During times where there is huge economic uncertainty, companies are generally focused on cost containment and cost cutting. However this has limited impact in those industries like running golf courses where so many expenses are relatively fixed. As level of service and value for money are primary factors in choosing where to play, golf clubs focusing energy and resources on increasing revenues have the best chance of success.

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So what tools do courses have at their disposal? One such tool is yield management, often referred to as revenue management, which is the business practice of maximizing financial yield through control of inventory levels and pricing. This practice is most applicable to those industries having fixed capacity and perishable inventory – like hotels with unsold rooms and airlines with empty seats.

In the golf industry, the perishable inventory is the time during which a hole is available (Kimes 2000). If a hole is not occupied for a period of time, it perishes without generating any revenue. Operators need to focus on filling up tee times, or in other words, increase utilization. There are opportunities for courses worldwide to improve on this metric. Focusing solely on utilization is not the complete answer to improving profitability; however it is a key lever for course operators to focus on.

Yield Management uses the basic strategy of providing the right service at the right time to the right customer at the right price (Kimes 1997). Now let us look at this in more detail at how this applies to the golf industry.

Right Service: The service offered by golf courses is available tee times. This is defined according to the dimensions of the service, how and when it is delivered, and how, when and whether it is reserved. What is largely practiced is the offering of tee times through a course’s own website, a golf reservations portal, or through telephone enquiries. What is common across all these practices is that information is pulled by the customer (i.e. having to go to a website or calling to get information). Excluding telephone enquiries, offers are communicated on a mass market basis without any differentiation. It is also unlikely last minute offers (i.e. tee times available within two days) are highly converted as players may not be aware of the offer in the first place.

Right Time: Tee times are highly specific to a golfer. Player demand may be highest on weekends or particular times of the day. Depending on when tee times are available, courses need to access the players having matching preference of times and make effective pricing decisions. (e.g. if a tee time is available during peak hours, it might not make sense to sell this at a reduced price, as peak demand should be there). However what is critical is that players are informed of the available tee time to be able to act on it.

Right Price: Courses can offer differential pricing and/or incentives that make sense for the demand level at a given time. Often there are pre-set times where discounted rates (e.g. twilight rates) are available; however, courses are often unable to communicate price changes in real time to get people to play under short notice.

Right Customer: Every player can be segmented according to the demand characteristics relating to the timing, the service and the price. Courses often send mass communications of special offers, rather than a personalized, relevant and targeted offer to improve conversion.

The key concept is to match the availability of a tee time with a player’s willingness to pay for a service rendered at that time. Yield management service offered gives course operators a powerful tool to use the cellular / mobile phone to reach golfers, to market one’s course and to price with timing, this software-as-a-service gives a demonstrable marketing return on investment. The service is immediate, relevant and targeted – bringing together golf courses with interested players.

Practicing yield management helps companies focus on revenue growth, not cost cutting or downsizing. The bottom-line is increased through top-line improvements. Companies using yield management have reported revenue increases of 3 – 7% and the potential gain in operating profits for the golf industry is tremendous. Small changes in revenue can have a big impact on profit, especially for high gross margin (i.e. having low variable costs) and low % operating profit industries. The average return of investment is from 350% upwards, depending upon the capacity and turnover.

In face of declining rounds, the focus at courses worldwide has been on cost cutting – with limited impact, since so many expenses at golf courses are relatively fixed. Reducing customer service levels is not the answer as level of service and value for money are primary factors in choosing where to play. Those clubs focusing energy and resources on increasing revenues have the best chance of success.

Services offered are now available for course operators to actively practice yield management. With increasing acceptance, companies that fail to participate could increasingly find themselves at a competitive disadvantage. Given a slowdown in the economy and over supply of facilities in the industry, courses are now competing vigorously for a limited pool of golfers and are actively looking for ways to stay competitive.