Using Technology to Manage Greens Fee Revenue

from Asian Golf Monthly Magazine

March 2010 issue

www.asiangolfmonthly.com

Revenue Management is a business tool that enables a golf facility to maximize its profitability by managing the price of its fixed and perishable tee time inventory.  It’s a business practice developed in the 1980s by the international airline industry in an effort to maintain profitability in the face of growing low-cost competition and raising operational costs. Later been adopted by the lodging and car rental industries, RM can be successfully applied through technology for managing and improving greens fee revenue.

In short, the use of RM in golf is the selling of the right tee times, to the right golfers, at the right prices, and at the right time.  It provides the ability to match tee times with the golfer’s ability or willingness to pay.  RM also provides the opportunity to mitigate the effects of bad pricing decisions or unexpected downturns in golf course utilization.

Integrating tee times to external systems can also significantly enhance revenues.  Sites such as travel websites (airlines, tourist boards), social networking (Twitter and Facebook), and sms/text messaging portals allow the course to cost effectively notify golfers of tee time availability. 

Most golf facilities will recognize that the demand for tee times vary during the course of a week.  During some periods, demand for tee times greatly exceeds the supply, while other times demand can be moderate or even excessively low.

Using proper data on course demand, golf management can set pricing strategies to manage demand at each level. In times when demand is strong, prices would be increased to bring demand more in-line with supply. Most commonly that would involve tee times on weekends and in the mornings.  In time-slots where demand is relatively low, management can set pricing a bit lower, to encourage golfers to utilize the course on weekdays and in afternoons. Using these two strategies will allow the facility to maintain the higher yield during peak periods, while increasing play during weaker demand periods.

Sample RM Pricing Model:

In this sample case, certain data will be scaled back to simply the presentation.  These however, are the assumptions to be used:

ž            Golfer Classifications

Member

Resort Guest

Local Guest

ž            Date Seasons

Peak Season 1 May – 30 September

Off Season  1 October – 30 April

ž            Time Periods

Weekend Mornings (Peak Season)

Weekend Afternoons (Peak Season)

Weekday Mornings (Peak Season)

Weekday Afternoons (Peak Season)

Weekend Mornings (Off Season)

Weekend Afternoons (Off Season)

Weekday Mornings (Off Season)

Weekday Afternoons (Off Season)

For many golf facilities, the pricing of greens fees for members is either at no cost, or fixed at a relatively low cost without limitations on when they can play.  In most cases, the application of Revenue Management will need to work around the current privileges provided to club members.  Their simple pricing table will commonly look like this:

Golfer Type:  Member
Date Periods	Time Periods	Pricing	Advanced Booking Period
No Restrictions	No Restrictions	No Cost	90 days advance booking

Other than Members, Resort Guests are generally allowed the largest advance booking period in which to reserve tee times.  This is because their golf normally coincides with corporate or personal travel requiring many months of advance planning.

Resort Guests are also the golfers most able or willing to pay higher greens fee rates for premium tee times.  For that reason, greens fees can be structured to charge higher rates during the facility’s peak season and peak time periods, such as weekend morning and holidays.

Generally speaking, the traveling golfer will likely plan their travel to a resort facility when weather and conditions are at their best.  Therefore, golf management can expect to charge the Resort Guest more on Weekend Mornings during Peak Season than at other playing times.

In the table that follows, a Resort Golfer will be expected to pay $180 for a Peak Season Weekend Morning, but only $65 for an Off Season Weekday Morning.   This may encourage some budget conscious travelers to modify their plans to travel during the Off-Season.  The facility’s profitability will increase as the pricing discrimination allows the course to remain at full capacity with higher prices during the Peak Season, while maintaining a sustainable rate and capacity during the Off Season.

Golfer Type:  Resort Guest
Date Periods	Time Periods	Pricing	Advanced Booking Period
Peak Season	Weekend Morning	$180	9 months
Peak Season	Weekend Afternoon	$150	9 months
Peak Season	Weekday Morning	$120	9 months
Peak Season	Weekday Afternoon	$90	9 months
Off Season	Weekend Morning	$110	9 months
Off Season	Weekend Afternoon	$75	9 months
Off Season	Weekday Morning	$65	9 months
Off Season	Weekday Afternoon	$50	9 months

A restriction usually placed on the Resort Guest is that they must have a verifiable hotel reservation at the facility’s lodge.  A cancellation at the lodge could result in a cancellation of the reserved tee time.

Yet another Golfer Classification is the Local Guest, a group that can be used to fill last-minute course vacancies.  They generally will not be willing to pay as much for greens fees, nor will they be providing the facility with hotel occupancy or the higher food and beverage sales associated with Resort Guests.  The Local Guest however, can be encouraged to pay a reduced greens fee (filling last minute vacancies) to enhance the course’s profitability.

In the table below, the Local Guest can reserve a tee time three weeks in advance for the same greens fee rate given to the Resort Guest.  For instance, both the Resort Guest and the Local Guest can pay $180 for a Weekend Morning during Peak Season.  The Resort Guest is given a nine-month advance booking period, while the Local Guest is given only a three-week advance booking period.  The difference is that the Resort Guest has also confirmed a room at the Lodge.  (The Local Guest can upgrade their classification to Resort Guest by reserving a room at the lodge).

In this sample, there is a price-break given to the Local Guest if they book their tee time less than two days in advance.  This discount is offered to fill any open slots on the facility’s short-term tee sheet.

To book and confirm a Weekend Morning tee time during Peak Season, the Local Guest has three options:

•  Book the full list price ($180) up to nine months in advance as a Resort Guest (with hotel room),
•  Book the full list price ($180) up to three weeks in advance (no need for lodging commitment),
•  Book the discounted rate ($120) up to two days in advance.  With this the Local Guest takes the chance that no time slots will remain open.

Golfer Type:  Local Guest
Date Periods	Time Periods	Pricing	Advanced Booking Period
Peak Season	Weekend Morning	$180	3 weeks
Peak Season	Weekend Morning	$120	2 days
Peak Season	Weekend Afternoon	$150	3 weeks
Peak Season	Weekend Afternoon	$95	2 days
Peak Season	Weekday Morning	$120	3 weeks
Peak Season	Weekday Morning	$75	2 days
Peak Season	Weekday Afternoon	$90	3 weeks
Peak Season	Weekday Afternoon	$70	2 days
Off Season	Weekend Morning	$110	3 weeks
Off Season	Weekend Morning	$70	2 days
Off Season	Weekend Afternoon	$75	3 weeks
Off Season	Weekend Afternoon	$65	2 days
Off Season	Weekday Morning	$65	3 weeks
Off Season	Weekday Morning	$50	2 days
Off Season	Weekday Afternoon	$50	3 weeks
Off Season	Weekday Afternoon	$40	2 days

Off Load Last Minute Tee Times.  Loyal local golfers provide the best opportunity for the golf course to sell tee times left open later in the day or for the coming day or two.  Filling the day’s remaining vacant tee times further allows the course to maximize the club to maximize revenues.   This can be achieved through an email blast or sms to registered golfers to notify them of a reduced greens fee for the last minute tee time.  Use of social networking sites such as Twitter or Facebook provide yet another outlet to notify golfers of the special pricing for last minute times.

Other Revenue Management options can also be considered when building the facility’s greens fee pricing structure.  For instance,

ž            Pricing discounts for groups of two, three or four players.  Using the example of a full rate at $180, the course may offer the second, third and fourth golfers rates of $170, $150, $120 if they make the booking together.  A single golfer would remain at $180, two golfers at $350, three golfers at $500 and four golfers at $620.  This would encourage a group of golfers to make a commitment all at one time.

ž            Cancellation fees can be another way to increase profitability while opening the tee time to a new reservation.  This could be structured to provide multiple levels of cancellation fees.  Once example would be:

ž           30% cancellation fee if within four weeks of the tee time,

ž           50% cancellation fee if within two weeks,

ž           100% cancellation fee if not cancelled more than two weeks out.

The purpose of the cancellation fee is to protect the facility’s profitability from a golfer’s changing schedule or the whim’s of their changing desires.   The facility has provided them with the convenience of booking and confirming tee times in advance, and as the tee time approaches it becomes more difficult for the course to fill the time slot with a higher paying client.

The preceding examples are a simplified version of what a golf club goes though to develop a full working RM model.  There will likely be more than three golfer classifications and more than one discount rate for several of those classifications.

Revenue Management does increase the level of complexity in creating greens fee rates, and requires significant research and planning prior to implementation.  Industry studies however, indicate that well-planned RM models provide at least a 2% increase in corporate revenue.