For a long time, one of my favorite service examples to discuss in class has been Disney’s FastPass system. In a nutshell, the program allowed guests to wait in a virtual line for a ride as opposed to having to stand in physical queue. When getting to a ride, guests would be quoted an expected wait for the regular queue as well as a time when they can come back to get in a short queue. That is, a family could decide whether they wanted to wait an hour in a line or come back in 90 minutes for a ride. I once had one of the engineers involved in launching the system as a student and he gave me all sorts of fun details (e.g., Euro Disney posed a challenge because the system had to be explained in so many languages). One of the most amazing things about FastPass was that it was free. That’s right: Disney was giving something patrons would value away for nothing.
Not surprisingly, that has come to an end.
The New York Times reports that Disney is implementing a new system that offers some free features (e.g., creating an itinerary in an app that updates automatically based on congestion) but essentially replaces the free FastPass program with one that requires a fee (To Skip the Line at Disney, Get Ready to Pay a Genie, Aug 18, 2021).
Here is Disney’s (hyperventilating) pitch for their new system:
The Old Gray Lady is a little less cheerleading. The “Lightning Lane” is essentially what until recently was the FastPass line.
Every ride at the resorts will continue to have a traditional standby queue. For those willing to pay $15 per person at Disney World and $20 per person at Disneyland, there will be Genie+. The upgrade, charged per day, allows visitors to choose the next available time to use the Lightning Lane at a variety of rides, including classics like the Haunted Mansion and newer favorites like Millennium Falcon: Smugglers Run. One of these selections can be made at a time, with the ultimate number of fast boardings that people can squeeze into a day depending on length of stay and overall attendance. (In other words, no stockpiling.)
However, some popular rides will not be available for Genie+ selection. For its most-mobbed attractions, Disney will offer Lightning Lane access à la carte — and the price will fluctuate based on date, attraction and park. (A bit like surge pricing for Uber.) Guests will be limited to two of these upgrades in a day.
The Times also opines that “Consumers have become increasingly accustomed to paying surcharges for special access and perks, many of which used to be included in the base price. The airlines have led the stratification.”
There are a couple of things to think about here. First, this gets fairly pricey, fairly fast. If you are at Disney World by yourself, it’s just fifteen bucks but if you are there with the family, $15 per person per day adds up. That says nothing about the rides they hold out of Genie+. They are looking at dynamically pricing these queues. There are some certainly interesting questions on how to do this. One thought is that you charge a high price for the Lightning Lane early in the day before the park is super busy. Intuitively, if your goal is to wring every nickel out customers, you want the regular free line to be kinda miserable by the time the main crowd is there. Starting the day with a high price on the Lightning Lane assures more customers pile into the standard lane early so that wait skyrockets before the park is at a peak load. (See this paper if you want to see where this idea comes from.)
Another issue is how Disney allocates capacity between premium and regular customers.
The calculus for families could come down to the value of paying for the ability to skip lines — and that will depend on ride capacity. People with Genie+ reservations will have priority over people in the regular stand-by line. If Disney chooses to allow up to 70% of a ride’s capacity to be set aside for Genie+, that could make it a better value, since that would means longer stand-by lines. (The company said that how the capacity divvies up will be similar to what was in place with the previous FastPass programs.)
“This shouldn’t be that bad because fewer people are going to use paid Fast Pass than they would free Fast Pass,” Testa said. “If they charge $20 per FastPass, relatively few people are going to buy that. So, it won’t impact the standby line as much.”
Disney is eliminating a beloved free perk at its U.S. theme parks, MarketWatch, Aug 18
Suppose Disney does not allocate very much capacity to the Lightning Lane, then the regular line moves fairly quickly and there is little or no reason to upgrade. Conversely, if you allocate a lot of capacity to Lightning Lane, the regular line is long and there is a strong incentive to spring for Genie+. The company can say they are going to be using a scheme similar to the old FastPass allocation but they have an incentive to starve the regular line of capacity.
And finally, do these schemes benefit customers? What I’ve always liked about the old FastPass is that this clearly worked for both customers and Disney. Customers spent less time in lines. What did they do with that time? They went on more rides (Disney reported greater ridership on “secondary” attractions) and saw more value from the experience. They also spent more in shops and restaurants. So Disney got both higher revenue from selling sodas and mouse ears while getting customers on more rides without laying out more capital.
How does that change when they charge for the service? It’s hard to see how this makes things better for visitors. If the same or fewer customers pay for the privilege, then customers who would have used the free service are stuck in the line and that’s a loss for both them and the firm. On the other hand, if they manipulate capacity allocation so that ponying up is the only way to get on lots of rides, more customers are forced into the system and don’t have that much to show for it since the Lightning Lanes are all jammed up.
I should acknowledge here that there is a counter argument here that says that giving away FastPass access is inefficient. If FastPass is free, even customers who have a low cost of waiting will exercise the privilege — squeezing out customers who a high cost of waiting. That potentially may hold but I am a bit dubious. If one looks at a standard queue (i.e., one where customers enter, are served and leave as opposed to an amusement park where customers move from attraction to attraction), combining pricing and priority queues often lowers overall consumer surplus even as it assures that the “right” customers get short waits. (See here: Gratuitous Self-Citation.)
