from admission fees, other sources, such as hotel reservations, merchandise, and food and beverage sales, contribute up to 70% of the revenue. Six Flags and Disney generated, respectively, 47.6% and 68% [15,16] in the same order of their revenue from admissions in 2007. Price Waterhouse Coopers completed a research on the on-site accommodations at 29 top European theme parks [17]. Of these 29 theme parks, 14 posses on-site accommodations and 5 planned to develop on-site accommodations by the end of 2010. A former group of theme parks reported that on-site accommodations contributed to the satisfaction of customers by providing a complete

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY

experience, and contributed to the theme parks revenue by tapping into the corporate market. Although the degree of the theming varies across hotels, it is reported as the main element that contributed to the overall experience of the leisure visitors. Consequently, this led to an increased mean length of stay of 2.8 days for theme parks with hotels compared to 1.7 days without hotels. Theme parks also command higher room rates with the introduction of the themed rooms. On the other hand, facilities such as conference rooms and spas allowed theme parks to reach different markets and increase utilization during the low season. In addition, park tickets that are bundled with hotel rooms increased the marketing power and revenue of the theme parks. During the high season, the real challenge is to match excess demand with the limited supply on hand. Hence, theme parks have to be clever about how to price the hotel rooms in order to maximize revenue. Rooms priced too high keep the customers away and the unused capacity will perish; rooms priced too low cause a theme park to miss revenue opportunity. This problem is a specic case of the capacity control problem that is well known in operations research. The solution of the problem is inventory assigned to each price level: in other words, price for each remaining room in the inventory. While it is known that the capacity control problem can be formulated as a dynamic programming model, this formulation is intractable in practice due to its size and complexity. As a result, various approximation methods are proposed in the literature. Decomposition and deterministic linear programming approximations are formulated and have been successfully used in practice. Lately, several stochastic programming approaches that consider demand uncertainty have been published. For further discussion see Buke et al. [18]. Food and beverage facilities in a theme park consist of quick-service and sit-down restaurants. Sit-down restaurants share several characteristics with the hotels, such as reservation lead time, xed capacity, perishable inventory, and seasonal demand. Hence, the associated revenue optimization problem

can be conceptualized in a similar manner. In the case of a restaurant business, inventory is dened as the time that is required to complete a meal and output is the number of tables available for reservation in addition to price differentiation. For further discussion of this topic, see Kimes [19]. In addition to hotels and restaurants, Rajaram and Ahmadi [20] estimated that merchandise sales contribute up to 40% of theme park prots. Unlike the hotel and restaurant businesses, merchandise inventory is not perishable and location of inventory in the store is adjustable. Hence, a different revenue optimization approach must be taken. Pricing with the consideration of inventory is a well-studied topic not just in general but also specically in the eld of revenue management. Please see the literature for a general review of this topic [21]. For such problems, the kernel of the solution is in the estimation of the pricedemand relation. In real-world applications, it is difcult to nd a case for which demand for an item is related only to its price. Ke [22] took a more holistic approach and considered shelf space and location of each product as well. Assortment changes in a store are incorporated in to the pricedemand model along with seasonality. The model aimed to identify the assortment changes (i.e., shelf space and/or location of one or more products are changed) that made positive impact on the store revenue. He utilized data from a major resort destination and reported 5% revenue improvement over historical assortment changes. Other factors that cannot be controlled by the store management such as number of visitors, weather, and competing products that contribute to the variability in demand must be identied and incorporated into the formulation in order to isolate their impact on demand. Rajaram and Ahmadi [20] developed a survey to assess the relationship between visitor ow and store sales. In the survey, visitors were expected to enter the rides in which they participated, time that they entered the queue, time that they left the ride, and amount of money they spent after each ride. A regression in which the dependent variable is store revenue and the independent

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY

variable is the number of visitors is developed, and the adjusted R2 is for the resulting model is 0.96. Contrary to the aforementioned approach, authors developed a model that utilizes this relationship to maximize revenue rather than price. They built an optimization model in which revenue is modeled as weighted visitor ow where weights are calculated for each location using per-person spending at that location. As a result of the analysis, they estimated an average prot lift of 9%. CONCLUSION Although marketing and strategic management issues in the theme park industry have been studied extensively, documented applications of operations research in the theme park industry are limited. Simulation techniques have been used to design rides and manage the wait time associated with rides as well as controlling the ow of the visitors via multiagent systems. Optimization techniques have been used to manage park resources intelligently and increase visitor satisfaction. Finally, revenue management tactics have been applied to pricing tickets effectively to prevent revenue leakage. Because theme parks share several characteristics with other service industries, the research on the latter one can be a good starting point to augment the literature. Although there is detailed research in the eld of revenue management on hotels, merchandise, and food and beverage, it is still an open question how existing models can be improved by incorporating the characteristics of the theme park industry. Also, there is no published research completed on theme park work force scheduling problem.

3. OBrien T. New coasters highlight capital park improvements for 2000. Amusement Bus 1999;111(37):3233. 4. Kirsner S. Rebuilding tomorrowland. Wired 2002;10:12. 5. Ahmadi R. Managing capacity and ow at theme parks. Oper Res 1997;45(1):113. 6. Tibben-Lembke R. Maximum happiness: amusement park rides as closed queueing networks. Working Paper. 7. Guo Q, Liu J, Chen X. Optimization model and simulation of the queuing system with QuickPass. Proceedings of the 6th World Congress on Intelligent Control and Automation. Dalian, China; 2006. pp. 14011404. 8. Desai SS, Hunsucker JL. A sensitivity analysis tool for improving the capacity of amusement rides. J Simul 2008;2(2):117126. 9. Dickson D, Ford RC, Laval B. Managing real and virtual waits in hospitality and service organizations. Cornell Hotel Restaur Adm Q 2005;46(1):5268. 10. Lovejoy TC, Aravkin AY, Schneider-Mizell C. Kalman queue: an adaptive approach to virtual queuing. UMAP J 2004;25(3): 337352. 11. Brega ML, Cantarero AL, Lee CL. Developing improved algorithms for quickpass systems. UMAP J 2004;25(3):319336. 12. Kawamura H, Kurumatani K, Ohuchi A. Modeling of theme park problem with multiagent for mas s user support. Multi-Agent for Mass User Support, International Workshop, MAMUS 2003. Volume 3012, Lecturer Notes in Computer Science. Berlin: Springer; 2004. pp. 4869. 13. Formica S, Olsen MD. Trends in the amusement park industry. Int J Contemp Hospitality Manage 1998;10(7):297308. 14. Heo CY, Lee S. Application of revenue management practices to the theme park industry. Int J Hospit Manage 2009;28(3):446453. 15. Disney 10-K. Annual Report. 2008. 16. Six Flags 10-K. Annual Report. 2008. 17. Clark J, Hall L. European theme park wars: hotels help refresh park revenues. Hospitality Directions: Europe Edition. PriceWaterHouseCoopers; 2004. 18. Buke B, Kuyumcu A, Yildirim U. New stochastic linear programming approximations for network capacity control problem with buyups. J Pricing Revenue Manage 2008;7(1): 6184.

REFERENCES
1. Adams JA. The american amusement park industry: a history of technology and thrills. Boston (MA): Twayne Publishers; 1991. ISBN: 0805798218. 2. IAAPA. Available at http://www.iaapa.org/ pressroom/AmusementParkIndustryIndex. asp.

APPLICATION OF OPERATIONS RESEARCH IN AMUSEMENT PARK INDUSTRY considerations: research overview, current practices, and future directions. Manage Sci 2003;49(10):12871309. 22. Ke W. The marketing operations interface in consumer retail: theory and practical approach [PhD dissertation]. Columbia University; 2009. Chapter 4.

19. Kimes S. Restaurant revenue management. Cornell Hotel Restaur Adm Q 1998;39(3): 3239. 20. Rajaram K, Ahmadi R. Flow management to optimize retail prots at theme parks. Oper Res 2003;51(2):175184. 21. Elmaghraby W, Keskinocak P. Dynamic pricing in the presence of inventory