Why do theme parks like Ocean Park offer huge discounts to Hong Kong residents and not to tourists?

1
Why do theme parks like Ocean Park offer huge
discounts to Hong Kong residents and not to
tourists?

• Nipun Sharma

2
Brief Outline

• Introduction - facts and assumptions
• Scenario 1 No discount to local residents
• Scenario 2 Heavy discounts to local residents

3
Ocean Park

• One day ticket to Ocean Park
• 185 / day
• Most expensive annual Pass available to a HK
  resident
• 550 / year
• Do the math
• 550 / 365 days 1.5/ day

4
Comparison

• 185 Vs. 1.5
• Tourists pay 122.8 times the money!!

5
Rationality assumption

• Opportunity cost for most people to spend a day
  at OP would exceed 1.5 rational people will
  not attend every day
• (more like 3-5 times a year).
• If locals were irrational, Ocean Park would be in
  debt because 1.5 would presumably be far below
  their MC.

6
Facts and assumptions

• Tourists are generally not very price sensitive ?
  inelastic demand
• Locals are ? elastic demand
• Diminishing marginal utility
• Tourist demand is higher during peak season ( Dec
  and Jan only) and lower the rest of the year
• Demand from locals is steady all year long

7
Scenario 1 Dont offer discount to locals

• High demand from tourists during peak season.
• Low demand from tourists during the rest of the
  year.
• Low demand from locals all year long.

8
Numbers are relative

• The numbers are not REAL just a set of easy
  numbers to show the relationship.
• OP needs minimum 40 tickets sold every month ? to
  meet their reservation point

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Tourist demand
10
PLUS
11
Demand from locals
12
EQUALS
13
Total demand under Scenario 1
14
Observations

• Ticket sales from Feb Nov 30 tickets short of
  reservation point.
• Ticket sales in Dec and Jan 60 tickets above
  reservation point.
• Overall, park will not make enough profits year
  along ? will shut down in the long run.

15
Scenario 2 Heavy discounts to locals

• High demand from tourists during peak season.
• Low demand from tourists during the rest of the
  year.
• Moderate demand from locals all year long.

16
Graph it out same tourist demand
17
PLUS
18
Demand from locals - moderate
19
EQUALS
20
Total demand under Scenario 2
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Observations

• Ticket sales from Feb Nov 20 tickets above
  reservation point
• Ticket sales in Dec and Jan 120 tickets above
  reservation point
• Park will make more than enough profits to
  support it self all year long.
• Peak season will be HUUUUUGE.

22
Conclusion

• Scenario 1 OP can only sustain it self during
  peak season and be in debts during the rest of
  the year
• Scenario 2 OP will make a ridiculous amount of
  profit during peak season and a good amount of
  profit the rest of the year.
• Basic price discrimination
• Tourists not price sensitive incentive not
  required
• Gives residents incentive to revisit

23
Words from the creator of OP
RAISE YOUR HAND FOR NIPUNPLEASE. THANK YOU.