Karin Cochran and Kevin Cherry

April 12, 2016

Dynamic Pricing

Background

• Session Law 2013-360, S.19.1 and 19.2 introduced dynamic pricing to the Department of Cultural Resources in 2013

• Session Law 2015-241 renamed the Department of Cultural Resources “the Department of Natural and Cultural Resources”, and transferred 7 programs (5 divisions) to the newly named DNCR

• Session Law 2015-241 extended dynamic pricing ability to the North Carolina Zoological Park, the State Parks, the North Carolina Aquariums and the North Carolina Museum of Natural Sciences.

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Dynamic pricing - “the adjustment of fees for admission and related activities from time to time to

reflect market forces, including seasonal variations and special event interests, with the intent and

effect to maximize revenues from use of these State resources to the extent practicable to offset

appropriations from the General Assembly.

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• Demonstrate type of fiscal note

• Prepare fiscal note

• Obtain state budget approval

• Revise rule text

• Agency general counsel reviews

• OAH attorney consultation

• Submit rule to OAH for notice of text / public comment period

• Consult with Joint Legislative Commission on Government Operations

• Adopts rule by Agency (Commissions have to hold meeting to adopt)

• Submit rule to OAH and Rules Review Commission for Approval

O

n

e

y

e

a

r

Fee becomes effective • Assess current pricing

• Review Market research for competing areas

• Discuss with advisory boards, commissions, etc.

• Receive Secretary Approval

• Change Price

• Communicate to Gov Ops through Reporting

W

e

e

k

sFee becomes effective

Exemption from Rule Making to

encourage Dynamic Pricing

Rule Making Process

The Rule Making process is time consuming for business practices

DNCR utilizes Dynamic Pricing to successfully manage the state treasures

• Battleship North Carolina (2013)

• Historic Sites (2013)

• Roanoke Island Festival Park (since inception)

• NC Transportation Museum (2013)

• Tryon Palace (2013)

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• The Division of Parks and Recreation (2015)

• The North Carolina Aquariums Division (2015)

• The North Carolina Zoological Park (2015)

• The Museum of Natural Sciences (2015)

These state entities raised prices before dynamic pricing

The advantages of Dynamic Pricing allows the state entities to operate with business principles to encourage sustainability

• Allows for timely decision making based on market dynamics and the development of innovative ideas to capture additional revenue

• Encourages pricing strategies that offer flexibility in pricing, including coupons, tiered rates, group rates, discounts to special groups etc. with potential to support cross divisional revenue generation

• Inspires new strategies for special programming to generate revenue while meeting a need in the community

• Allows for risk-taking in trying different price points including seasonal prices without having to change the rules numerous times

• Encourages entrepreneurial spirit while maintaining the mission to preserve history and conserve natural heritage

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Advantages of Dynamic Pricing

DNCR’s Dynamic Pricing Strategy is truly dynamic – recognizing the diverse approaches to generate revenue across the agency

• Peak season pricing – increasing pricing during the peak season at sites with consistent heavy visitation

• Special discounts – offering price breaks to increase interest and to attract partnerships during historic low visitation periods

• Long-term admission fees changes- increasing admission fees where visitation is high and analysis of comparable fees support an increase

• Short-term admission fees changes - decreasing pricing to encourage visitation at sites undergoing renovations

• New experiences – offering new fee-based activities at sites to bring in new sources of revenue (e.g. camps, craft demonstrations and workshops, behind-the-scenes tours, holiday events, candlelight tours, lectures, concerts).

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Pricing Strategies

DNCR’s Dynamic Pricing Process starts with market research and

concludes with Secretary Kluttz’s approval

Analysis

Pricing for admissions, programming and other fee related activities are reviewed against market research with

projected revenue estimates and pricing sensitivity analysis

Decision Making

Division Director of the state attraction makes the decision to change pricing and includes all analysis in the

recommendation to the deputy secretaries for discussion and approval

Approval

Secretary of Natural and Cultural Resources with input from the department Deputy Secretaries, the CFO, boards and

commissions, and the Assistant Secretary for Marketing & Communication, makes the final approval.

Reporting

History and Arts - submits a report within 30 days of any fee change to the Joint Committee on “Gov Ops”. Submits

amendments to the applicable rules to the Office of Administrative Hearings.

Nature - Notifies the codifier of rules to the Office of Administrative Hearings to repeal the former rules for the fees.

Commission and Historic Sites continue to offer additional experiences to generate activity and revenue

• New Programs• Candlelight Programs• Summer Camps• Easter Bunny events • Behind-the-Scenes Tours• Special Programming & lectures, concerts

• New Pricing• Reduced AAA and Military to 10% to match

market rates with no negative response• Created consistency on age-based pricing

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NC Transportation Museum generates 67% of revenue through special events

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• Focus on Special Events

• Thomas the Train

• Polar Express

• Lincoln Train

• Bunny Train

• Focus on renovations for daily visits

• Focus on adding other programs and amenities

North Carolina Zoo appreciates dynamic pricing flexibility to take risks with pricing

• Increased the admission fee by $2.00 – April 1, 2015

• Created discount for groups of 15 or more – April 1, 2015

• Generated $400,000 additional revenue (computed by comparing old and new pricing for actual visitation) but compensated for unfortunate weather.

• Appreciates flexibility to take risks and try new prices

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World’s Largest Natural Habitat

• Seasonal Pricing

• Special Offers

• Renovation Pricing

• Market Pricing and Seasonal Passes

Example: Jennette’s Pier

• Raising prices by $2.00 for the 2016 season in the Pin-Rig fishing fee to match market rates

• Offering a Pin-Rig Season Pass.

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NC Aquariums are using dynamic pricing in the 2016 season

NC Aquariums raised prices $2.95 in 2014

with very little change to visitation

State Parks and Recreation Division considers price increases for high demand sites and activities while reducing prices to encourage demand

• Examples of Rentals and Fees

• campsites

• picnic areas

• community buildings

• cabins

• special activity permits

• slip rentals

• boat launching

• boat rentals

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Dynamic Pricing contributes to the strategic goals of DNCR

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Efficiency

• Provides an efficient way to change prices to stay in line with market dynamics as entrepreneurs

• Encourages reinvestment into the state entity to address long overdue maintenance concerns and to create a stronger state attraction

• Allows for consistency across the department while recognizing no site has the same internal and external factors

• Inspires divisions to create unique experiences and opportunities to engage broader audiences to

increase visitation and significantly contribute to the tourism industry

• Allows effective budget management of site with use of interest bearing special revenue fund

Economy

• Inspires divisions to create educational experiences that meets the demands in the

community

Education

ncculture.com

Thank you!

Please let me know if you have any questions.