Sports Abacus: Child Prices In Premium Areas
Ticket revenue analysts have to weigh the options of discounting when it comes to seniors or children in their premium seating areas.
This doesn’t mean that the top premium seating option should be reduced for a senior or child, but it should be discussed. Especially when there are seats open on the first or third baseline of a baseball stadium.
This isn’t about making a discount reduction, but understanding from analytical perspective how that affects your revenue overall.
If a discount reduction is given in the premium area for a child or senior to sit there, it is usually about a 40% discount off of the regular pricing structure.
This is where the fallacy of more concessions eaten by children comes into play. The idea that the concessions will be positively impacted in a way that garners enough revenue to make up the difference lost on the ticket price.
So, if the seat is $15, you’re giving up $6 (meaning that you earning $9 on a $15 seat). Now, here’s where it gets tricky, do you actually generate more from that reduced price person(s) sitting in those seats than you would if you had adults in those seats?
Children may eat more in concessions, but the concessionaire prices aren’t always cut and dry. A $5 hotdog (assessed as a 200% mark-up from cost, would be $1.25-$1.50 for the basic materials & cost of the worker) means that you are likely earning less than $2 per hotdog. That means, in order to make up for the $6, the child themselves would have to devour 3 hotdogs just to get back to the full price point that you would earned with an adult sitting in that seat.
I’m not suggesting that there isn’t a reason to have a child or senior seat. Don’t get me wrong on this. What I’m saying is that we should start estimating the actual value of each customer when we place them in a seat. What exactly are achieving in return in overall profit by having a customer sitting in a seat?
Each ticket price should show a realized revenue portion – especially on seat value – in order for the franchise to properly understand how to engage that value portion.
This is goes back to how complimentary tickets blow out any thought of profit whatsoever because you are automatically putting each customer’s expenditure in a hole in order to make up for the loss on the ticket end.
This is about understanding what it takes to generate specific amount of money per customer – beyond just a per cap but into actual dollars of what each customer’s value is when they are placed in a seat, and whether they actual hit that value.
When you look at any type of discounting, especially for a child or senior, this has to be factored into whether or not it makes financial sense for a franchise to do so. Especially when it comes to the premium areas of the stadium.