Dynamic Pricing - Does it work?

[TheMackDaddy]

Hi all, looking for some insight/comments into dynamic pricing for golf tee times.

 

The city of Seattle recently switched to a “dynamic pricing” method for tee times, where the price fluctuates throughout the day based on demand. In theory, this would maximize revenue, but in practice, my gut feeling tells me that it's not fine-tuned enough to work.

 

Golf is an inelastic product. That means that if the price goes up a little, demand doesn’t really change. If you’re set on playing golf today for say, $50, you’ll probably still go play if the price were $58. The converse is also true, and means that dropping the price to attract extra golfers doesn’t accomplish the intended effect.

 

Seattle public courses are rarely full, so the “supply” of rounds isn’t an issue; the courses can accommodate more golfers, but as mentioned, this won’t be accomplished simply by lowering prices, which instead leaves the course with less money.

 

Dynamic pricing is new for Seattle courses. I think it’s only been in place for a few months. And, if the model Seattle uses has all the proper inputs (an elasticity input for example), then I think Dynamic Pricing would be helpful. However, as someone who spent an entire summer creating the pricing model for a mid-market business, I know how difficult it is to capture all the variables, and I’m skeptical that Seattle is using a adequate model.

 

I'm curious to hear your thoughts, especially if you work at a course that's transitioned to a dynamic pricing method. Thanks in advance.

 

 

[Justmuckit]

I don't work at a course, but my experience here in St. Louis is that courses have no problem dynamically raising prices, but rarely lower them - even though they are sitting empty all day. There's a really good course on the Illinois side who won't change their price even when they have 3 straight hours of tee times available.

[thevaporz]

Golf is a very elastic market. Gas prices are inelastic. We've always had dynamic pricing, it's called primetime and twilight. I walk for $19-$40. I'll consider $60 for nicer courses but that's about my limit.

[TheMackDaddy]

> @thevaporz said:

> Golf is a very elastic market. Gas prices are inelastic. We've always had dynamic pricing, it's called primetime and twilight. I walk for $19-$40. I'll consider $60 for nicer courses but that's about my limit.

 

[Here's a study from Cornell that says otherwise](https://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=2116&context=articles "Here's a study from Cornell that says otherwise")

 

From the abstract: "We find that during the entire sampling period the demand for golf was primarily price inelastic, suggesting that a drop in price will not have a significant positive impact on demand and revenue will decrease."

 

That's from a study of 140,000 rounds of golf. Maybe for yourself, golf is elastic (although you point out that you'll play for $20, $40, and sometimes $60, so I think it's inelastic for you as well).

 

To your second point, we have always had dynamic pricing, where rates are segmented, but this new method of constant fluctuation is fairly new to the golf industry.

[thevaporz]

So your courses don't have rack rates anymore? One minute you could book online for $20 then the next minute it goes up to $28 for the same tee time, depending on how many people are looking to book for that time? I don't see that pricing structure working very long.

[Augster]

This seems silly to leave tee times open. Drop the open tee times to $25 or less with cart. Just like that, no more open tee times.

 

Our course, to fill up early tee times, would do $20 with cart from sun up to 9am M-F. The course was completely packed during that time. Since we like to play at 9 on weekdays, we went from 3.5 hour rounds as there wasn’t much ahead of us, to 4.5-5 hour rounds on weekday mornings.

 

We were happy when different management decided to do away with that pricing. It seems, in my area at least, there is no end to people who will play cheap morning golf with carts.

[TheMackDaddy]

> @thevaporz said:

> So your courses don't have rack rates anymore? One minute you could book online for $20 then the next minute it goes up to $28 for the same tee time, depending on how many people are looking to book for that time? I don't see that pricing structure working very long.

 

As I understand it, yes. [Here's the webpage to book tee times](https://premier.cps.golf/PremierV3/Home/WidgetView "Here's the webpage to book tee times").

 

"We are proud to offer DYNAMIC PRICING to guests booking tee times on Premier's website. DYNAMIC PRICING eliminates a standing green fee and replaces it with a golf rate that changes based on current demand. This model allows golfers to find a rate that works best for them rather than being bound to a single, static rate. "

 

My point is that if nobody is playing, the algorithm will drop the price, but the drop in price won't attract additional customers. This means less money for the golf courses.

 

Why do I care? Golf courses have become a hot debate in Seattle, as people are considering getting rid of one or more of the public courses. If the courses start losing more money, there's a greater chance the city will shut them down, convert them to housing, etc. That's why I don't want this new dynamic pricing model to screw everything up, and I'm skeptical that Seattle is using an adequate model.

 

[https://seattletimes.com/sports/golf/seattle-considering-what-to-do-with-4-public-golf-courses-and-528-acres-of-green-space-they-cover/](https://www.seattletimes.com/sports/golf/seattle-considering-what-to-do-with-4-public-golf-courses-and-528-acres-of-green-space-they-cover/ "https://seattletimes.com/sports/golf/seattle-considering-what-to-do-with-4-public-golf-courses-and-528-acres-of-green-space-they-cover/")

 

[earleyrc]

This seems overly complicated, but may have some merit. The biggest investment in a round of golf is the 4-5 hours it takes to play 18.. the extra couple $ will likely not be a deciding motivator one way or the other. The biggest variable for golf courses is the weather. If you can make extra money when it's nice outside and most golfers are trying to play, then why not do it?