In our latest podcast Barry Render interviews Simon Philips, former President at Marvel Entertainment, former EVP at Disney, and current President at Falcon’s Beyond. Falcon’s Beyond (https://falconsbeyond.com/) is a global leader in theme park master planning. Barry and Simon discuss the latest announcement about the massive new Dragon Ball theme park in Qiddiya City, Saudi Arabia, as well as other operations at Falcon’s Beyond. Dragon Ball is said to be larger then Walt Disney’s Magic Kingdom here in Orlando.
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Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM. See our earlier blog post with a recording of author and user Chuck Munson to learn how to find these, or contact your Pearson rep to learn more! https://www.pearson.com/en-us/help-and-support/contact-us/find-a-rep.html
When organizations make location decisions (see Chapter 8), being near competitors (“clustering”) is often seen as a plus. Here in Orlando, the capital of theme parks, we take our cluster very seriously. After all, the parks are the main economic drivers and top employers. Disney’s 5 parks employ some 77,000 “cast members.” Universal Studios parks another 28,000, and SeaWorld has 22,100. Then there is Legoland, Gator Land, and others.
Riders on the Expedition Everest roller coaster at Walt Disney World’s Animal Kingdom park.
When the Universal Epic Universe theme park opens next year, it will add 750 acres populated by Harry Potter, Donkey Kong and dragons to the company’s Central Florida resort, which now includes 3 theme parks: Universal Studios, Islands of Adventure, and Volcano Bay Water Park.
Less than 10 miles down the road is Walt Disney World, the biggest part of Disney’s most important profit engine, and the stuff of dreams for tens of millions of visitors a year. Its 5 parks include: Magic Kingdom, Animal Kingdom, Epcot, Hollywood Studios, and Typhoon Lagoon Water Park.
The competition is intense, writes The Wall Street Journal (April 13-14, 2024). To understand the stakes for both companies, consider this: A common vacation itinerary includes 3-4 days at Disney World and 1-2 days at Universal. If Universal can now persuade families to spend one more day at its parks instead of at Disney, it could nab hundreds of millions of dollars in annual revenue. A family of four visiting Disney World for a 5-day, 4-night stay with Park Hopper tickets, a quick-service dining plan and a room in a moderate-tier hotel would spend upward of $5,000, not counting the cost of souvenirs or add-ons such as the Genie+ line-skipping service. Shortening the Disney leg by even a day would trim hundreds of dollars from their spending at the company’s parks and resorts.
When Walt Disney World opened in 1971, about 5 years after the death of the company’s namesake founder, adult admission cost $3.50. Visitors could roam Magic Kingdom—the only theme park on the property at the time—and take in dozens of free attractions and performances.
Attendance has since snowballed. Universal’s first theme park first opened in 1990. Islands of Adventure now attracts more than 11 million visitors a year, while Universal Studios has about 10.8 million guests. Disney’s Magic Kingdom, which has more than 17 million annual visitors, has long been the world’s most-visited theme park.
Classroom discussion questions:
Why is clustering important in theme parks?
Describe a different cluster, one close to your college or home.
Disney is thought to have invented the “switchback queue” (that snakes back and forth) during the 1964 World Fair in NYC. Guests stopped complaining about the long queues at the Disney attractions, even if the lines hadn’t actually gone down. Over the next decades, the company perfected the waiting experience with props and preshows designed to entertain but also distract its guests from the endless waiting. In 1999, Disney’s FastPass allowed guests to pick their battles by skipping lines that weren’t worth the wait. Ever since, having fewer people in queues and more roaming the park has been the name of the game.
Queues of shoppers maintaining distance against coronavirus outside a market in Piura, Peru
Distractions give human minds pause. But designers and engineers still have not figured out how to vanquish long lines. In a pandemic, frivolous distractions won’t cut it. The people who waited for 5 hours today to cast a ballot don’t need distractions from the wait; they need measures that will keep them safe and, better yet, allow them to avoid waiting in the first place. (On average, people overestimate how long they’ve waited in a line by about 36% by the way. This means that the actual wait time, no matter how short, isn’t the main problem; it’s is how long people feel they’ve been waiting).
WaitTime, a creator of crowd-intelligence-software designed for stadiums, uses ceiling-mounted cameras, computer vision, and patented AI to interpret crowd conditions in real time, so published wait times are always up to date.
New fear of proximity could spell the end of the physical line. Eight months into the pandemic, make-do solutions such as tape markers and DIY signs are giving way to more deliberate strategies such as magnetic queuing grids, virtual lines, and timed-entry passes.
Classroom discussion questions:
Why do queues depend on cultural/social habits?
What measures can be used to force people to stand 6 feet apart?
Disney makes billions of dollars by persuading people to watch its movies and TV shows, play with its toys and games, and visit its theme parks. Yet the entertainment titan did its best to discourage fans from visiting the new Star Wars area in Disneyland, California last quarter, pushing attendance at its domestic parks down 3%. (Disney had been expecting a surge in guests to visit the new attraction).
A second Star Wars themed land opened Aug. 29th at the Disney park here in Orlando. But this time, Disney hopes it learned from the May opening at its California version, reports the Orlando Sentinel (Aug. 30, 2019). There, guests had to be staying at one of the company’s hotels or sign up for online reservations that quickly filled up. Fans in California may also have stayed away because they thought Disneyland would be too crowded. Local hotels raised prices. (Both new lands are opening with only one of the two main rides finished, something that may have further discouraged guests).
Restrictions that limit access for many annual-pass holders are ending this week, allowing more guests to enter the Florida attraction without paying extra. That wasn’t the case in California, which opened at the start of the peak summer season when many annual-pass holders couldn’t use them. Fans in Florida were able to come inside the park as early as 4:45 a.m., 3 1/4 hours earlier than the regular opening time. Crowds were at capacity, with some Star War loyalists lined up at 3:30am, only to face lines that reached 5 hours for new rides. Discounted ticket prices were offered for guests to wait until noon to enter. Orlando-area hotels are also offering discounts timed to the Star wars opening.
Disney took a big bet on Star Wars this year, whose expansions cost $1 billion at each of the two parks. But for theme park devotees, Thursday was the equivalent of Black Friday shopping — a controlled chaos that was enjoyable nonetheless.“I’m still on the high,” said a New Jersey guest who hadn’t slept in 24 hours.
Classroom discussion questions:
What tactics discussed in Supplement 7 did Disney employ to impact capacity in California?
Disney’s theme parks in the U.S. can fill to capacity during certain times of year.
After raising some ticket prices for its theme parks by more than 20% over the past 5 years, Walt Disney will set a new benchmark when it offers die-hard fans the chance to attend a 6-hour preview of a new attraction at Disneyland — for $299. Even for fans used to high prices, the sneak peek at Pixar Pier breaks new ground.
The steep price stems in part from a perennial tension Disney faces at its theme parks, where public demand is so strong, reports The Wall Street Journal (June 19, 2018). Raising prices — currently around $100 on average days and more than $120 during “peak” times around holidays — could mitigate tourist appetite and increase profits. The company, however, is wary of appearing to gouge customers. Disney is working on adopting a dynamic pricing model similar to airlines, in which prices fluctuate depending on when a ticket is purchased. Disney already has introduced a limited version of dynamic pricing to its parks, charging a range of prices based on 3 categories of dates: “value,” “regular” and “peak.” Prices range from $97 to $135 for Disneyland.
Under the new changes, a ticket to Disneyland for Christmas Day, for example, may cost less if purchased on July 1 than on Dec. 24. This would encourage visitors to commit to a day to visit the park farther in advance, which allows parks to plan better. Disney parks often reach their limit during the summer tourism season and over Christmas break, when the parks sometimes have to turn away would-be customers for several hours.
New attractions at the parks help Disney to handle crowds, but they also draw more visitors. Disney’s “Avatar”-themed experience has drawn crowds that can cause waiting times for some rides to average 1-2 hours—and in some cases, stretch to 4 hours.
Classroom discussion questions:
1. How does Disney’s use of yield management differ from that of airlines?
2. How does Disney deal with capacity issues (see the 6 points on page 313)?
Overcrowding during holidays has become enough of a problem — endless lines for rides do not make for “the Happiest Place on Earth” — that Disney had little choice in moving to a demand-based ticket-pricing structure, analysts say. Demand-based pricing (which we call revenue or yield management in Chapter 13) is commonly used in the lodging and airline industries. It has also been adopted by other theme park operators in the U.S., including Universal Studios, which will unveil a major Harry Potter-themed expansion of its Los Angeles park next month. Movie theaters and sports teams are also experimenting with similar pricing efforts.
For Disney, the change will likely shift people visiting during mid-tier times into the quietest ones. During high-demand periods such as Christmas, it will generate more money but likely create no noticeable attendance drop-off.
Classroom discussion questions:
Why is Disney introducing demand-based pricing?
What professional sports teams are using yield management?
While it might seem easier to schedule Star Wars every 15 minutes, this actually is more difficult. First, because the movie is being released in 2D and 3D, theater owners have to predict the demand for both. They also have to decide which other movies they will stop showing to make room for Star Wars. (Theaters don’t start to cash in big on ticket sales until a movie has been playing longer.)
The real money is made at the concession stand. Theaters keep about 5% of ticket sales. Profit margins on concessions can run as high as 85%. It’s essential theaters schedule their movies to start and end at different times. They don’t want too many people coming and going simultaneously which create crowds that slow down the concession counter. Get it wrong, and they will have crowds waiting to buy tickets, in line for the bathroom–and not buying Junior Mints. Some theaters use algorithms and software to do their scheduling. Others still take their cue from Han Solo and go with their gut.
Disney “made the difficult decision to eliminate certain positions, including yours,” as a result of “the transition of your work to a managed service provider,” said a contract presented to employees on the day the layoffs were announced. It offered a “stay bonus” of 10% of severance pay if they remained for 90 days. But the bonus was contingent on “the continued satisfactory performance of your job duties.” For many, that involved training a replacement, and the new workers took the seats at their computer stations.
Former employees said many immigrants who arrived were younger technicians with limited data skills who did not speak English fluently and had to be instructed in the basics of the work. HCL America, a branch of a global company based in Noida, India, won a contract with Disney. But the layoffs at Disney are raising new questions about how businesses and outsourcing companies are using the temporary visas to place immigrants in technology jobs in the U.S. These visas are at the center of a fierce debate in Congress over whether they complement American workers or displace them. According to federal guidelines, the visas are intended for foreigners with advanced science or computer skills to fill discrete positions when American workers with those skills cannot be found.
Classroom discussion questions:
1. Why did Disney make this change? Is it a common strategy?
2. Discuss the merits and problems with the H-1B program.
The cost of each band has dropped from $35 to under $5
It was February 2011, and Disney’s CEO, Bob Iger, gathered his board of directors. Iger set his sites on his boldest gamble yet: to reinvent Disney’s iconic parks. He planned to pump $1 billion into MyMagic+, a sweeping plan to overhaul the digital infrastructure of Disney’s theme parks, which would upend how they operated and connected with consumers. At the core was the MagicBand, an electronic wristband that could digitally carry everything a guest might need—park tickets, photos, coupons, even money. It would give guests entry to Disney World, pay for goods at retail shops, and unlock their hotel room doors. “It would be a virtual key to the Magic Kingdom,” writes Fast Company (May, 2015).
Iger’s effort would prove to be monumental. Disney World isn’t an amusement park: It’s a metropolis. Sprawled across 25,000 acres of Orlando, it contains 4 theme parks, nearly 140 attractions, 300 dining locations, and 36 resort hotels. Its 15 mile monorail system has a daily ridership of 150,000. The parks have their own power plant and security force, plus some of the world’s largest laundry facilities.
More than 28,000 hotel doors needed their locks replaced in order to connect wirelessly with the MagicBand, even as the rooms were occupied. Two dozen workers spent 8 months upgrading 120 doors per day. The company rolled out 6,000 mobile devices to support MyMagic+ in the parks. More than 70,000 cast members got MyMagic+ awareness training. Disney World’s physical infrastructure, which was first built in the late 1960s, also needed major capital improvements. Park-entry touch points (283 of them) needed to be upgraded. As much of Disney World lacked a Wi-Fi connection, the company had to install more than 30 million square feet of coverage. It was a huge effort to wire a communications infrastructure the size of San Francisco.
Not surprisingly, the project did not go smoothly. The rollout did not hit until mid-2014. But now that it is place, MagicBand has cut turnstile transaction time by 30%. Park capacity has also increased, and over 5,000 more people fit into the park each day. And guests say MagicBand is a lifesaver; they couldn’t imagine going back to the old system, with all the paper tickets and FastPasses.
Classroom discussion questions:
1. Are there any operations downsides to this new technology?
2. Can this technology be easily expanded to all theme parks?
It’s one of theme parks’ biggest challenges, reports the Orlando Sentinel (Oct. 12, 2014): finding ways to ease the pain of waiting in line. Disney tried something unusual last week, when it required FastPass reservations for anyone boarding the Toy Story Midway Mania ride. Amusement parks have plenty of motivation to lessen waits, or at least make them less boring. Guests leave happier — and are more likely to return. Shorter lines at popular rides mean tourists have more time to visit secondary attractions. And time not spent in line means more cash at the registers in a park’s shops and restaurants.
A few years ago, Disney created a new underground center here in Orlando in which employees monitor crowds via computer and video camera, then decide which congestion-fighting weapons to deploy. A ride might launch more vehicles, for example, or a restaurant could open more registers. The parks’ arsenal of crowd-control tactics also includes distractions, which have grown increasingly elaborate. At Disney World’s Fantasyland, for example, kids frolic in an indoor playground until buzzers alert their families it’s time to board the Dumbo ride.
Disney has also encouraged more widespread use of the passes through its MyMagic+ billion-dollar technology project. Guests can now reserve rides and shows up to 2 months before their visits: 75% of Walt Disney World guests use FastPasses now. But don’t expect to see a lineless theme park anytime soon.Ushering guests through too many attractions too quickly, and a new set of problems is created. Visitors might get bored if they see everything too fast. “The flow within a park assumes a certain number of people will be standing in line, more so during peak periods than nonpeak periods,” says a former Disney VP. “You take them out of line, and where do they go?”
Classroom discussion questions:
1. Why are queues such an important OM issue at all theme parks?
2. What other options does Disney have for capacity planning?
That’s the magic of the MyMagic+, Walt Disney’s $1 billion experiment in crowd control, data collection, and wearable technology that could change the way people play—and spend–at Disney. If the system works, it could be copied not only by other theme parks but also by museums, zoos, airports, and malls. Change is always tricky for Disney, where introducing a new brand of coffee can spark a revolt by fans. And MyMagic+ promises far more radical change. It’s a sweeping reservation and ride planning system that allows for bookings months in advance on a website or smartphone app. Bracelets called MagicBands, which link electronically to a database of visitor information, serve as admission tickets, hotel keys, and credit or debit cards; a tap against a sensor pays for food or trinkets. The bands have RFID chips—which critics derisively call spychips.
The goal is to offer people what Disney calls “a more immersive, more seamless, and more personal experience”—allowing Disney employees to address a child by name, for example, or wish someone a happy birthday. Moreover, visitors with full Disney World schedules mapped out in advance on the MyMagic+ system will be less likely to jump spontaneously to one of the dozens of other attractions here in Central Florida, including Universal, SeaWorld, and Legoland. And, of course, the MagicBands make it so easy to spend. The new system also helped the Magic Kingdom park accommodate 3,000 additional daily guests during the Christmas holiday season by reducing congestion around the most popular attractions.
Classroom discussion questions:
1. What other examples of RFID use in services exist? (Hint: see Table 7.4)
Disney sweater found in the remains of a fire last year in Bangladesh
Ever since a building with garment factories collapsed in Bangladesh a few weeks ago, killing more than 1,000 people, Western apparel companies with ties to the country have scrambled to address public concerns about working conditions there. But one big American company, Disney, had already decided to leave the country — pushed by the devastating fire just six months ago that killed 112 people. The Walt Disney Company, the world’s largest licensor with sales of nearly $40 billion, recently ordered an end to the production of branded merchandise in Bangladesh. The New York Times (May 2, 2013) reports that on March 4, the company had sent a letter to thousands of licensees and vendors setting out new rules for overseas production.
This comes as no surprise to those of us in Orlando, where Disney, with its 60,000 “cast members” (employees in layman’s terms), is king. Its public image as a safe, clean, and wholesome company is carefully maintained. Disney’s move reflects the difficult calculus that companies with operations in countries like Bangladesh are facing as they balance profit and reputation against the backdrop of a wrenching human disaster. “We felt this was the most responsible way to manage the challenges associated with our supply chain,” says Disney’s president of consumer products.
With some labor groups urging Western companies to stay and fix problems rather than leave, Disney said that it would pursue “a responsible transition that mitigates the impact to affected workers and business.” It set out a yearlong transitional period for its contractors to phase out production in Bangladesh, Pakistan, Belarus, Ecuador and Venezuela by April, 2014. In deciding in which countries to permit production, the company relied heavily on the World Bank’s Governing Indicators, which evaluate performance on issues like government effectiveness, rule of law, accountability and control of corruption.
Discussion questions:
1. Evaluate Disney’s decision to leave these 5 countries vs. staying and trying to improve conditions.
2. How can a major company protect its reputation when global supply chains are so complex?
How do the companies handle the surge–and losses from turning away customers willing to pay the $85 a day admission fees? Legoland simply closed its parking lot at 12:30 pm. It also extended its operating hours by 1.5 hours to 8:30pm. Universal similarly hit capacity at 12:30 pm and stopped admitting guests. But it set up a queue for customers to wait outside the park and allowed them to enter as early arrivals fizzled out and went back to their hotels. Universal also delayed closing, from 11 pm till midnight.
Disney’s tactic was different. It limited access to guests staying at hotels that it owns, to people with high-priced tickets (like park-hoppers or annual passes), and to those who had made dining reservations inside one of the parks. At 2:30 pm, Disney then resumed normal admission.
This can provide an interesting example of how different companies deal with capacity when you teach Supp.7. The theme parks also bring in extra workers, open more food and drink stations, add more parades and street entertainment–anything to keep the visitors happy once they enter.
Discussion questions:
1. How does this differ from issues other service firms (like hospitals, restaurants, etc.) face when they are at capacity?
2. How does Disney’s policy differ from its competitors?
For $3,500 each, health-care workers spend 3 1/2 days at Disney, learning to pay closer attention to the patient experience. “Oftentimes in health care, the patient in the bed is almost secondary”, says a consultant. “Everyone comes in looking at their task instead of the patient”.
When Disney worked with Florida Hospital to open a new children’s pavilion a few months ago, the plan includes simplified name tags, new uniforms, a ban on cell phones, greeting patients with a smile, and kneeling down to talk to children at eye level. (Our Table 6.5 in the Managing Quality chapter relates to these “determinants of service quality”).
“By exceeding expectations, doctors can attract new clients through referrals from satisfied patients”, says Dr. Chris Smith, a S. Carolina family doctor who attended the Disney program. At Smith’s office, the receptionist is now a “greeter”. And he has established off-stage private break rooms for staff to relax, vent, or do things a patient should not see. Just like other industries, doctors are learning that every service activity matters.
Discussion questions:
1. Ask students to describe a positive and a negative medical service experience.
2. What other quality tools can medical professionals employ from non-medical fields?
It’s hard to motivate students about how important forecasting is in OM with common examples like IBM’s stock price, Dell sales, or housing starts. So in Ch.4 we have two tools to help set the stage. The first is the Global Company Profile featuring Disney World. Disney does detailed daily, weekly, monthly, annual, and 5-year forecasts of park attendance, with a staff of 35 analyzing a whole flock of interesting variables. The second tool is the 8-min. video case study we created on how Hard Rock Cafe uses forecasting.
Students like the Hard Rock video not only because the company is “cool”, but because the applications of moving averages and regression are clever and thoughtful. For example, multiple regression is used to estimate the price elasticity of each menu item. Hard Rock is able to estimate the impact of a $1 price increase of cheeseburgers on sales of chicken sandwiches and margaritas.
The weighted moving average technique is used to set sales and bonus targets for store managers. The company also uses exponential smoothing and other models to forecast daily sales/food needs, purchasing needs, and borrowing needs. A good lead-in to the video is to ask students what they think Hard Rock needs to forecast with mathematical models.
