Revenue Management In The Private Golf Club Industry: A Case Study In New Zealand

Abstract

The golf course industry has been recognised as one of the industries with suitable characteristics to adopt revenue management (RM) strategies. The main streams of RM research in this industry are studies looking for optimal tee time intervals for golf courses using simulation or regression models, and examinations of consumers' acceptance of various discriminative pricing strategies using survey methods. This thesis provides an exploratory study in the private golf club industry using approaches taken from both streams of research. The operation of the private golf club industry is similar to that of the public golf course industry, but it also possesses its own unique characteristics. For example, the main source of its revenue is annual membership fees instead of green fees charged per round for every player as used by public golf courses. The two different ways of generating revenue might lead to material differences in determining suitable RM strategies for the two industries. To our knowledge, this research is the first RM study to examine the private golf club industry in New Zealand. The current study employed similar methods used by Kimes & Schruben (2002) and Licata & Tiger (2010) in the public golf course industry in the United States of America (U.S.) with some adjustments reflecting potential differences in the two industries. Firstly, a process simulation method is designed to examine duration controls. The current bottlenecks on the course are identified from the simulation results. In addition, a new finding is reported that bottlenecks on the course shift with changes in tee time intervals. The changes of golfers' average waiting time and playing time in a round of game provide a reference for the Golf Club’s management to choose an optimal tee time interval. Results also show the realized capacity of the course and its theoretical capacity when different tee time intervals are used. Secondly, an online survey method is employed to determine golfers' attitudes toward waiting and the acceptability of paying premium fees for two improved services: a faster play provided by enlarging the current tee time interval, and a guaranteed tee time reservation place provided during popular periods. A clustering method based on members’ attitudes toward delays is employed following the approach of Licata & Tiger (2010) in terms of the analysis of the acceptability of premium fees and other variables such as members' feeling about delays and price consciousness. Using regression analysis, we have found the price consciousness variable has significant positive association with the premium fee strategy for a round of golf during popular times. However, we failed to find any significant correlation between the acceptability of the strategy of additional charges for a guaranteed fast game and all the variables tested. The results derived from the study would benefit the management of a private golf club by identifying potential constraints on the course, and obtaining a better understanding of members’ attitudes towards the acceptability of the premium fee strategies for different kinds of services.