Revenue Management on the Links

Abstract

In principle, golf-course operators should be able to take advantage of the time-based strategy of revenue management. To do so, however, requires a revision in the way most golf-course operators traditionally have viewed sales. Many golf courses track item contribution margin, costs, revenue per daypart, or similar operating ratios. A different type of measure, revenue per available tee-time, integrates the duration (elapsed time) of the round as a factor in the revenue calculation. The golf-course industry generally has the requisite conditions for using revenue management successfully: fixed capacity, relatively predictable demand, perishable inventory, cost and pricing structures that allow for some flexibility, and demand that is variable and uncertain. Indeed, certain elements of currentday golf-course practice, such as differential pricing (e.g., late-day specials, seniors' discounts), promoting special events (such as local tournaments on off nights), and managing customer play time carry the seeds of revenue management, but few golf courses have established the necessary strategic approach to assemble those tactics (i.e., duration management and demand-based pricing) into a coherent revenue-management strategy. For example, golf-course operators can make duration more predictable by reducing the uncertainty of when (or whether) customers will arrive and by reducing the variability of the length of the round. Operators can apply differential pricing and logical rate fences to build demand during off-peak periods and to establish appropriate prices for busy periods. This article establishes a framework for an overall revenue-management strategy based on the concept of revenue per available tee-time (stopping short of offering a specific action plan).