Examination of Witnesses (Questions 260-279)|
WEDNESDAY 15 NOVEMBER 2000
M O'CONNOR AND
MR D JAMES
260. The first question I should like to ask
on regional variations is whether any consideration was given
to differential prices by region given the oncosts of travelling
(Mr O'Connor) The pricing strategy was not an issue
we decided, it was a commercial decision for NMEC to make a decision
about. I do know that NMEC negotiated a very good deal with National
Coaches whereby a combined ticket and bus ticket anywhere in the
country came in at £29.99.
261. On the issue of price, do you know what
the elasticity of demand is? If it were 4.5 million at £15
or £20 or £10 what would the figures be?
(Mr James) May I relate that to the movement of the
average yield which we have achieved across the year and how as
price structures have reduced the yield has gone down but the
numbers have gone up, which has been one of the saving factors
here. We started off with an expectation that we would achieve
a yield of something of the order of £13 and in fact we have
achieved year to date £11.20, which illustrates the average
discount that we have multiplied up and agreed across that. Since
we have introduced the very substantial special schemes with various
big sponsors for subsidised tickets that has undoubtedly made
a big contribution to the process. Effectively discounts have
arisen in a number of different ways.
262. The message I am getting from this whole
hearing is the feeling that the whole marketing strategy, the
marketing mix, the price strategy, the opportunities for differential
discounts and when they were offered, how they were offered, by
region, by time of day, by user group, London regional, has all
been learnt on the hoof as you moved through the year and with
hindsight a lot more commercial opportunities could have been
exploited if it had been properly managed the year before. Do
you have any comment?
(Mr James) That is very perceptive but there is another
factor which nobody has mentioned, which is probably now beginning
to sink away from sight and that is that the original concept
was that there would be a two-ticketing structure for the day
whereby there would be an attendance up to five o'clock and a
very significant presence and another ticket sale programme for
the evening. On that basis they expected to be able to double
the number of people they could put in in the day. The real capacity
of the Dome at any one time is somewhere round about 45,000
comfortably on the day and we have only nudged that figure on
one or two occasions and it has been extremely full when that
263. Forty-five thousand in one day.
(Mr James) Forty-five thousand in a day. We have just
been on the underside of that figure on a couple of occasions.
I think that one of the big failures here was that we could not
make the two-ticket system stick. People saw this as a day attraction,
principally because it had to be with children and I think that
was another over-estimate at the beginning.
264. The other point which struck me is that
if one invests in an asset, a machine or whatever it is, any business
person would make that asset work through the night or whenever
possible. The lateness in thinking about the London market struck
me, in particular the people with children in school and not in
holiday time who could bring their families is obviously an evening
market. Why do you think the Dome management is so late in even
thinking about that in terms of it being a major contribution
(Mr James) They were not actually late but it was
just one of the problems which overlay the early stages. It got
off to a shocking start in terms of the ticket sales and the management
progressively addressed the issues. The expression is on the hoof,
but this was a management which learnt very fast and did react
and indeed they hit that idea on the head very swiftly.
265. During the operational year, as opposed
to thinking it out beforehand.
(Mr James) In the first four weeks of the year when
it was realised that this would not work.
266. So we have a situation, it seems to me,
where we would develop a product, and you talked yourself about
twin-track management teams, where the marketing plan was not
really thought up properly until the product was in the marketplace.
(Mr James) The marketing plan was thought up in great
detail. The problem was that there was no opportunity for it to
be given a test run. Effectively the test run was the day it opened
and there was no opportunity to learn in advance what the imperfections
of the system might be until they had the doors open.
267. Do you not think from a purely theoretical
point of view that it is reasonable to assume, when you observe
centres like EuroDisney, that having tickets on sale at the door,
having some carparking at least, allowing for differential pricing
according to the cost of time and travel to get where you are
going and the idea of marketing to American tourists, for example,
when they are booking their holidays, are all sensible idea that
anybody who knows what he is doing in this area should have thought
of before the attraction was opened?
(Mr James) I wholly agree with you and it would have
been part of the programme of the team which would have been responsible
for setting up their stall to run the business from 1 January
if there had been the essential overlap running of the two-team
268. Do you think there has been a problem of
a blurred and shifting vision from the Dome being a great national
showcase to celebrate the millennium to moving towards being a
visitor attraction which washes its face commercially and that
was one of the key issues where there have been difficulties?
(Mr James) I cannot actually relate to that. What
is the Dome? It is a celebration of the world in which we are
today to a very large extent. If you take a common theme, the
exhibits are all seeking to relate to young people, or indeed
not so young people, a perception of the world around them, to
open up and excite the minds of the young to the new century which
they are going to grow up in. It has to that extent been consistent
as a vision and is not unrelated even on that basis to what was
set up for the 1951 exhibition which I remember vividly.
269. What I am trying to get at, which you are
really talking around, is that the conception of the Dome was
one of value to society and the individual as opposed to being
a marketable consumer product. That was a start point.
(Mr James) It was certainly not consumer product orientated.
It was selling a reflection of the world around.
270. To what extent is that the reason why it
has not done as well commercially as you might have thought?
(Mr James) I would not have thought so, with respect.
I would have thought that the correlation here is to people looking
at this exhibition and seeing in it the mirror image, the reflection
of the world around them. It is not a consumer exhibition at all
and not meant to be.
271. As an attractive and enjoyable experience
of value, to what extent was that conclusion not thoroughly market
researched against the target markets we were after in a price
range which was realistic? Was that again learnt on the hoof?
(Mr James) It was certainly a consistent objective.
The achievement within a price objective was heavily curtailed
by the very short period of time in which they had to create the
whole of this. We are talking of the creation of a new company
here, the New Millennium Company, which is certainly equal in
size to a FTSE Top 100 company and probably a FTSE Top 50 company,
yet it has to be created from start to finish in a couple of years
and then given an operating life of one year. Against that background
the vision has been remarkably consistent.
272. Do you think there is an argument on the
basis of that, that we should extend it for another year?
(Mr James) You could not extend it. We have looked
at that. You could not extend it for another year as there would
be very serious cost penalties in doing so because you would have
to negotiate the continuity of intellectual property rights and
all sorts of other issues which would be very onerous.
273. Clearly it is the case, as you will know
from your colleague from EuroDisney, that their first year was
not as successful as their current year. I think visitor numbers
are now about nine million.
(Mr James) Yes and Alton Towers were the same; they
have all had the same experience. The last quarter has been wonderful.
We had a ten-day period recently in which we crammed through more
than 350,000 people. It was wonderful.
274. If we had all these things like numbers
by day and type, etcetera, I know it is difficult to say these
things, but in terms of the commercial viability for a successive
year, would you imagine the whole situation would be
(Mr James) If you went on another year you would lose
money, but not so much as you had lost this year.
275. Would you hazard a guess as to how many
people would go next year?
(Mr James) I would have thought you would have a progression
which would probably work on a principle of at least a 35 per
cent increase overall and it would be the sort of industry progression
you get year on year for a couple of years.
276. I know there is some concern in this Committee
about the regional attraction of this particular attraction. Something
like 50 per cent of tourist income is spent in London. Some people
may not like that but it is a simple fact. To what extent was
the Dome actively marketed to people coming on holiday or staying
overnight from the United States for instance?
(Mr James) Very heavy overseas marketing was put in
and a considerable amount of that good work however was undone
by the strength of the pound which resulted in a significant shortfall
of visitors to this country during the key early months of the
year. In addition, our very bad Easter, which was our first major
reflection of the shortfall, was largely due to the fact that
the pound was so strong that everybody in Britain was able to
go abroad for Easter instead of staying for the Dome.
277. When the commercial sector said it did
not want to take on this project because of the risks involved,
do you think that should have sent a very strong signal to those
people generating predictions that they should have had a wider
range of scenarios?
(Mr James) No, actually I do not. Perhaps I am being
unduly cynical, but the process of offering this to the commercial
sector was a necessary part of the process but I do not think
it ever stood a snowball in hell's chance of being picked up.
278. A simple question about Jennifer Page.
She has not been given performance pay. What is her severance
package? Does anybody know?
(Mr Young) I do not know the figure, but I know that
it was six months' salary and a lump sum. I have the figure now
if you want it: £179,000.
279. Do you think that is reasonable in terms
of her performance?
(Mr James) I think that Jennie Page was a heroine.
You are talking about somebody who came without any experience
of putting together a development like this which would have frightened
off most people in the commercial sector from even beginning,
yet she delivered it on time, at a budget which was perceived
to be five percentage points over budget and do not forget that
at five percentage points, three point of that overrun are because
I had insisted on that being included to cover exit costs at the
end which were not there. Her overrun is only down to two percentage
24 Note by Witness: Where 35,000 has been exceeded
during the course of the year, this has been across a full day
rather than at any one point within that day. Back