Decoding the mysteries of peak utilization
Deep and broad demand triggers pricing power
The people who run budget motel chains talk about heads in beds. For cineplex owners, it’s about butts in seats. And like golf course operators, these people sell inventory that perishes throughout the day. But marketing tee times is more nuanced and complex than selling movie tickets at the Regal Cinema or room nights at Holiday Inn. The golf product is a lot less commoditized, pricing across a given market has more variation and the golfer’s purchase decision has more emotion built into it.
Technology is helping course managers gain a certain degree of pricing power that, in turn, leads to marginally higher profits. Recognizing the peak times during any given day or week, also known as the “high-utilization” sections of a tee sheet, is certainly important. But the savvy golf course operator knows that not all high utilization is created equal.
Looking on the computer screen at your bookings for a sunny Saturday in June, certain information is plain as day—what’s been reserved and at what price. However, other information is hidden from view and will take some sleuthing and perhaps some experimentation to uncover.
The ongoing challenge is to accurately identify what is or is not a high-utilization “day-part” and build optimal pricing based on the data you’ve analyzed around high utilization.
“Looking at a particular period and saying ‘we’re busy at that time’ doesn’t get you below the surface to a true understanding of your demand,” says Kesler Pollard, GolfNow Market Sales Manager for greater Raleigh, N.C., “it only scratches the surface.”
Pollard states that to truly qualify as “peak,” you need to have both depth and breadth – “depth” relating to actual utilization levels, like 40%, 50%, etc., and “breadth” referring to the variety of player types that make up that utilization percentage.
“If you have a day part that is 80% utilized and all of those tee times are from a single player type (i.e. members, seniors), that day part has strong depth and weak breadth, so this doesn’t necessarily indicate high demand,” Pollard said. “On the other hand, if that 80% comprises a wide variety of player types, then you have both strong depth and breadth, and that’s where pricing power can be exercised.”
Another simple and reliable indicator of peak demand is a fast pace of bookings at or near your highest price. “When a section of the sheet is full and has filled far in advance of the day of play, that’s a signal that you’ve got some pricing power and could move rates up,” says Pollard.
His colleague Scott DeFriez agrees, though it’s critical to note they are both framing their viewpoints in the context of dynamic pricing as a strategy—along with access to dynamic-pricing tools that can execute the strategy.
“The more you understand inherent demand, the more you’ll be able to find effective tactics for maintaining and increasing it,” says DeFriez, who is Area Sales Manager for GolfNow in the Northeast. “Over time you learn to segment the customer, identify the channel they’re using to book golf, understanding why they booked with you instead of a competitor, and so forth. Now you’re on your way to effective revenue management.”
A good example of segmenting, or categorizing, the customer is found at a Raleigh-area GolfNow Plus course with which Pollard consults. Its tee sheet is downright strange compared to a typical daily-fee course because of a strong customer flow from a nearby university. “The longstanding pattern for public golf is steadily lower demand the later you go into the afternoon,” says Pollard. “Another rule of thumb is that advance bookings will be a key demand indicator for any given period. But this golf course is an outlier on both those counts.”
As Pollard tells it, on any given weekday the course will show a blank sheet after 1 p.m., yet by 7 p.m. its heavy walk-up play will have pushed the afternoon utilization rate as high as 70 percent. “In this case, normal signs would point to extremely low demand, which would, in turn, suggest incentive pricing to sell at least some inventory,” he says. “But the course is too conveniently located and the customer segment has an academic lifestyle that simply keeps them from pre-booking. We respond to that by maintaining non-incentive pricing much later than you’d expect, then adding some incentive at just the right point in the day where it’s appropriate.”
With online and mobile being the fastest-growing booking channel, it’s become easier to manage a fluid tee sheet that is priced to demand. “At the end of the day, pricing based on demand, charging above the rack rate when utilization is high, and using technology to automate these changes is a new concept for the golf industry,” says DeFriez. “For now and in the future, it’s one of the keys to growth in a very competitive marketplace and a way to keep pace with an ever-changing consumer, which leads to an overall healthier golf market.” The courses that learn to optimize revenue from their peak periods will indeed be at an advantage—able and ready to make investments and improvements that cause those peak periods to extend outward and even pop up on the sheet in places where you’d never expect them.