Golf in the Millennium: Boom or Bust? Yield Management: Maximize Play And Revenue

02nd Apr 2010

NB: This is an article written by Stephen A. Johnston

Public golf courses have a limited number of tee times each day. Once they expire, the opportunity for selling them is lost forever. Times are money.

In effect, golf courses are in the business of marketing space and time availability as opposed to most industries, which sell commodities or services that are not time specific. The golf industry is not alone in this regard and can be compared to hotels and airlines.

Indeed, it was in the airline industry that the buzz phrase yield management was first heard. Once a flight departs with unsold seats, those sales opportunities are gone. The harsh reality is that the expenses directly related to each seat don’t reduce much for those unsold spaces.

Tee times, like airline seats and hotel rooms, represent a very clearly defined and limited inventory. They are either sold or they become worthless immediately upon the expiration of each time. On the other hand, a “widget” that does not sell today can still be sold tomorrow. If the sales period is about to end and the inventory of unsold widgets is too high, clearance pricing can blow out remaining stock at discounted rates generating at least some revenue per unit. Not so with golf.

Variable pricing strategies configured to match fluctuating supply and demand situations, have provided the airline industry with the most effective yield management. Similarly, the dilemma for most public course and semi-private operators is how to fill the majority of time slots for the highest price points.

This raises a number of issues and KPMG’s golf industry benchmarks indicate the following. Tournament rounds produce the highest net rate per round and greatly reduce the risk of eliminating rounds of play due to weather conditions. Member rounds, on the other hand, which can be considered pre-paid green fees, produce the lowest net rate per round although they do ensure traffic through the golf course.

General public rounds require the greatest marketing effort and frequently require a “hook” to attract customers. Many operators employ discount strategies in this regard. These rounds usually yield a higher net rate per round than members, but below tournaments.

Our research also confirms that seniors and juniors are significantly more flexible in their golf scheduling consistent with the their lifestyles. The point to be made here is that golf courses should capitalize on the flexibility of target markets such as seniors or juniors when managing their green fee rates and periods.

Women are another key target market. In order to grow the demand for golf throughout Canada, marketing to the female demographic, including a focus on business women, is essential. Cater to their needs with programs that are packaged to fit their lifestyles and work those considerations into your yield management efforts in terms of customized rates and time periods. With each of these specific market segments, it is important to co-ordinate your marketing strategy with your yield management. Together, they should maximize your net green fee rates and eliminate as much of your unsold tee times as possible.

Since competition in the Canadian golf industry is expected to increase significantly as more courses open and the trend is to more sophisticated management practices, it will become more important to apply the principles of yield management. To do so effectively, golf course owners should analyse their green fee patterns to determine high or low demand periods for each day of every month and then price accordingly. This does not mean a different rate for each tee time, but more selective pricing or promotions during certain periods.

Comprehensive information is very key to yield management strategies and golf course operators must take advantage of today’s technology to collect and compile the necessary data. The days of pencilled-in manual tee sheets are over as computer and Internet-based systems are now becoming extremely powerful tools. Those operators who don’t keep up to date with the technology advances will be left behind as the competitive pressures increase.

Yield management is a strategy that can also involve your staff on a daily basis. With a really good game plan and a team effort, your golf course can overcome a lot of the pressures from aggressive competition. The principle should be that your staff is trained to never turn a customer away. Ensure that they are well trained and motivated to find solutions, which avoid rejecting a golfer who intended to play your course.

For example, “Our first tee is not available but we would be pleased to drive your foursome to the 7th tee, Mr. Smith.” If such a group could play #7 through to #6, you probably gain 4 full price green fees. If there is only space for #7 through to #18, then a discount, or preferably a complimentary lunch, etc., may be offered which still yields substantially more than turning away the business.

To effectively involve your staff, they need to be aware of where on the course all golfers are. Once again, technology can provide such tracking and future applications of GPS systems will further enhance the possibilities for on-site yield management. Obviously, the staff must have the confidence that you have delegated the appropriate authority and adequate training is essential.

The pricing of green fees for various rate periods is an interesting challenge for all operators. One of the frequently applied mechanisms is the “discount coupon book” concept, which can take many different forms. Over the years, too many promoters have benefited on the backs of golf course owners by selling discounts to golfers.

Most golf courses have attempted to fit these discount promotions into non-peak times. However competition and salesmanship of the promoter have often forced some prime time discounting. If we aim for a key benchmark of 75 percent of the posted green fee as an appropriate net rate, then 4 for 3 is in the right range and 2 for 1 is too cheap.

However, a certain number of deeper discounts with appropriate time restrictions may, indeed, be better yield management than zero revenues for unsold tee times. Establishing the right overall strategy is a balancing act dependent on competition, weather and promotional plans for specific target markets or rate periods.

One advantage of discount coupon promotions is the perceived value of the golfer who relates the discount directly to the cost of the regular green fee rate. Customers enjoy a good deal and the discount coupon is generally more appealing than a fixed lower rate of equal amount for non-peak time slots. In addition, the effectiveness of any given coupon promotion is very trackable and golf courses have the option of running their own in-house discount card or contacting a reputable promoter.

Relating back to technology once again, watch for the Internet to emerge as a mainstream marketing tool for more effective discount promotion strategies. For starters, the lead-time required for printing and distributing traditional coupons is eliminated as golf courses become empowered by on-line promotional opportunities. In addition, database and tracking reports will be much more comprehensive.

Don’t be afraid to get aggressive with your yield management, under certain circumstances. If you know you are going to have unsold tee time inventory, create specific strategies such as junior or beginner programs which might even be at 80% discounts for certain periods. They can still yield increased revenue while leading to future full price sales. Also consider other components of your golf operation than the traditional 1st and 10th tee opportunities. Look at all tees and all times, as well as the driving range, the pro shop and food service for combined revenue possibilities. Again, you and your staff have to use judgement.

For example, if rates change at 3:00 PM, and there are people lined up at 2:30, consider starting them early if there is open space. Remember that you get nothing by waiting and may earn goodwill, faster play and the potential for additional players by starting earlier on occasion. Stringent rules without staff authority to become flexible may limit the effectiveness of your yield management.

Having discussed the need for effective discounting policies for given rate periods, it is equally important to emphasize properly pricing your prime time golf. In many cases, Canadian golf courses are short-selling themselves, particularly with Friday through Sunday morning tee times.

If you are sold out and turning away business, reconsider your ability to “premium price” that inventory. Perhaps advance booking privileges or prepayment options could yield higher revenues. How about surcharges for threesomes or twosomes, possibly even selling only foursome priced times during high demand periods?

Many operators worry that increased green fees during peak periods will drive existing customers away. However those golfers who do resist will frequently shift to your discounted times and be replaced by full paying customers at the premium rate. Many Canadian golf courses are quiet on weekend afternoons, only a short time after their busiest mornings, and the prospect of channelling some of the high demand times back a few hours may be achievable through more price differentiation between the two options.

Obviously, your marketing strategy needs to support any premium pricing with messages confirming the value you offer during prime time in order to justify the premium price. Yield management doesn’t pre-empt the need for your customers to perceive good value from their golf experience. To conclude, many Canadian golf courses should consider more flexible pricing on both premium tee times and non-peak periods as we enter the new millennium. Remember, the next time you go to book the last seat on a commercial airline, you are certain to pay double or triple what many other customers on the same flight will have paid. Most of the airlines that did not effectively manage such yield strategies are no longer with us.