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Dynamic Pricing: An Integral Part Of Yield Management
Brian Conley

“Supply and demand” is an economic model which states that the price at which a good is sold is determined by the good’s supply and its demand. When the supply of a good is equal to its demand (known as economic equilibrium), it reaches a stable price which buyers and sellers agree on. In golf our supply is determined by our tee sheet, price is reflected by our rates. So, every time you sell a tee time you’ve reached your economic equilibrium? Not necessarily. Without a dynamic pricing model, you are leaving money on the table.

Simply stated, yield management is the process of making frequent adjustments in the price of a product in response to certain market factors, such as demand or competition. As operators we too often focus on rate and forget about supply thus resulting in an imbalance in the economic equilibrium. Fixed rates determine one thing, a ceiling. Terms referring to rates such as senior, twilight, aerification all mean the same thing, “discount.” These aren’t rates but rather strategies that work backwards from a goal. They lead to a downward cycle that forces clubs to overbook and possibly devalue their product in an effort to reach revenue goals. Yet, seldom does this cycle produce efficient profitability. If you could make more money doing less why wouldn’t you? Let go of the vine, an unused tee time is not a lost opportunity!  

Understanding and focusing on market factors such as competition, demand and other influences will provide the best strategies for a fluid and dynamic pricing strategy. Every facility has different levels of price elasticity, or how high and low equilibrium moves in a given time period for a set of inventories. The more elastic the facility the more elaborate the dynamic pricing strategy will be. These strategies will vary over time as market influences also include seasonality, customer lifestyles and weather events.

Once we have a functioning dynamic pricing model then what? As operators we turn back to the aforementioned “supply and demand” equation and manage the side we actually control, supply. Our supply is the inventory of tee times on any given day. Tee times are very finite and time sensitive so we absolutely have to have a flexible, DYNAMIC, pricing strategy so that we can manipulate inventory until it creates a sale or reaches the equilibrium point. Evaluate your inventory and consider the impact of:

1.    Tee time intervals

2.    First and last available tee times

3.    Advanced booking windows

4.    Staggered tee time releases

Change to a new dynamic pricing model and watch your profitability grow focusing on your inventory. The goal is NOT 100% utilization: it is 100% equilibrium. It’s perfectly fine for a tee time to go unused. The best hotels in the world run at 65% - 70% occupancy. They can do this with a truly dynamic pricing model and so can you.

Let us show you how.

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