Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 260-279)



  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 down?
  (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[24] comfortably on the day and we have only nudged that figure on one or two occasions and it has been extremely full when that has happened.

  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 towards revenue?
  (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 concept.

  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 points.

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

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 12 September 2001