Today you've just been told that you are being promoted to president of DLR.
1) Disneyland Resort is grossing $600 million a year at the gate off 18 million visitation. You can break these visitations into 3 roughly equal-sized groups.
(visitation: unique person visiting either or both parks per day.... Visiting multiple parks or multiple times on the same day is 1 visitation.)
a) 6 million visitations by 600,000 APs (averaing 10 visits each) at an average of $175 each for the AP = $105 million annual revenue
b) 6 million visitations by 4 million non-AP "out-of-towners" averaging 1.5 days each and spending $50 per person per day on tickets = $300 million.
c) 6 million visitations a year by local, non-AP using a variety of off-season (2-for-1) and other discounts they average $32.50 per person per day = $195 million.
(Where these numbers come from... 18 million visitations is aproximation from Amusement Business. $600 million annual revenue is gustimation based on $2 billion domestic gate revenue (as reported in 2003,2004 annual reports) multiplied by DLR pulling ~30% of domestic park total attendance. AP number is from many sources including Al and Marcie. Non-local is based on widely reported 2/3-locals, 1/3 non-locals numbers from DCA construction time-frame. Remaining number is simply what is left....)
On top of the $600 million gate revenue, you're grossing another $600 million revenue on merchandise and food.
$25 per AP per visit = $150 million.
$40 per non-local per visit = $240 million
$35 per non-AP local per visit = $210 million
(Where these numbers come from... $600 million from annual reports that show ticket and in-park sales are roughly equal. Per guest break-down... mostly guess, with a need for 18 million visitations to generate $600 million... means about $33 each with APs below this, locals near this level and non-locals above this level.)
In addition, you're making another $120 million a year on the 2000 DLR hotel rooms.
(Where this number comes from 2000 rooms * 365 days * .87 occupancy * $200 a night.)
And $120 million on DTD leases. (a number plucked out of thin air....)
To counter this $1,440 million in annual revenue, you have $1,240 million in operating costs.
(This number comes from parks and resorts as a whole having 14% operating margin)
These break down to: (pure guestimation)
$40 million for hotel operations. ($50 per room per day)
$40 million for DTD operations (thin air)
$300 million for food and merchandise (50% margin)
$600 million in park operation (maintenance, custodial, attraction operation, tram service, utilities, insurance, etc) costs
$160 million in management including TDA, corporate governance, property taxes, benifits to retirees, etc
$100 million advertising
Because of the $200 million in operations positive cash flow(revenue - costs), your capital budget is limited to $150 million a year. Out of this amount of money, you have to cover refurbs of older rides (running you about $75 million a year) and the construction of new attractions.
The top complaints of your guests:
#1 Way too crowded during summer and holiday (when the bulk of you non-locals visit)
#2 Too expensive. Tickets are too expensive. Merchandise is too expensive. Food is too expensive. Hotel rooms are too expensive. Shops in DTD are too expensive. Parking is too expensive.
#3 Not enough good rides at DCA
#4 DL has not had a major new ride in 10 years.
#5 Maintenance sucks and your operations employees do not have the positive attitude of prior days that made Disney magical.**
** Here's the rub... Your park looks good right now, because you got an extra $150 million in capital from the 50th anniversary budget to fix it up. Next year's revenue are expected to rise by enough to cover that extra capital investment. However, the $600 million you have budgeted for park operations will just match the level of spending from 1995-2003 when guests were complaining loudly about poor maintenance.
Now, the task....
Corporate is demanding you increase the operational margins from 14% to 20%. Expected revenue from the 50th will cover the 2005 fiscal year, but you're asked for a 2006 budget.
You have to cut ~$90 million in costs (below the 2002 budget) or increase revenues $360 million with 25% margin on those increased revenues or some combination of the two.
What do you do?
Try to keep the plans at least semi-realistic and logical... Example: raising prices sharply will drive away attendance, lowering operations budgets but also dropping merchandise, hotel and DTD revenues. Dropping prices will bring more guests, but will lower per guest spending, increase operations budgets and make the overcrowding problem worse. Building new E-Tickets is nice, but eats up all your capital budget, increases operational costs, and makes the overcrowding worse (unless built in DCA where overcrowding is less of a problem except during 2-for-1 when you're giving the park away).