Golf Revenue Equation points to Duration and Demand

Digging around in the recycle bin behind the office last night, we found an interesting article: "Revenue Management on the Links," Cornell Hotel and Restaurant Administration Quarterly, Feb. 2000, pg. 120-127.

Author Sheryl Kimes isolates two variables that dominate in golf course revenue management issues: 1.) the uncertainty of play duration and 2.) price management based on player demand characteristics.

Play duration

Play duration is affected by arrival and pace. No-shows or late-arrivals are generally the biggest losses in terms of arrival. Ways to combat that? Require guaranteed reservations with credit card approval and charge a fixed fee for no-show/no-call golfers. Reconfirming reservations the day before also works psychologically to prevent flippant no-shows. Automated email is an ideal solution for this.

Pace of play requires a little more creativity. One option is to redefine play as an event with a time limit for a round of golf rather than the open-ended approach. This runs against common practice. During busy times, carts could be required with a reduced rental fee. Some courses even post golfer playing times, hoping that peer pressure will encourage pace improvements.

The main goal of removing uncertainty of play duration is so that tee-time intervals can be shortened. On a busy day, going from a 10 minute interval between groups to an 8 minute interval adds substantially to the revenue bottom line.

Demand characteristics

To determine price, Kimes warns against "charging price premiums" due to the negative fallout from customer perceived unfairness. Instead, set a "full" price during times of high demand and offer discounts off that full price during slack or unfavorable times. The discount approach is viewed more favorably by customers than a surcharge arrangement.

Using intangible rate fences can shift demand from busy times to slow times, reward reliable customers, and leave the highest-margin business for the busiest and most desirable times. (No, these fences aren't made of wire and wood.) A rate fence segments customers based on their habits. Typical golf industry fences: group membership, lead time in reservation booking, guarantee by the customer for the reservation, and time of day/week/season.

Although fencing is common practice for airlines, hotels, and rental cars, Kimes warns against customer perceptions when applying revenue management techniques like fencing to golf. As a well known function of business, customers will go out of their way to punish a business they think is unfairly gouging on prices.

One thing is certain: to move a golf course into the managed-revenue realm, the course needs to implement sound data gathering practices, automated communications, and customer-profiling technology. More revenue is possible for the courses willing and ready to implement these things. When you're ready, consider Cypress Golf Solutions.