from Golf Management News
Australia
February 2004
Tee times are finite resources.
Like airline seats and hotel rooms, there are only so many that can be sold, and the more that remain empty, the jore costly it is to the business.
In this feature golf business analyst Bill Healey outlines what is involved and the benefits of revenue management while on page 8 and 9 three Australian Golf Courses reveal how they are trying to maximize course yield.
For years, the golf industry has struggled with designing policies to maximize revenues, while sitting on a fixed capacity and a fluctuating demand. Just as airlines have a fixed number of seats, and hotels have a fixed number of rooms, golf courses have a fixed number of tee times available to maximise revenues.
In addressing this issue back in the 1980s, the large international airlines pioneered the concept of Revenue Management . . . integrating the control and management of capacity and price. Since the golf and airline industries are both characterised by high fixed costs, low margins and segmented pricing, business is won and lost at the margins.
Characterised another way, in golf, Revenue Management is selling the right tee time to the right golfer at the right price. Since the airlines have had success in increasing revenues through proper use of revenue management, other industries such as hotels and car rentals have followed. Golf is only beginning to explore this channel.
Maximizing revenue is a balancing act between the contradictory goals of maximising yield (price per round) and maximising the number of golfers on the course.
To increase revenues, golf facilities have had to get as many high-paying customers as possible on the course. But management must recognize that a single level greens fee does not maximise revenues. A more sophisticated pricing model should be developed . . . hence the need to integrate Revenue Management into the facility’s Golf Reservation System.
Most golf courses will recognize that the demand for tee times greatly exceeds the supply during certain parts of the week, or even certain parts of the day. Recognising when demand is strong, when it is moderate and when it is weak is the first step in optimizing the course’s revenue.
Using this data, golf management can set pricing strategies to manage demand at each level. In times when demand is strong, prices should 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 priding a bit lower, to encourage golfers to frequent 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.
Management could get a bit more sophisticated in their pricing structures as well, making a certain portion of their unfilled tee times available at a greater discount as the tee time approaches . . . for instance 48 hours in advance. This will allow the course to book teh nigher yield tee times further into the future, thereby guaranteeing times to those willing to pay for prime-time spots.
Through discounted greens fees, leader demanded times will find their way to golfes who are price sensitive, are more flexible in their playing times, and are more willing to take a chance on getting a last minute time slot.
Revenue Management does increase the level of complexity in creating greens fee rates, and requires significant research and planning prior to implementation, but studies from the airline and lodging industries suggest well planned RM models will provide at least a 2% increase in corporate revenues.
Revenue Management is a valuable practice that has a place in golf, particularly through a sophisticated Golf Reservation System. Controlling and managing capacity and pricing is not an easy task to do manually. Revenue Management is a tool best used when fully integrated into the facility’s IT platform.
