Theme Park Pricing and Land-Acquisition Case

Context

You manage pricing analytics for a Disney-like theme park. Baseline demand is steady. A land auction could expand the park and increase unique visitors for the next decade. You need to quantify current contribution profit, evaluate the investment’s NPV, test key assumptions, and consider capacity constraints.

Baseline

• Unique visitors: 10,000,000 per year
• Each visitor buys exactly one pass; mix:
  • Day Pass: 60%
  • 3-Day Pass: 30%
  • Annual Pass: 10%
• Prices and average visits per buyer:
  • Day Pass: $120 for 1 visit
  • 3-Day Pass: $300 for 3 visits
  • Annual Pass: $800 for 6 visits
• Per-visit costs and margins:
  • Variable operating cost: $25 per visit
  • Ancillary gross margin (net of cost): $12 per visit
• Ignore existing fixed costs

Project (Land Auction)

• Impact: +15% unique visitors per year, starting next year, for 10 years
• Mix and per-visitor spend patterns unchanged
• One-time purchase price: $1.2B upfront (year 0)
• Incremental fixed operating cost: $100M per year (years 1–10)
• Discount rate: 10%
• Terminal value: $0 at end of year 10

Tasks

1. Compute current annual contribution profit (tickets + ancillary − per-visit variable costs).
2. Compute the 10-year NPV of the land project and state whether you would bid, and why.
3. Identify the three most critical assumptions to stress-test, and show a simple sensitivity (±10%) on each to see how the decision boundary moves.
4. If capacity constraints cap total annual visits at 30,000,000, explain how you would modify your analysis and what data you would need to validate the assumptions.