We discuss the subject of yield (revenue) management in detail in Chapter 13, Aggregate Planning. Examples are provided from the airlines(American), hotels (Marriott), car rental companies (Hertz), and even Disney’s theme parks. But the latest issue of Operations Management/Management Science (OR/MS) Today (Oct., 2010) turns to an interesting and relatively new application of revenue management that may interest your students, namely, major league baseball.
Ticket prices to sporting events have always been priced to depend on the seat’s location. But the San Francisco Giants have discovered that dynamic pricing of game tickets has increased 2010 revenues 6%. Ticket costs now depend on the opposing teams, pitching match-ups, day of the week, and even the weather forecast.
For example, a ticket in the Field Club, behind home plate, for the Oct. 1st game between the San Diego Padres and the host Giants cost $68 at the start of the season. It went to $92 on Aug. 1st,$121 a week later, $145 on Sept. 4th, and $175 just before the game!
Discussion questions:
1. Are other sports and teams replicating this concept of dynamic pricing ?
2. Will there be fan pushback to the idea?
3. How did the 2010 pennant race impact on the Giant’s decision to use yield management?
As a Philadelphia baseball fan, I am hesitant to offer my opinion on anything to do with the revenue of the San Francisco Giants, as anything they make in the post season is due primarily to bad calls during the Pennant race. However, I will come out of mourning to add my thoughts to this (otherwise) excellent blog post.
I teach Yield Management in both the classroom, and in workshops for hotel owners and operators. Sometimes we find that the most lucrative YM practices don’t involve forecasting demand, but instead, focus on simple operational issues. For example, the first thing we do with our hotel clients is to analyze the effectiveness of “discount management’ in their Global Distribution Systems (GDS). We found that, in many cases, price adjustments were not always made consistently through all the channels in the GDS. Executives must be certain that all pricing decisions are “pushed” out through their reservation systems.
In the case of Major League Baseball, how many channels does each team use for ticket sales? What kinds of discount programs are in place? (AARP, Group Purchases, Veterans, etc.) During periods of high demand, do the teams have some way of cancelling discounts?
With some of our hotel clients, we found that discounts still existed, even during three-day weekends, because someone forgot to shut down a discount program. In each case, it cost the hotel big money.
As for the Giants selling high-priced seats, I have just one thing to say “You shouldn’t even be in the series!” Next year, it is a Philly comeback era.