The “E” Ticket Ride and its Discontents, Continued

By Dave Shute

For the first page of this article, click here.

NEXTGEN–AND BETTER MANAGEMENT–TO THE RESCUE?

The old ticketing system fully disappeared by 1982, and has since been replaced by today’s model of one price admitting guests to all attractions.

The old model disappeared while Epcot was being designed and built.  It’s interesting to speculate on how the World Showcase would have worked under the old model of attraction tickets driving revenues.  The shift to today’s pricing may be why the show buildings constructed as part of the Germany and Japan pavilions were never filled with rides–the revenue model no longer required these investments.

I noted on the first page of this article that while the old ticket system added costs and complexity, it had some advantages

• For first time visitors, it provided a rough guide to the quality of the attractions
• It encouraged variety–i.e. “A” and “B” Tickets
• It created an additional means of managing demand besides waiting times, and
• It provided a different optic on the short term economic effects of a new ride.

“E” Tickets are not coming back–but it’s not too hard to see how a combination of better management and some of the possibilities of Disney’s NextGen project might bring back some of these “E” Ticket benefits.

THE FUNDAMENTAL PROBLEM AT WALT DISNEY WORLD

Predicting how this might unfold requires defining the problems that are to be solved by better management and by NextGen.

My inference is that the basic issue being addressed is this:  Disney World makes the most money when its visitors are the most miserable.

That is, the fixed-cost operating economics means the parks and hotels just print money when they are bursting at the seams. But these times of spectacular crowds and profitability are also the most miserable times for guests to visit.

That’s no way to run a business.  Waits are the biggest problem Walt Disney World faces.

The next most important issue is that the Disney World resort hotels have become a key driver of operating economics, but are losing competitiveness in the market–particularly the moderate resorts.

Both of these factor into the third issue, which is that return visitors drive long term returns, but if first time visitors have a miserable time because of lines, and don’t see the value for money of the Disney World hotels, then they will be less likely to come back at all, much less stay in a Disney resort hotel if they do.

NEXTGEN TO THE RESCUE?

There’s only a few ways to reduce crowding.

• One is to increase capacity. Recent changes in the Fantasmic schedule, and experiments with running two afternoon parades a day at the Magic Kingdom, show Disney gets this. See this fascinating recent story from Jim Hill for more on both.
• Second is to limit entrance–e.g. by setting a lower threshold for park closings.  This is hard to do for both economic and dissatisfaction reasons–Disney would likely lose more satisfaction from turning more people away than it would gain from the resulting slightly shorter lines.
• Another is to move people from inside to outside the parks.  Tom Bricker had a recent post on TouringPlans.com’s blog in which he both speculated about and advocated for installing World of Color at Downtown Disney.  Creating a bigger draw to Downtown Disney would reduce evening crowds in the parks.  Tom wasn’t sure how to monetize this.  But it could be monetized by a purchased FASTPASS, and/or could be reserved to resort hotel guests.
• Another is to strengthen the economic incentives for people to attend during the less-crowded times of the year.  Disney does a fair amount of this already with price seasons and discount programs. It could do more.

But the single most effective way to reduce waits would be to better use the capacity in the parks Disney already has.

Ally this with better waiting experiences, avoiding some lines entirely, and having some predictability about your family’s ability to get on to cherished rides–and to me that all adds up to NextGen.

Experienced park-goers know that there’s lots of good rides where waits are often short or non-existent, like Pirates of the Caribbean and The Haunted Mansion, and lots of times of the day when even higher-demand rides have shorter lines–e.g. in the hour after opening, the hour before close, and before and during parades and firework shows.

Shifting demand from the highest-demand rides at their peak waiting times to these rides and/or these times would improve the overall experience of guests.

Moreover, simply knowing when one enters the park that one will get to ride, for example, Splash Mountain and Space Mountain, without having to stand in line for 90 minutes, will also improve the guest experience.

The NextGen idea of making it possible to in effect schedule a FASTPASS for these and other rides well in advance will help with the experience of busier days.

It’s this same scheduling ability that can shift demand to currently less busy times of the day, and to rides with lower capacity utilization.

Families will be more likely to ride Splash Mountain in the first hour of the day or during a parade if they already have a reservation for that time, and to ride the Carousel of Progress, Hall of the Presidents, or the Liberty Belle if they have already chosen a pre-set time to experience these attractions.

And this is where the “E” Ticket concept comes back.

I expect Disney to make available for pre-scheduling–what Al Lutz says is now being called internally the “XPass”–many more rides than are currently covered by FASTPASS. (For some of my prior speculation about this, click here; Tom Staggs has since confirmed parts.)

However, my guess is that Disney won’t offer all of these rides at the same “price.”

I expect it to ration Xpasses in some way so that a family each day can reserve only so many of the most popular rides, so many of the next most popular rides, some many of the next most popular, etc.

This will require classing the rides–and what better way than to go back to the “E” Ticket, “D” Ticket, etc. labeling?

I also expect that the amount of Xpasses available will vary by hotel type–families at deluxes will be able to reserve more Xpasses per person per day than families at the values.

This is one of the ways that Disney can add value to its hotels in general, and to balance out demand among hotel types.  For example, it can vary the number of Xpasses available to guests at moderate resorts until the value for money of these hotels is appropriately competitive.

THE ROLE OF BETTER MANAGEMENT

I’ve been working lately in my real job on the philosophical issue related to all of this–getting paid for the value you create, rather than getting paid for an incidental revenue event that happens to be the traditional way of doing things.

The way Disney monetizes the parks–tickets, hotel bookings, food and souvenir sales, etc.–aren’t directly tied to the value it creates.

This is common in many businesses, but it raises a basic philosophical question: are you trying to maximize your economic return while not crossing a minimum level of guest satisfaction, or are you trying to maximize guest satisfaction without going below a minimum level of return on capital?

If you are doing the first–and Disney seems to have been focused on the first for most of the last 25 years or so–the tendency is to look at immediate revenue drivers and short-term operating returns.

If you look at the latter, you focus more on guest satisfaction, on improving the overall experience, and on longer term returns.

I’ve seen some indications lately that Disney is shifting more towards the second approach.

You can see a bit of this in a recent Harvard Business Review interview with Bob Iger. While discussing the issue of the pressure to generate quarterly results, he notes that while it’s hard, “we’re really trying not to run the company on the basis of short term analysis.”

But actions are more important than words. Actions that encourage me range from Disney’s current re-fashioning of Disney California Adventure to what it’s doing right now with Fantasmic and the afternoon parade to, most importantly, the massive NextGen investment.

Don’t get me wrong–all these, if successful, will make Disney money and make it more competitive.  Tying access to NextGen benefits to Disney’s hotels would be a particular competitive masterstroke, since Walt Disney World’s competitors have few or no hotels, making Disney’s move very hard to match.

But they may not make money in the short term. The payoff will come from repeat visits generated from better experiences on first visits.

Running a publicly traded company for customer delight rather than maximal shareholder returns is incredibly hard in today’s environment. But as Roger Martin suggests in Fixing the Game, doing so may be the most critical issue that American capitalism faces.

Most of what needs to change will come from board-driven changes in mission, and then building around those a consistent set of values and processes (e.g. the nature of incentives within compensation systems).

Part of it also is making what’s less visible more visible, so that the numbers that get managed match better to the goals the company is pursuing, tying the management processes and short-term goals and metrics better to long-term value creation.

This brings us back to the old days when new rides created new revenues and new profits.  A shift created by NextGen to being able to reserve a some “E” Ticket rides in advance may have just this effect.

If access to a new “E” Ticket ride is partly gated by reserving a Disney World resort hotel, and also partly gated by which type of hotel gets reserved (because some  hotel types provide more “E” Tickets per day per guest than others), then new rides should generate both more Disney World resort hotel occupancy and a shift in demand for the higher end hotels.

This will provide once more a direct and short-term tie between new “E” Ticket rides and new profits, and thus help incent their development.

At least that’s my thought—what’s yours?

“The “E” Ticket ride is built out of wish-fulfillment of the human ideals of control, beauty, play, order, and especially for the exercise of humanity’s highest imaginative functions” –Freud, Civilization and its Discontents (just slightly paraphrased)

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