Managerial Decision Analysis

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Case Study - Akron Zoological Park

During the late 1980s, the decline in Akron’s tire industry, inflation, and changes in
governmental priorities almost resulted in the permanent closing of the Akron Children’s Zoo.
Lagging attendance and a low level of memberships did not help matters. Faced with
uncertain prospects of continuing, the city of Akron opted out of the zoo business. In
response, the Akron Zoological Park was organized as a corporation to contract with the city
to operate the zoo.

The Akron Zoological Park is an independent organization that manages the Akron Children’s
Zoo for the city. To be successful, the zoo must maintain its image as a high-quality place for
its visitors to spend their time. Its animal exhibits are clean and neat. The animals, birds, and
reptiles look well cared for. As resources become available for construction and continuing
operations, the zoo keeps adding new exhibits and activities. Efforts seem to be working,
because attendance increased from 53,353 in 1989 to an all-time record of 133,762 in 1994.

Due to its northern climate, the zoo conducts its open season from mid-April until mid-
October. It reopens for 1 week at Halloween and for the month of December. Zoo attendance
depends largely on the weather. For example, attendance was down during the month of
December 1995, which established many local records for the coldest temperature and the
most snow. Variations in weather also affect crop yields and prices of fresh animal foods,
thereby influencing the costs of animal maintenance.

In normal circumstances, the zoo may be able to achieve its target goal and attract an annual
attendance equal to 40% of its community. Akron has not grown appreciably during the past
decade. But the zoo became known as an innovative community resource, and as indicated in
the table, annual paid attendance has doubled. Approximately 35% of all visitors are adults.
Children accounted for one-half of the paid attendance. Group admissions remain a constant
15% of zoo attendance.

The zoo does not have an advertising budget. To gain exposure in its market, then, the zoo
depends on public service announcements, the zoo’s public television series, and local press
coverage of its activities and social happenings. Many of these activities are but a few years
old. They are a strong reason that annual zoo attendance has increased. Although the zoo is a
nonprofit organization, it must ensure that its sources of income equal or exceed its operating
and physical plant costs. Its continued existence remains totally dependent on its ability to
generate revenues and to reduce its expenses.

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Source: Professor F. Bruce Simmons III, University of Akron.

ADMISSION FEE ($)

YEAR ATTENDANCE ADULT CHILD GROUP
1998 117,874 4.00 2.50 1.50
1997 125,363 3.00 2.00 1.00
1996 126,853 3.00 2.00 1.50
1995 108,363 2.50 1.50 1.00
1994 133,762 2.50 1.50 1.00
1993 95,504 2.00 1.00 0.50
1992 63,034 1.50 0.75 0.50
1991 63,853 1.50 0.75 0.50
1990 61,417 1.50 0.75 0.50
1989 53,353 1.50 0.75 0.50

Answer the following questions.

1. The president of the Akron Zoo asked you to calculate the expected gate
admittance figures and revenues for both 1999 and 2000. You can use at
least three forecasting methods to estimate the forecast values and
compare the results. Recommend the best method to the president of
Akron Zoo.

2. What factors other than admission price influence annual attendance and
thus should be considered in the forecast?

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 Managerial Decision Analysis

ANSWERS

1. Based on what I've learnt on Quantitative Analysis class I suggest two

Quantitative and Qualitative Methods.

Quantitative Methods:

 Moving average or weighted moving average are probably the best

approaches to predicting attendance. I've made these choices base on
KISS principle, which is an abbreviation of "Keep It Simple Stupid"
meaning the simple answer is usually the best.

Forecast using weighted-moving average:

Year 1999:
[(3*117874) + (2*125,363) + 126853)] /6 = 121866

Year 2000
[(3*121866) + (2*117874) + 125363] /6 = 121118

Moving Averages
Year TOTAL PERSONS Sales (adults) Sales(children) Sales (groups) TOTAL SALES
1995 108,363
1996 126,853
1997 125,363
1998 117,874
1999 119,613 $ 167,459 $ 149,517 $ 26,913 $ 343,888
2000 122,426 $ 171,396 $ 153,032 $ 27,546 $ 351,974

 Simple linear regression analysis would be suitable if we were given by

the management team or we could develop independent variables as like
the number of new animals, number of active exhibits and etc. For
example, we could use weather to predict attendance, but we would have
to find a prediction of the weather to use in our prediction model. The

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 Managerial Decision Analysis

Independent variable chosen for simple linear regression would have to

form a straight line.

 Trend analysis could be used. Here, as with moving average and

weighed moving average, we are using past historical data to predict
future values of attendance.

 If multiple regression was used with the independent variables that I

mentioned before, we would still have to determine the future values of
the independent variables. We would need to develop methods of
estimating our independent variables in order to predict Annual
Attendance. As with simple linear regression, we are using other variable
to predict annual attendance. We would have to meet many assumptions
in order to proceed with a multiple regression analysis.

To see how I calculated and figured out the number please go to

Appendix 1, 2, 3, and 4.

years x y y*y xy
1994 1 133,762 1 133,762
1995 2 108,363 4 216,726
1996 3 126,853 9 380,559
1997 4 125,363 16 501,452
1998 5 117,874 25 589,370
SUM 15 612,215 55 1,821,869
5

x 3
y 122,443
b -1,478
a=y-bx 126,876

y=126,875.8+1,477.6*x

GATES ATTENDANCE SALES

1999 2000 1999 2000
135,741 137,219 Adults $190,038 $192,107
Children $169,677 $171,524
Groups $30,542 $30,874
TOTAL $390,257 $394,505
TREND PROJECTION

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Qualitative Methods:

Another method could be qualitative methods where we can ask people what
they think. We can use Comment cards, Surveys, Questionnaires for data
gathering. From our fundamental economic studies, we know that if we increase
the entry fees we would experience a decline of people attending the zoo. We
would need to determine how much of the variation in attendance is caused by
variation in fees. Using the methods above can help us finding the right answer
and evaluate past predictions and determine which approach was previously the
most accurate.

2. Other factors that may influence the annual attendance and worth to be
considered are as bellow:

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 Managerial Decision Analysis

 Marketing plan focusing on online advertising and providing online

resources, maps, and pictures about the zoo.
 Tour guides (to give background information on animals)
 Number of new animals
 Number of active exhibits
 Discount rates for groups and promotional events
 Coverage on local and online news (for instance the announcement
of new born animals or new arrivals or events)
 Cleanliness and facilities
 The weather and climate
 Renovations on older exhibits
 Advertising - public service advertising
 area population shifts, Area’s birth rate
 Quality of service
 Zoo Working hours
 employment trends
 Gasoline price
 Rate of tourism growth in the area

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