March 28, 2012 by ak879@cornell.edu

Revenue Management in the Golf Industry

Golf Industry Overview

Golf is a great sport! Why? Because it is one of the few sports that you don’t have to be in shape to play it and play it well! Just google John Daly and you’ll know what I mean. Golf is a very popular sport because it’s social and it requires as much mental ability and concentration and it does physical.

There are more than 35,112 (http://en.wikipedia.org/wiki/Golf) golf courses worldwide and many of them are located in resorts and tourist hot spots. Half of all golf courses are located in the United States and it probably has to do with the abundance of real estate in the country. But of course, like everything else in the world, the next big thing is golfing in China, which has exploded in popularity since its introduction to the country in 1984.

The National Golf Foundation (http://www.ngf.org/) and Golf Digest (www.golfdigest.com) offer plenty of information about the golf industry and its latest news.

Golf is popular amongst both men and women and there are plenty of professional tours around the world. The PGA and LPGA tours and the most popular for male and female professional golfers and they have some of the biggest prize purses in the industry. I think golf is the greatest sport in the world and I am biased because I’ve been playing it since I was four years old. But this is how I convinced a friend: I told him that if I was a famous professional athlete of any sort I would pick golf. Why? Because it’s the only sport where your professional career could last as long as a regular job. I can be a professional golfer until I’m retired! And after that I can even join the Senior PGA tour where I can still make a great living. Just ask Lee Trevino of Chi Chi Rodriguez.

The problem with golf and revenue management is that it usually charges a fixed price and it’s hard to control duration, which places it in Quadrant 3 of the RM levers. Since it is a social sport and depending on the size of the group, type of course and weather, it is very hard to estimate how long it’ll take a group to finish a round of golf.

Space in golf is pretty fixed and it is defined

This is how a round of golf is usually priced:

– The golfer pays a “green fee” that allows him/her to play a round of 18holes

– The time it takes to finish the 18 holes varies greatly depending mostly on the size of the group

– It is categorized as a “gentlemans” sport and it’s considered rude to hurry other players

Space

The golf industry defines space implicitly in that they are in charge of the space and they do not require to sell a specific part of that space but the whole course or golf range.

Golf courses divide their space up in different types, duration and distance for their holes. They also add other types of spaces like golfing ranges where they can get additional revenue from customers that don’t necessarily want to play a full round of golf.

They can also use the space to generate additional revenue, for example:

– They have the golf range that serves the golf course

– A golf pro shop to generate retail sales

– Professional services like gripping clubs

– Professional lessons (might not take space but generate additional revenue)

– Bars (19^th hole)

– Other F&B outlets like restaurants

Some creative solutions to generate additional revenue using the space could be:

– Offer spa and sauna services in their locker facilities if they have them

– The space could also be rented out for events, such as weddings and outdoor concerts

– They could do outdoor cinemas at night

– They could have summer camps at night for kids

Time

The golf industry uses time implicitly because it is very hard to know how long it will take a group to finish a round of golf and it is very hard to control it without annoying customers. There are things that can be done, for example:

– Discount if the group is done before X amount of time

– Charge for time and not for rounds (problems with slow foursomes)

Slower ones must be willing to let faster ones go through

– Charge different prices based on weather forecasts (a discount for a potentially rainy day, give they sign a disclaimer)

– Older people have to be 3 or less per group

– Field marshals to help ease the time pressures

– Use ball finders in certain holes to make finding the ball easier (reducing time). This could be very helpful in markets where labor is inexpensive

– Caddies for bigger foursomes (time controllers and sell them as free caddies or charge)

– Charge higher for “professional caddies” who will make play faster

Price

There are several rate fences that can be used in golf in order to charge different prices at different times or level of service. Some of them were mentioned in the previous point because they go hand in hand with time, but some additional examples are:

– Charge different prices

Morning vs afternoon
Weekday vs weekend

– Golf cart to have fences for bundling and other services

– Charge for time and not for rounds (problems with slow foursomes)

Slower ones must be willing to let faster ones go through

– Advanced payment to reduce no-shows and determine overbooking levels too

– Cancellation Fees for no-shows

– Booking curves in order to determine which days are the ones with the most demand

– BUNDLING

– Daily traffic curves to determine what time of days are the best tees (every half hour?)

– Pay extra to pass a slow “foursome”

– Charge different prices based on weather forecasts (a discount for a potentially rainy day, give they sign a disclaimer)

When it comes to Golf Ranges, which could be an add-on to a golf course or free standing, has a lot of RM opportunities too:

– Different prices for the bucket at different times based on Curves by time and day of week (with length of stay too)

– Offer unlimited balls for a pre-determined LOS instead of charging by the bucket… This way we know exactly how long they will last.

– Offer different quality of balls and charge more or less for them (makes hard to sort them but could be worth the effort)

– Charge more at night or day depending on demand

– Offer virtual ranges

– Time and price could also be enhanced by having some kind of set path:

10 shots at three different distances with three different clubs

– Be able to reconfigure the range and/or the booths where the players shoot the balls

There are many things that can be done with golf revenue management. But the most important thing to do before rolling out RM initiatives is to test it first. A new RM strategy might sound exciting but it could be a potential source of dissatisfaction with the customer and reduce revenue instead of improving it.