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Southern California Theme Park Attendance Study

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Southern California Theme Park Attendance Study Southern California Theme Park Attendance Joy Hogley • Wenxuan Chen • Dongmei He Applied Management Research Special Project April 27, 2005 Advisor: Gigi Johnson, Executive Director, Entertainment and Media Management Institute TABLE OF CONTENTS PROJECT SUMMARY..............................................................................................................................1 INTRODUCTION.......................................................................................................................................4 INDUSTRY OVERVIEW ..........................................................................................................................5 THE THEME PARK INDUSTRY IN THE UNITED STATES................................................................................5 THEME PARK CHARACTERISTICS..............................................................................................................6 PROFIT DRIVERS........................................................................................................................................9 PROJECT OBJECTIVE..........................................................................................................................10 THE SOUTHERN CALIFORNIA THEME PARK INDUSTRY ..........................................................................10 SUMMARY ...............................................................................................................................................14 BACKGROUND RESEARCH AND INTERVIEWS............................................................................15 DATA COLLECTION .............................................................................................................................16 ANALYSIS METHODOLOGY ..............................................................................................................18 STEP ONE: CORRELATIONS ANALYSIS....................................................................................................18 STEP TWO: NARROWING DOWN THE LIST OF VARIABLES......................................................................18 STEP THREE: REGRESSION ANALYSIS.....................................................................................................19 ANALYSIS OF SOUTHERN CALIFORNIA THEME PARK ATTENDANCE...............................20 SOUTHERN CALIFORNIA ATTENDANCE MODEL .....................................................................................20 Evaluation of Variables Within Each Category.........................................................................................20 Regression Analysis ...............................................................................................................................24 Regression Interpretation .......................................................................................................................25 Summary...............................................................................................................................................27 SOUTHERN CALIFORNIA ATTENDANCE-PER-CAPITA MODEL ................................................................28 Correlations Analysis.............................................................................................................................28 Regression Analysis ...............................................................................................................................29 Summary...............................................................................................................................................30 CONCLUSIONS .......................................................................................................................................31 CONCLUSION ONE: Population Growth drives Attendance Growth, While Economic Factors Cause Annual Variations ..............31 CONCLUSION TWO: Weather Has a Minimal Impact on Attendance.........................................................................................32 CONCLUSION THREE: Prices are Not Deterring Attendance.......................................................................................................35 CONCLUSION FOUR: The Industry has Many Misconceptions of What Drives Attendance Levels .................................................37 FINDINGS: Finding 1: Male teens have the strongest correlation with attendance. .......................................................37 Finding 2: Strong Links Between Attendance and the Hispanic Population.................................................38 Finding 3: New Attractions Seldom Have an Impact .................................................................................39 Finding 4: Capacity May Impact Attendance............................................................................................41 Chen, He, Hogley Southern California Theme Park Attendance i RECOMMENDATIONS..........................................................................................................................43 ISSUES FOR FURTHER STUDY ..................................................................................................................43 Look For a Way to Grow Attendance-per-Capita......................................................................................43 Investigate Relationships between Attendance and Revenues.....................................................................44 Improve the Research by using Seasonal Data .........................................................................................45 Research Impacts on Other Local Attractions...........................................................................................45 FURTHER RESEARCH RELIES ON INDUSTRY COOPERATION ...................................................................46 APPENDICES Appendix A: Top 50 parks in North America and Globally by 2004 Attendance Appendix B: Southern California Theme Parks Appendix C: Bibliography Appendix D: Attendance Data Sources Appendix E: Data Sources Appendix F: Southern California Analysis Appendix G: Southern California Attendance-per-Capita Analysis Appendix H: National Attendance Analysis Chen, He, Hogley Southern California Theme Park Attendance ii PROJECT SUMMARY 2004 was a good year for the theme park industry, as the country finally began moving out of an economic recession. However, looking closely at the attendance numbers, there are some puzzling results. Central Florida, the largest theme park destination in the world, had just one major new attraction open during the year.1 Despite being hit by a record three hurricanes, Florida’s theme parks had a great year, with a 5.1% growth in attendance. Meanwhile, the seven theme parks of Southern California experienced a dry, sunny summer and opened four major new thrill attractions.2 Their attendance growth was just 3.1%.3 How can this be, when clearly people prefer roller coasters to hurricanes? As part of the UCLA Anderson School of Management’s Applied Management Research Program, we had the opportunity to conduct a research into a subject of our choice. We decided to investigate the issues influencing theme park attendance in Southern California. The Importance of Attendance to Southern California’s Theme Parks The primary profit drivers for any theme park are attendance and the average revenue per customer. Parks face very high fixed costs as compared to variable costs, and every customer represents profit once the park reaches the breakeven point. However, Southern California’s theme parks have experienced consistently slow attendance growth over the past two decades. Market shares have also remained very stagnant, and no park has been able to consistently capture share from the others. Every year each park takes their portion of the region’s total theme park attendance, and that total attendance grows extremely slowly. Attendance is an interesting issue because it connects all of the parks in the region. Project Methodology To begin the project we researched the theme park industry, focusing in particular on attendance issues. We could not find any existing published studies of theme park attendance drivers, but we found many sources that suggested what the attendance drivers might be. To learn more about the local industry we interviewed theme park managers in Southern California. This initial research allowed us to generate a list of potential factors that influence attendance. The next step was to collect and compile data for all of these factors. 1 Revenge of the Mummy at Universal Studios. EPCOT’s Mission Space was also fairly new, having opened the previous fall. 2 Tower of Terror at California Adventure, Revenge of the Mummy at Universal Studios, Journey to Atlantis at SeaWorld, and Coastersaurus at Legoland 3 Attendance growth was calculated from Amusement Business year-end attendance figures. See Appendix D. Chen, He, Hogley Southern California Theme Park Attendance 1 Once the data was collected, we used statistical analysis to investigate which factors had the strongest impact on attendance. This resulted in an excellent predictive model of attendance in Southern California, using just three key variables: California population, California unemployment, and the total number of theme parks. Conclusions The dominant predictor for theme park attendance in Southern California is population size, and attendance growth over the past two decades has simply mirrored population growth. From year to year
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