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Sunday, March 02, 2008 

Despite the poor economic numbers in the US, the price of crude oil has surged to over $100 a barrel. Fuel prices continue to climb according, and the reality of $4.00 a gallon gas and diesel has an enormous impact on show costs. Maybe there's a way to offset some of those increased fuel costs.

-- Can a Fuel Surcharge Help to Move the Show?--

Ben Trumble

We see them every time we open a phone bill, buy an airline ticket, or ship a package at UPS. Surcharges, they’re everywhere. And with the run-up in oil prices fuel charges in particular have become ubiquitous, we barely notice so long as they are modest. Could fuel surcharges work in circus, helping to move a show and adding to the bottom line? Maybe they could.

The small business economics of recession and downturn are a juggling act worthy of Monte Carlo. In a recession credit is tight, unemployment is high, consumers are scared, and monetary policy can lead to a weak dollar and inflation. Many of us can remember the 1970’s when three Presidents took on soaring fuel prices, significant job loss, and a double-digit run-up in core prices. Sometimes only time can heal an economy. Approaching the 2008 outdoor amusement season most economists suggest that the American economy is slipping into recession, others suggest that it has already arrived in the localized economies of Florida, California, and Michigan. The last two recessions, in 1990-1991, and in 2001 were mercifully short-lived. Economists like Paul Krugman at Princeton suggest that the current recessionary cycle will likely last well into 2009 with continued problems in the employment sector thereafter. It may be several years before real estate values decline to the point where the housing market recovers, and stock prices, still artificially boosted by interest rate cuts will likely retreat with the Dow bottoming out in Bull Market territory.

During a recession tight credit, market fears, and a natural inclination to save money leads to a decline in consumer spending. It isn’t just that families put off buying a new car… in an effort to better “budget” entertainment expenses are frequently early and easy hits. Thirty-six dollars NOT spent by a family of four to see a questionably entertaining movie at the multiplex is thirty-six dollars saved. Likewise a hundred dollars not spent on a theme park is real money. It isn’t that families forego entertainment entirely, but they search for bargains. Circus profits in a down economy when circus is seen as a good value. When a recession is coupled with inflationary pressures the cost of taking a show on the road can actually increase at a time when boosting ticket prices is virtually out of the question. A bargain is a bargain when consumers say it’s a bargain. A twenty-dollar adult ticket to the circus may be a real deal on the outskirts of metro New York, or San Francisco, while in Buffalo it isn’t. Reducing ticket prices at least in some local economies to boost admissions, or the use of special price coupons relying on a greater total dollar revenues is nothing new, but admissions can only be cut so much and there’s limited wiggle room for discounts and laydowns particularly when playing sponsored dates. Certainly traditional shows have and will continue to use laydowns and mail-outs for free or reduced price children’s tickets, two for one adult tickets, and flat price family passes to fill a tent or a building because these marketing schemes often work well. But in a recession all the free kiddy tickets in the world won’t entice anyone into a show if the full priced adult ticket is perceived to be too expensive within the new parameters of the family entertainment budget. Perception is everything and sometimes we fall down in explaining why a bargain really is a bargain. Simple math should convince anyone that if three children and two adults can be admitted to a circus for twenty-five dollars using free tickets and two for ones, it’ s good deal and less than the price of a movie. But unless that math is spelled out, consumers focus on what they’re paying for that one adult ticket and not on what they’re receiving for free. The better the explanation before mom and dad stand in the ticket line the fewer the walk aways.

If inflation means that costs are rising, and recession means that ticket prices can’t, how to recoup some of that expense? Experience indicates that adding fees on to free and or discounted tickets can be troublesome. Whether described as processing fees, or seat fees, even when implemented by legitimate shows hidden charges have been viewed by circus patrons and by at least several States as deceptive. Often the legality of fees seems to hinge upon how ticket offers are described and fair warning alerting consumers that additional charges may apply. Sometimes it’s all in the wording. If fees have gotten a bad reputation as a result of their misuse, surcharges are something most of us understand. A modest fuel surcharge applied to seats rather than tickets would seem to be a reasonable revenue enhancement. Cruise ships add fuel surcharges, taxis add fuel charges and virtually every common carrier adds fuel charges. Virtually any product or passenger moving from point A to point B is so charged.

Circus is a product. Fuel surcharges for circus or carnivals are legitimate because carnival and circus producers are shipping/delivering a commodity to a new community each time the show jumps. A sponsor for all practical purposes orders a show and a producer/leasing company delivers the show to that town. Or the producer orders the show for a lot/license date and the leasing company delivers. Until the show is set up it’s all about delivery and shipping and transit costs. So long as any surcharge is modest (say fifty-cent on every occupied seat) and so long as tickets, laydowns, and promotional materials refer to a modest fuel surcharge on each seat (to be charged at the gate) no deception is involved, nor is the amount great enough to discourage attending the show. Because a fuel surcharge is attached to seats rather than tickets, this revenue stream does not impact agreements with sponsors nor does it alter sponsor ticket prices. For lot/license dates a fuel charge might allow for a slightly reduced general admissions price when marketing deems a price cut beneficial to overall admissions numbers. For example, if a family of four attends a show using two free kid tickets and one two for one adult coupon, the general admission price could be reduced from twenty dollars to eighteen dollars with no real difference in revenue. Psychologically eighteen dollars seems like the better deal, thus the circus becomes a better entertainment bargain. Because a fuel surcharge could be used even for sponsored dates, it really does decrease the percentage of costs associated with gas/diesel. If a show fills 1000 seats a day that’s $3500 per week in the fuel fund. For many shows that’s comparatively little, but it translates into a saving at the pump equivalent to fifty cents a gallon on 7000 gallons of fuel a week. Because fuel surcharges might be viewed as shipping costs and are stated separately from ticket prices, such charges are not universally taxable, depending on the rules in each specific state. Admissions charges on the other hand are taxable in most sales with a current sales tax.

So it works and it makes sense, but how would sponsors and circus goers react to fuel surcharges? While nobody likes to spend more money a modest fuel charge is generally painless and easy to understand. For several years now we’ve all watched prices at the pump soar, particularly in summer, and we’ve seen those price bumps reflected in similar charges on other goods and services. A fuel surcharge shouldn’t alienate anyone while on the plus side it might be another piece of the puzzle keeping circus on the road through a recession.

About me

  • I'm B.E.Trumble
  • From Everywhere, United States
  • Ben Trumble works in circus, carnival, and media relations
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