A Pro Forma Advisors Feature
By Mark Dvorchak Managing Partner at Pro Forma Advisors, LLC and Wonwhee Kim, Founder of The Park Database (Below).
We’re often called to prepare revenue estimates for large theme park attractions and resorts around the world.
We’ve noticed that there is usually a great degree of uncertainty about the true ticket price at parks, especially when we make comparisons across countries.
Why is this important? People in the industry often target certain price tiers when designing parks, with preconceptions about what $40, $60 and $80 parks should be. The ticket price to a park is often the largest component of revenues, so getting the price right is extremely important to development returns.
However, when ticket prices are converted at inappropriate exchange rates, it leads to distorted understandings of achievable ticket prices and the true level of competition in the market. At Pro Forma Advisors, we convert ticket prices at PPP exchange rates.
A PPP (purchasing power parity) rate is published by organizations such as the World Bank, or the IMF, to adjust for the cost of living across countries, so that GDP and income comparisons can be made. You may have seen this in other forms, such as the Economist’s Big Mac Index.
We utilize PPP for two reasons. First, a price that is converted at PPP normalizes the price to a standard that can be compared to other prices around the world. Second, this price should approximate the ‘true cost’ of the ticket, as experienced by the host country’s residents.
As an illustrative exercise, we looked at headline adult ticket prices around the world for full access (pay-one price ticket levels) to various parks in Europe and Asia, and converted these at both spot and PPP exchange rates.
Some observations:
- Exchange rate policy in the Asian countries where the currency is floated within a tight range (China, Korea, Singapore) leads to wildly distorted ticket prices when converted at normal spot rates. This leads to distortions such as Hong Kong Disneyland seeming to be priced in the $58 range (the same as Knott’s Berry Farm or Cedar Fair), when it is actually a Disney park commanding a $80+ ticket. The same holds true for Universal Studios Singapore.
Japan is an outlier in this chart, with an exchange rate that is less heavily managed than in the other Asian countries. Its relatively strong currency (against the US dollar) leads to a ticket price that is high for international visitors but for the average resident in Japan, is on par with that of regional parks in the United States.- A case can be made for ticket price ‘tiers’. The branded parks such as Universal, Disney, and the Busch parks command prices that are between $80 to $100. The next level down is a tier for non-branded regional parks. This is where the major Korean and Chinese parks end up, next to projects such as Ocean Park (Hong Kong).
- In contrast to Asia, the opposite effect holds true in Europe. With a currency that has steadily appreciated against the US dollar since its inception, prices (when translated against the dollar) seem higher than they actually are.
Header Image: “Walt Disney World Resort guests use MagicBands for FastPass+” kind courtesy Disney
