Four Things to Know About Revenue Management

Golf course revenue management, or knowing how to apply revenue management principles to a tee sheet, requires many things. The objective of this resource is to give you four definitions that will become the back-bone of the language you speak as you work to maximize revenue at your facility. These are common terms to revenue management professionals but to the golf industry these are relatively new and not widely understood.

A Quick Primer on Key Performance Definitions

Benchmark uses four important key performance indicators.  Key Performance Indicators are a business metric used to evaluate factors that are crucial to the success of an organization.  The understanding of these four KPI’s is critical to your ability to successfully manage the tee sheet.

Your tee time inventory is the most valuable asset any golf course possesses.  Remember, just like an airline, hotel, car-rental, bowling alley and even a day-spa,  your asset expires, in your case every ten-minutes, so proper revenue management is necessary.

1. Occupancy Percentage (OCC %)

   All rounds played (divided by) all available rounds (capacity).
   This is the first of the four KPI’s and simple enough to understand. How full are you? The KPI is Rounds Played divided by Available Inventory. This equation begins by calculating your “available inventory” or your “capacity.” When is the first tee time? When is the last tee time? How many players per hour can you tee off at peak demand? How long does it take to play your golf course? At Sagacity Golf we calculate capacity by starting twenty-five minutes after sunrise and ending four and one half hours prior to sunset with each full hour containing twenty-eight available rounds. The numerator, or the number that is divided by capacity, is all of the rounds played on your golf course. All rounds should be included: 18-hole, 9-hole, back nine start, as well as comp rounds, employee rounds … all rounds. And, for the moment, we won’t make it any more complicated than that.

2. Revenue Per Available Round (RevPAR $)

   All green fee related revenue (divided by) capacity.
   For the revenue management expert, this is the most important KPI. Revenue per available round (RevPAR) is calculated by taking all revenue generated from green fee-related sales and dividing it by the capacity for the same period of time. This calculation quantifies how successful you were at generating green fee revenue based on all of the inventory available. It’s a balance of occupancy and average rate. For the un-educated, this KPI is often overlooked and mistaken for the easier to understand measurement of average rate per round.

3. Channel Mix Percentage (CMIX %)

   Rounds booked direct (divided by) all rounds.
   This is a relatively new calculation that has come about with the growth of golf packagers, wholesalers and third-party websites. It measures the percentage of rounds that are booked through marketing channels owned by the golf course vs. marketing channels owned by others. Golf course, or direct channels, can be your phone, a call center that answers your phone, your website or your mobile app. Indirect channels can be wholesalers and third-party marketing entities. The calculation is rounds booked direct divided by all rounds played. It’s really too early to tell what a “healthy” channel mix percentage is, but know this: rounds booked directly typically have a higher-yielding green fee amount and also come with the additional benefits of a direct relationship with the golfer (your customer). It’s permissible, some would say indispensable, to have some of your rounds come indirectly. After all these third-party sources have economies of scale and can attract a lot of eyeballs. But remember, these rounds come at a cost beyond the commission.

4. Average Rate Per Round (ARPR $)

   All green fee related revenue (divided by) all rounds played.
   This calculation is the one most widely cited by golf course operators over the years. They say, “I have an average rate of $49.00.” Or, “There’s no way we’re a $25.00 golf course.” Average rate per round is another very simple calculation: all revenue generated from green fee related sales divided by rounds played. This metric is helpful when showing the amount paid by golfers, especially during certain days of the week, certain times of the day and by specific rate categories of golfers. It is how a golfer compares and evaluates your golf experience vs. other golf courses they might select. When you drill down into this analysis, you can say, “Hey, look at that, on Fridays in April between 10:00 am and 12:00 pm we are running at 88% occupancy. But my average rate is $55.00, whereas my competitive sets average rate is $62.00.” Knowing this information helps you make better informed revenue management decisions.

As you master the understanding of these four key performance indicators you will be able to properly measure the results of your performance, compare them to others and start to actively revenue manage your tee time inventory and optimize performance.