Application within Other Industries
The practice of yield management began to expand beyond the airline industry starting in the early 1990s. Hotels, cruise lines, car rental companies, railways, advertising firms, and others saw value in the technique and implemented versions appropriate to their business. Industries that typically benefit from yield management have the following in common:
* Perishable inventory. This refers not just to physical goods, but to any product or service that loses its value if unused by a given date. Examples include empty airline seats, unused rental cars, and unoccupied hotel rooms.
* Variable demand and fixed capacity. This refers to an environment where demand fluctuates, but available capacity does not.
* Advance sales. Inventory is reserved prior to its use. This means that availability and rates can be adjusted based on how early or late a reservation is booked, and based on the volume of reservations over time.
* Multiple pricing structure. Because demand and customer types vary, different pricing structures are used to maximize revenue.
* Very low marginal costs. The cost of selling an additional unit is a small portion of overall costs.
* Price as a powerful lever. Due to low marginal costs, per-unit pricing control is
a powerful tool for increasing operating income. Conversely, inappropriate pricing has a very negative impact.
Slow Acceptance within the Golf Industry
The characteristics that make a business suited to yield management are also common to the golf industry. Tee times are perishable inventory. Courses have a limited capacity and are booked via reservations. Different times and courses have different pricing structures.
There is a negligible cost to booking an additional tee time, and unit pricing can have a dramatic impact on overall revenue.
Although yield management would seem a natural fit for the golf industry, it is rare to find a course today that uses this technique to increase revenue. Part of the reason has been lack of business need; the industry was booming during the 1990s, and resources were directed elsewhere. Today the economic picture is different. Overinvestment in new properties has resulted in a facilities growth rate that exceeds the rate of growth in the number of golfers. Courses are now competing vigorously for a limited pool of players, and are actively searching for ways to stay competitive.
Currently, the main impediment to yield management is the lack of adequate systems automation in the golf industry, combined with a perception that automation serves only lower-level business functions and does not contribute materially to the bottom line. As in the airline industry, yield management is driven by the reservations process. However, many courses still use paper-based tee sheets, and others have only recently begun to replace manual processes with simple, standalone computer systems. Even the more advanced tee sheet systems perform scheduling and reporting tasks only, and do not incorporate methods of integrating yield management rules within the reservation process.
Potential Application in the Golf Industry
Of the three components of yield management, discount allocation is most applicable to the golf industry. Different rates and availability can apply based on reservation advance
time, location, time of year, time of day, special events, party size, player type, package, etc. to arrive at the fullest and most profitable mix of reservations on the tee sheet.
As with other organizations that are new to yield management, golf operations will face a learning curve in implementing the practice. The ability to forecast demand based on historical patterns is a prerequisite. Customer management is also important. In the airline industry, there continues to be an undercurrent of consumer dissatisfaction due to the perception of price discrimination. For this reason, golf properties should implement yield management not as a radical change in price structure but as a series of intelligent decisions regarding appropriate returns on available inventory.
The complexity of yield management requires not only specialized technology, but also an investment in education, training, customer service, performance measurements, and business process change. To successfully implement yield management, golf properties must be committed at all levels, not just in the area of information technology.
OpenTee: An Emerging Solution
To date, the only system that delivers operational yield management to the golf industry is marketed by OpenCourse Solutions, a San Diego-based provider of systems automation to the golf and resort industries. Known as OpenTee, this system automates all tee sheet functions, integrates the tee sheet with other business systems, and incorporates yield management tools into the mix. OpenTee’s yield management functionality was developed as a joint project with Walt Disney World in Orlando, and was designed to support that company’s extensive revenue management requirements at five championship courses.
OpenTee addresses discount allocation by allowing management to control authorization of low-price availability. This control is performed at two levels:
* Management level. Management personnel can configure the system to turn availability on and off by course, season, day, time, package, player type, party size, and rate type. These variables provide management with a wide range of options for configuring availability and rates based on past experience, forecasts, and special events.
* Reservation level. During the reservations process, an automated “reservation wizard” applies the rules set up by management. Reservation clerks or customers are guided through a series of screens to arrive at an optimal time and price based on the player type, preferences, and golf package. The rules used by the wizard can be adjusted by management in real time to accommodate unexpected fluctuations in demand.