When less is more: How to increase revenue at a reduced capacity.
Updated: Feb 3, 2022
COVID-19 has driven rapid cultural change for the Tourism and Leisure Industry, which has faced a relentless list of challenges over the past two years. With lockdowns, closures and constant changes to health & safety guidance, the need to automate processes and communicate effectively has never been more critical. For a business to endure in this new post-pandemic world, digital transformation is essential. VisitEngland’s Annual Visitor Attractions Survey for 2020 showed that 70% of attractions pivoted to develop their digital technology to connect with visitors. Online booking systems use almost doubled to 57% by the end of 2020. In 2022 many attractions will be taking the necessary steps to advance digitally, but large transformations can require significant investment. After a difficult two years that saw a 55% decline in revenue for the industry, the biggest challenge remains: how to increase Spend per Head (SpH) whilst operating at a reduced capacity.
Embarking on cost-savings efforts will prevent you from spending in unnecessary areas, enabling you to use those funds on more effective channels and campaigns. Whilst operating at a reduced capacity may appear to have adverse financial consequences, it’s certainly not all doom and gloom. A period of reflection can pave the way to find new sources of growth beyond your current offering. Most attractions are designed to throughput customers quickly to handle peak demand, but a limited capacity makes creating more effective dwell time the priority.
“I believe that the daily moderation of guest numbers has also brought positive benefits for guest and visitor experience and was a sizeable factor in the huge upswing that many of us have seen in catering and retail spend this year. Visitors relax if they feel comfortable and spend more when they feel relaxed.” – Sean Mannie, Commercial Director Marwell Wildlife.
If a quieter site means visitors will feel more comfortable frequenting your food and beverage outlets, then this is one area that can contribute to your financial growth. So how to do it? Matt Barnwell, Director of IH Solutions, has produced four fantastic in-depth articles to help you understand and measure the different metrics that positively influence F&B SpH. He says,
“Operators can often create a massive impact on F&B revenues without needing to resort to price increases. As a starting point, they can check customers don't wait for too long, always get offered the right product (or package of products), have a frictionless transaction experience, and above all receive great quality food and drink every time. Likely, the reduced visitor numbers experienced by many attractions in recent times has done a lot of the heavy lifting to help operators achieve these goals. Spend-per Head being attained in this period should be the new budgeted amount going forwards, and effort should be made now to put in place measures to make F&B serveries able to better cope with the higher visitor numbers expected as the country returns to normal."
Creating value-add packages could be another area worth investigating. Bundling food & drink vouchers within the ticket price could help guarantee you that ancillary spend. You can deter families from bringing their refreshments by encouraging them to pre-book instead.
Some attractions have adopted a dynamic pricing model, allowing operators to charge varied rates for specific days or timeframes. Disney has become a pioneer in dynamic ticket pricing, and many other theme parks are following suit. The iconic theme park says its pricing is a strategy to help stagger attendance for a better guest experience. However, reports show that its prices have increased faster than the inflation rate! Dynamic pricing only works for some business models, and inconsistent pricing might get on your customers' nerves. Constantly shifting prices can be frustrating. Another current trend proving useful is to shorten regular opening hours to enable the selling of tickets to special events for an experience with fewer people.
The cost of admission is, inextricably, tied to the visitor experience. Increasingly these experiences are becoming immersive. Without the mass crowds that previously drove this, the industry is adopting new technologies, such as AR and VR. These also cater to the millennial and generation Z groups driving industry growth. Museums, in particular, are adopting AR to open up new levels of engagement. Tate Britain recently used Facebook's Spark AR platform to power an art exhibit called 'The Virtual Wing' that visitors access via their Instagram account. Some attractions already offer additional experience add-ons such as evening light displays or VIP/Meet & Greet passes that allow visitors to feed animals at zoos or meet their favourite characters. Add-ons could be a great way to increase SpH without the need to increase your admission fees. Arts & crafts activities are also a popular addition that helps with visitor engagement. Twycross Zoo offered Elf Academy activities over Christmas, including making reindeer food and wrapping paper. Underutilised areas of your site could place host to interactive games, another popular way to increase dwell times and balance out visitor distribution. Gamified trails, such as those developed by Data Duopoly, actively encourages exploration and can better connect and educate visitors at your site.
Memberships and annual passes are another opportunity to increase revenue. One obvious appeal of membership schemes is the potential for savings and discounts. But the broader appeal is in allowing people to manage their leisure time effectively, opening up a direct line of communication with your attraction. If your venue operates a pre-book only model, you are inevitably going to bear the occasional burden of no-shows from pass holders. Merlin has set about tackling ‘no shows’ by introducing a £1 fee on annual ticket holder bookings. Offering to refund this booking fee through on-site purchases could be one way to appease guests who are irritated at having to pay again. The Natural History Museum has introduced the opportunity to add a donation when booking, appealing to its members’ altruistic values. If your visitors have the impression they have paid, they are more likely to turn up. Gift Aid can add 25% to donations, so optimising gift aid is also essential. Ultimately your pricing model will be led by your consumers and an understanding of their primary motivations. Being aware of your capacity and where the demand will come from should also help influence your approach.
Whatever measures or changes you decide to implement, the important thing is to keep trying new and different ways to connect with your audience.
“It’s probably hard to think about and to say. But we should accept that what we did in the past wasn’t perfect,” says Bernard Donoghue, Mayor of London's Ambassador for Culture and CEO of Association of Leading Visitor Attractions (ALVA), “And we shouldn’t try and replicate it when we open. We must recover better.”
The pandemic has afforded us a rare opportunity to take a step back and rethink our attitudes to tourism and the visitor experience. Businesses that reevaluate their customer experiences, value propositions, go-to-market strategies, and operations will fare best and continue to grow. Let us use this time to learn, grow and make positive changes, refreshing our understanding of customers' expectations and needs. This approach will lead to successful, resilient businesses and a better future for the Tourism and Leisure Industry.