Fixed price, unpredictable duration
Golf courses have only in the past few years started applying revenue management. Due to the industry boom in the 1990s, revenue was high enough that such a system was not seen as requirement. But with the current decrease of demand, more and more golf courses turn to revenue management to know exactly when to offer reduced rates and rate fences to maximize total revenue. As more and more golf courses introduce revenue management, properties that fail to participate will find themselves in the long run in a competitive disadvantage.
“Time is money when it comes to golf.
You can`t get as many rounds in on a tough course”
(Tiger, Licata, & Howard, n.d.)
Why are golf courses suitable for Revenue Management?
Golf courses have a relatively clear definition of their fixed capacity, predictable demand and perishable inventory (time a hole is available), flexible cost and pricing structure, variable demand and therefore apply for the use of revenue management.
The relatively fixed capacity, for example, can be measure by the golf courses size, number of holes as well as the hours of operation. In summer season revenue can therefore be increased due to more daylight hours (Kimes, 2000).
In the golf industry management needs to consider that tee times are perishable. Through managing their revenue by calculating the RevPATT, management integrates the duration of a golf round into their pricing revenue management.
Demand based pricing
Golf courses often fear unsatisfied clients when applying demand based pricing because they are scared to lose m customers. The problem in this area is that clients are jet not used to revenue management in golf courses specially with changing prices. Therefore golf courses have to slowly apply demand based prices by introducing lower rates for example when weather is bad.
Also, they have a relatively high average of clients who reserve before coming to play.
Golf courses could use overbooking as a revenue management tool but generally it is not practiced, but according to Kimes (Kimes, 2000) rely on walk in clients to generate non-guaranteed revenue. Kimes also states that golf courses can successfully overbook if their forecast on cancellations, no-shows and walk in customers is accurate. “The displacement may be based on time of arrival, perceived importance or frequency of use” (Kimes, 2000).
The goal of duration control of golf courses is to reduce the tee time interval.
Courses can reduce on one hand the uncertainty of when customers arrive as well as the variability of the length of a round. First, operators need to know how long players usually take to complete one round and how much these may vary to the average calculated.
To reduce the actual time clients spend on the golf course, there are several different strategies management can put into place to reduce the duration. Most courses use for example Marshalls to regulate the flow of play by reminding slow players to speed up.
Offering separate playing times for beginners and advanced players due to the different time which the two groups need to complete one round is a good way to not only reduce duration but also to increase guest satisfaction because advanced players do not have to wait for beginners. Reduced cart fee during busy times is another solution, but if too few golf carts are available, duration can increase.
Using peer pressure by posting play time to reduce duration is common use for example in Singapore (Kimes, 2000) while in some countries this practice might upset humiliated and non-competitive customers
Golf courses have the possibility to apply various different physical as well as non-physical rate fences. Physical rate fences could be for example the size of the party or whether golf carts are used. Non-physical rate fences could be the lead time in which the reservation is done and if it is guaranteed, if the client was a walk-in or on which day of the week, time of the day or in which season the customer booked. Members or corporate businesses could agree on a special rate as well.
Hotels and resorts in the golf industry use revenue management to skillfully optimize their total revenue. For consumers, fair price equals a positive price-value relationship. Why prices change due to demand is for managers often difficult to communicate but today clients understand that prices go up when demand is high and therefore the practice of revenue management is accepted by an increasing number of consumers. We have seen that there are some areas that have more problems than others to implement revenue management due to the different market segments they target as well as how used clients are to prices changing.
Today, an industry trend is found towards the use of revenue management in all areas analyzed and therefore one can only recommend to any manager in the golf industry to take a closer look at revenue management and start considering its use. At least the numerous success stories related to revenue management in the hospitality industry should be reason enough.
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