Dynamic pricing can be a powerful tool for golf course operators, but its implementation requires careful consideration. Balancing revenue optimization with customer satisfaction is crucial to the success of any dynamic pricing strategy.
Dynamic pricing, also known as surge or demand pricing, is not new to the golf industry. However, it took a back seat after 2019, as many tee times were primarily reserved by members during the post-pandemic period.
As of 2023, dynamic pricing has re-emerged as demand within the industry has subsided. However, golf course operators should approach its use with caution. What may seem like a revenue-boosting strategy can quickly become a pitfall if not properly understood and managed.
Dynamic pricing is a strategy where the price of a product or service is adjusted continuously based on various factors such as demand, supply, competitor pricing, and market conditions. This strategy is supported by technology and data analytics, allowing businesses to set flexible prices in real-time.
While dynamic pricing might seem like a sophisticated tool to increase the number of rounds of golf sold, it’s essential to fully understand how the underlying algorithm works. Without this knowledge, golf clubs may find themselves in a precarious situation.
Dynamic pricing works exceptionally well in industries like hotels, airlines, and even pubs. It allows businesses with limited inventory to adjust prices based on demand for scarce items. Consider the last available seat on a Friday night flight or the last room at a hotel. The system can increase the price of the remaining inventory or lower it if it hasn’t sold in a certain time frame, helping businesses achieve full occupancy.
Hotel operators, for example, set a minimum price threshold. The algorithm is instructed not to drop the price below a certain point, as it may be more economical to leave the room unsold than to sell it below cost due to service expenses.
In golf, the inventory being sold is tee times. Unlike hotels, golf courses generally have more inventory available daily, meaning that increasing prices for the last few tee times won’t be as frequent. However, it could happen, especially during those last couple of prime tee times on a warm summer evening.
Now, imagine an overcast, chilly Tuesday afternoon in summer, or worse, winter. You might rely on your dynamic pricing system to fill these slots. But here’s the reality check: Is the system selling those tee times at the price you want? Or are they being sold at a lower price than your desired green fee strategy? Possibly at a discount that your customer base may start to expect?
Remember, the algorithm bases price reductions on the number of unsold tee times as the booking time approaches. It might lower the price to attract more golfers, but the critical question is—do you know what discount is being applied, and does it align with your guest member rates?
Clear communication, fairness, and a focus on long-term customer relationships are vital when using dynamic pricing to sell golf tee times. By understanding the risks and adopting a thoughtful approach, golf courses can maximise revenue while maintaining a loyal customer base.