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Medium Profitability Pricing Strategy Business Model Innovation

Seven Flags

#Entertainment #Hospitality #Amusement Parks #Leisure & Recreation
ProHub Comment

This case tests the candidate's ability to evaluate a pricing and segmentation strategy using financial analysis and sensitivity considerations. The core challenge is balancing revenue maximization ($16 optimal price point) against cannibalization effects (50% assumed rate) and ensuring capital recovery within management's 10-year payback constraint. The case rewards candidates who recognize pricing elasticity, calculate payback period proactively, and identify key risks and opportunities beyond headline numbers.

Estimated Time 15 minutes
Difficulty Medium
Source Darden
50 / 100
Our client is a mid-size amusement park chain, with 10 parks around the U.S. serving over 10 million visitors each year. In their Richmond, VA park, it operates both a traditional thrill-ride section, as well as an animal experience. (Show park map.) Currently, the two sections are covered under one entry ticket price. However, management is considering offering a separate ticket for only the animal experience section. They have come to us to determine if this is a good idea.

Clarifying Information

  1. Financial goal: Management wants a payback period less than 10 years. (If the candidate asks, payback period = investment / on-going profit.)
  2. Current price: Tickets are currently $20 and provide visitors full access to the park
  3. Park attendance: The Richmond, VA park is an average sized park within the client’s portfolio
  4. Business model: The park is a typical amusement park (think Six Flags or Busch Gardens). Visitors buy a ticket for entrance (assume same price for adults and children), and all rides / amusements are accessible under the one ticket price. The park also sells merchandise and food / drinks separately.