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Disney Resort in California: Profits Maximization Research Paper


Reasons for building Disneyland and Disney Adventure

Disneyland was opened in 1955 while Disney Adventure was opened in 2001. The construction of Disneyland was motivated by the idea of creating a unique amusement park within the United States. Walt Disney envisioned that the construction of Disneyland would attract the public, and it would later lead to the success of the business. The opening of the park was not successful, and the park received a lot of negative press reviews. The number of visitors received during that year did not meet the expectations. This had an impact on the profitability of the company. The overall performance of the theme park was dismal.

Besides, the founder was not satisfied with the rate of growth of the business. Therefore, it was necessary to improve the existing features of the company and come up with new constructions that would be more appealing to the public. Therefore, there was a need to perfect the features of the park so that the customers would feel that they get value for their money. This lead to the construction of other features such as Disney Adventure, Downtown Disney, and Disney Grand Californian Hotel and Spa. Therefore, the reasons for the construction of the two separate theme parks were to diversify the products and services offered to customers, improve customer satisfaction, and to maximize the profit earned by the company. The bottom line was to attract as many customers as possible and ensure that they stay longer at the theme parks.

Price discrimination at Disney

Disney uses a complex pricing strategy to charge its products and services. The company offers different park passes to a different group of people. An example of a price schedule for the different pass types is presented in the table below.

Premium
Annual passport
Deluxe
Annual passport
Southern California
Annual passport
Southern California Select
Annual passport
Price $668 $499 $359 $279
Days of Admission 365 315 215 170
Dinning discount Up to15% Up to10% Up to10% Up to10%
Merchandise discount Up to 20% Up to10% Up to10% Up to10%

The table shows that the company charges different prices for the different types of passes. An evaluation of the pricing schedule shows that it is relatively cheaper for an individual to pay for the premium, annual passport than the other three because the pass holder is entitled to higher rates of discount for the purchase of merchandise and dining. Apart from the higher discount rates, a premium pass holder enjoys theme parking, unlike the other cardholders. Also, on the pricing schedule, it can be noted that the different packages are available to citizens living in certain regions. For instance, Southern California and Southern California Select passports are valid for residents living in areas with ZIP codes that lie between 90000 to 93599 only (Disney Parks and Travel 1a).

Apart from the annual passes, the company uses tickets for pricing their products and services. The two types of tickets used are Park Tickets and Park Hoppers. A Park Ticket allows a customer to visit one park in a day while a Parker Hopper allows a customer to visit more than one park. The Parker Hopper allows the customers to spend more hours at the park. The tickets are also priced differently depending on the number of days spent at the theme parks. The pricing is presented in the table below.

Category of the tickets Type of ticket Ages 3 to 9 Ages 10 & Up
1-day park theme ticket Park Ticket $86 $92
Park Hoppers $131 $137
2-day park theme ticket Park Ticket $162 $175
Park Hoppers $197 $210
3-day park theme ticket Park Ticket $209 $225
Park Hoppers $244 $260
4-day park theme ticket Park Ticket $230 $250
Park Hoppers $265 $285
5-day park theme ticket Park Ticket $244 $265
Park Hoppers $279 $300

It can be noted that the price per day reduces as the number of days for the ticket increases. This implies that it is cheaper to pay for a 5-day park theme ticket than a 1-day ticket. Thus, it is evident that the pricing schedule is designed to encourage guests to stay longer in the park. Further, it can be observed that the company aims at raising more revenue through annual passes as opposed to the tickets because it is priced cheaply. Also, the company offers higher premium and discount rates for tickets that last for a longer duration than those that last for a shorter duration. Apart from the discounts and premiums, it can also be noted that the company makes subsequent visits much cheaper than what its competitors charge.

Based on the pricing schedule, it is clear that the company uses third-degree discrimination. This type of discrimination is a scenario where the company charges dissimilar prices for similar products in the different market segments. The company separates the market segment based on price elasticity and the inability to resell products across the different market segments. The company has been able to execute price discrimination because it understands the demographics and the ability to pay of each market segment. Through price discrimination, the company has been able to maximize revenue and profits. The company achieves this by ensuring that the price charged exceeds the marginal cost of providing the products and services. The pricing strategy has similar characteristics to monopoly pricing.

Pricing of hotels

The price range per person for the hotels is grouped into three categories. These are $0 to $15, $175 to 250, and over $250. The hotels are located in five resorts these are Magic Kingdom Area, Epcot Area, Disney’s Animal Kingdom Area, ESPN Wide World of Sports Area, and the Downtown Disney Area. The price range is based on the location of the hotel and the category of the resort. The most common categories are Deluxe Villas, Deluxe Resort Hotels, Moderate Resort Hotels, and Value Resort Hotels, among others. These categories have different characteristics. Thus, the company is able to charge different prices for the services provided in the different hotels (Disney Parks and Travel 1b).

Maximizing investment return/minimizing risk

Based on the above analysis, it is evident that the company is focusing on maximizing investment return. The company has continually improved the quality of its products and services with the intention of maximizing return. Besides, the company came up with a complex pricing strategy that allows it to practice price discrimination. The strategy is aimed at maximizing investment return.

Increasing the price rate

The price rate of the company has increased significantly over the years. For instance, 1-day one-park admission prices increased from $10.75 in 1981 to $92 in 2013. Further, it can be noted that the increase in price rate is higher than the inflation rate in the United States. The increase in the prices can be attributed to the massive capital investment in the theme parks and constant improvement of the condition of structures and features in the park (Niles 2013).

Works Cited

Disney Parks and Travel 2014a, . Web.

Disney Parks and Travel 2014b, . Web.

Disney Parks and Travel 2014c, . Web.

Niles, Robert 2013, . Web.

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IvyPanda. (2020, June 1). Disney Resort in California: Profits Maximization. Retrieved from https://ivypanda.com/essays/disney-resort-in-california-profits-maximization/

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"Disney Resort in California: Profits Maximization." IvyPanda, 1 June 2020, ivypanda.com/essays/disney-resort-in-california-profits-maximization/.

1. IvyPanda. "Disney Resort in California: Profits Maximization." June 1, 2020. https://ivypanda.com/essays/disney-resort-in-california-profits-maximization/.


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IvyPanda. "Disney Resort in California: Profits Maximization." June 1, 2020. https://ivypanda.com/essays/disney-resort-in-california-profits-maximization/.

References

IvyPanda. 2020. "Disney Resort in California: Profits Maximization." June 1, 2020. https://ivypanda.com/essays/disney-resort-in-california-profits-maximization/.

References

IvyPanda. (2020) 'Disney Resort in California: Profits Maximization'. 1 June.

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