While dynamic pricing can be a powerful tool for golf course operators, it is crucial to approach its implementation with caution. Striking a balance between revenue optimisation and customer satisfaction is key to a successful dynamic pricing strategy.
Surge pricing or dynamic pricing is not a new phenomenon within the Golf Industry. It has taken a back seat recently since 2019, with a lot of tee times having been consumed by members post the pandemic.
2023 has seen a re-emergence of dynamic pricing as demand has subsided within the industry. A cautionary note is required in its effective use in golf. What is portrayed as tee time sale dynamite can quite easily become a golf operators kryptonite. Especially if it is left unchecked and not fully understood at the outset.
Dynamic pricing is also known as surge pricing or demand pricing. It is a pricing strategy in which the cost of a product or service is continuously adjusted based on numerous factors such as demand, supply, competitor pricing, and other market conditions. This approach is facilitated by technology and data analytics, allowing businesses to set flexible prices in real-time.
This all sounds extremely exciting and sophisticated. We all like a new tool that in a clever way is going to increase the number of rounds of golf sold. However, without understanding how the algorithm works – a fancy word for process – it can get very quickly get a club into hot water.
So where does surge pricing work well. Hotels, airfares, and pubs are a few areas where this tool works well. Ideally it enables a business that has scare inventory to increase its price based on demand for a scarce item – think about that last flight on a Friday night or that last room at a hotel. The system can look at how many rooms are left and put a premium on the price of the room based on there on being a few rooms left. Also, if those rooms have not sold in the last few hours, it can also lower the rates to ensure the room is not unsold and the hotel has achieved full occupancy.
What a hotelier will do is set a floor to their price. It will tell the algorithm what to take the price of the room down to. What it will not do is continue the price drop to midnight of the room booking to the point of zero cost. This is because there comes a price where it is cheaper to not sell the room. The cost of servicing the room the following day, laundry, staff costs etc.
Now flip this to a golf course where the inventory being sold is tee times. Unless it is a big hotel, there is more inventory available at a golf course daily verses hotel rooms. This means that creating a situation of upward pricing for the last few rounds of golf will not be a regular occurrence. Although, it can happen, just think of those last couple of tee times of a warm summer evening.
Now to reality and picture an overcast, cold Tuesday afternoon in the summer or worst still in winter. But do not worry I hear you say, we have our dynamic pricing module set up to assist in selling these very tee times. Now for the reality check. Is it selling those tee times at the price you want it to? Or are you selling them at a price that is below your green fee pricing strategy? At a discount lower than you want your player base to become accustomed to?
Remember, the algorithm looks at the amount of tee times sold within a determined period to the point of the tee time. It will lower the price of the round by a set discount to stimulate golfers to book. So, the big question – do you know what discount you are offering and does that match your guest member rate? Clear communication, fairness, and a focus on long-term customer relationships are vital to navigating the potential pitfalls associated with dynamic pricing in the sale of golf tee times. By understanding the risks and adopting a thoughtful approach, golf courses can ensure they are maximizing revenue while maintaining a positive and loyal customer base.