The Pellucid Perspective - October 2011 - (Page 2)

PRICING POWER When will pricing power return to golf? Can “unbundling” reinvigorate golf’s pricing power? By Jim Koppenhaver T wo recent articles about pricing strategies and success in even a mini bar re-stocking fee so if you eat that $10 can of related industries, hotels and skiing, caught my attention peanuts, they’ll also charge you $2 for the housekeeping staff to and turned my thoughts to, “If they’re having (some) suc- inventory and replace it!) cess in creatively regaining pricing power, why not golf?” In the • Resort fees (I stayed in the Fontainebleu Hotel in Miami hospitality industry, it seems that they’re following the airline earlier this year and paid $7.50/daily for the wonderful pool industry model of “unbundling” services, in addition to having and grounds which I never got the opportunity to enjoy in my some latitude to increase the base room rates by demand and 2-day stay) traveler types. In skiing, Vail Resorts seems to be having some • A tray charge for room service in addition to the food exsuccess in moderate rate increases at the lifts but they’re also pense plus the delivery fee augmenting and benefitting from an increase in the breadth • Paying to have the hotel hold your bags for early or late of spend across ancillary services (lessons, rentals etc.). Inter- check-ins estingly, the ancillary revenue increase is being driven by more According to Smith Travel Research (STR), hotels have had people buying multiple services vs. any substantial increase in success in increasing occupancy rate but Average Daily Rate the individual rates for those services. Let’s (ADR) has been more of a struggle. That take a look at the two scenarios as reported said, the key summer season saw a 4% ADR In the hospitality in the press recently and then we’ll see if we increase for the June-August period, which industry, it seems could apply either success story to golf in the the golf industry would happily take at this near-term future. that they’re following point. Before moving on to skiing, the other The headline on the hotel article was a litmajor benefit which hotels have been able to the airline industry capture on the cost side is their big “Save the tle misleading: “Revenue Estimate at $1.8B a Year for New Fees Charged By Hotels.” What Planet” PR push. This in-room communicamodel of “unbunwas missing to put that statement in perspection campaign makes an eco-appeal to traveldling” services, in tive was the fact that this represents less than ers to re-use their sheets and towels without 2% of hotel revenue in total and the fact that any economic benefit to the consumer. On addition to having the 80% increase they cite in the sub-lead line the cost side however, all that conservation some latitude to is over a decade (still, that’s 8% growth a year, falls (heavily) to their bottom line. Case in but on a small base). What they’re doing, borpoint, when was the last time that a hotel ofincrease the base rowing from the airline industry, is “unbunfered you a $2/day rate reduction for re-using room rates by dling” services that used to be included in the your towels and sheets? base cost of the product and treating them as Meanwhile, out on the mountains in demand and separate charges. golf ’s “off season,” the results for Vail Retraveler types. For the airlines it started with reservation sorts (owners of 6 of the largest skiing/ change fees ($50 or more to just change your snowboarding areas in the US including Vail, flight, really?), then came checked baggage Beaver Creek, Breckenridge and Keystone) fees, then extra legroom fees, then faster security line privileges, show another pricing success story closer to home for the golf earlier boarding privileges, award redemption fees, etc. Heck, industry. Both are sports which have limited appeal, are relafor $29.99, you can buy most any (single) thing that used to be tively expensive endeavors to both participate in and “gear up” included in your base ticket price. (compared to tennis, bowling, etc.) and have relatively high fixed Hotels had to work a little harder to “unbundle,” but they’ve costs for the operators. In an article published in First Tracks! come up with an interesting array according to the article, which (, it runs through Vail’s is based on a study by Bjorn Hansen, dean of New York Univer- topline performance for the 2011 ski season. I extracted the folsity’s Preston Robert Tisch Center for Hospitality, Tourism and lowing highlights from the text that are relevant to this discusSports Management (full article if you’re interested can be found sion (all results excerpted below are excluding the acquisition of here: Northstar-at-Tahoe, which paints a more accurate “same mounHotelFees.html). Examples of creative hotel “unbundling” are: tain sales” comparison): • The increasing practice of reservation cancellation fees • Total Mountain net revenue increased 7.7% • In-room Internet fees • Skier visitation was up 4.1% (thus accounting for over half • In-room amenity fees (bottled water, mini bar and, lately, the Total Mountain net revenue gain) OcTOber 2011 2 The Pellucid PersPecTive

Table of Contents for the Digital Edition of The Pellucid Perspective - October 2011

The Pellucid Perspective - October 2011
Table of Contents
When will pricing power return to golf?
Municipal golf’s identity crisis
Let’s make a deal
‘Winter rounds test drive’ promotion wins Labor Day battle
September weather impact: Too little too late?
‘Brown’ not making Half Moon Bay golfers blue
Cincinnati, OH Core Business Statistical Area (CBSA)
Comings & goings
The “Most Powerful” — really?

The Pellucid Perspective - October 2011