Hi folks,I thought I would post my thoughts today on the very popular hot topic in our industry- yield optimization. For those of you who aren’t clear on what I mean by this, I am referring to the automatic adjustment of rates at the park based on the occupancy. So as your park reaches certain occupancy thresholds the system automatically applies a algorithm to the rate structure to increase the rates. In other words as occupancy goes up so do the rates. The classic model of supply versus demand. As we are in the software business we get asked about this a lot. Previously I have posted my thoughts on this subject in the ARVC report. No less than Dave Gorin responded in the next monthly report refuting my thoughts and taking the opposite side of the debate. (Which is healthy and OK with me). It looks like now we will be building this feature into the next major rewrite of Campground Manager Software® however philosophically we are against it. I know hotel programs work this way and airlines work this way but rv parks and campgrounds are a different animal. In a RV park and campground there is a basic level of trust between the customers and the park business owners/staff. We own a park (Jellystone Niagara) and we are on the front line every day to see the social interaction. Once the camper sets up his RV the first thing he does is meet his neighbors. The discussion starts with the RV hardware and then the talk invariably turns to how much they paid for that evening for the site. By charging different rates for different people based on the time of day they called or arrived at the park you are risking breaking the bond of trust between you the business owner and the customer. Plus you cannot post rates in with any sense of confidence. Once you break that trust with your customer he will either take a round out of your park staff or worse, keep quiet and go somewhere else. Is that worth the extra 5% or more you might get for that night’s rate? It will cost you many times more than that to get the customer back. (If you ever do). Hotels are different. You check into a hotel you don’t go next door to ask the people in the next room what they paid. Everyone also knows that with front desk people at hotels, if you stand their long enough, will reduce the rate. Do you want that at the front desk of your park? In the current version of Campground Manager Software® we already have yield management albeit in a different version. You can have off season and on season rates. You can have long weekend premium rates. You can have a different rate for every day of the week if you want. In my opinion that is the way that you maximize revenue without breaking the trust of the customer. Besides why are we patterning ourselves after the airline industry? In the same week that two more airlines have declared Chapter 11(Aloha and ATA airlines ) in the US, why would we want to follow that model? As Warren Buffet says “I will no longer invest in the airline business. The airline business as not made money as a sector since flight was invented.” I would be interested in your thoughts. Peter
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5 responses so far ↓
1 Eli White // Apr 21, 2008 at 5:02 pm
I agree with your thoughts for the most part. Having been in the hotel business for 35 years and now responsible for the development of an RV Resort, pricing is a critical component to both forms of hospitality. Yield management has become commonplace in the hotel industry and is just beginning to filter over into the RV world. Like hotels, if you provide a range of rates for your sites and adjust for seasonality and day of the week, a fair pricing model can be imposed without jeopardizing the trust you reference with your camping guest.
Pricing within a range of rates can allow an owner to layer the evenings return by rewarding those who book well in advance. This helps the management team with their forecasting, staffing, purchasing and a host of other actions needed to function properly. You can also use the layered approach with groups wishing to reserve a block of sites for a rally. Once you reach different levels of occupancy, rates will increase within the established range of rates helping to offset the discounts required to capture the rally group at a discounted rate.
Physical charateristics of the park can also dicate the pricing points. Large pull-thrus versus shorter back-ins, and premium waterfront locations versus interior lots that may be slightly more narrow than the premiums. Yielding can also allow the more expensive sites like premium sites to be utilized by offering upgrades to the better sites for the lower prices when standard sites are filling up and the present market is not willing to pay the premium price. By upgrading you not only capture additional revenue but you make a good impression with the guest. Just like a first class upgrade on an airplane for coach fare. So yielding works in both directions.
Gambling that a front desk clerk in a hotel will give in to your late night pleading sometimes works but I wouldn’t recommend that practice in highly sought after locations. You just may find yourself back in the car looking for the next best location. We like to think that our range of rates allows us to discount early within the stated range and as the sites fill up, we simply move up the range until we reach our maximum range rate or the park is filled, whichever occurs first. The blended rate will then give us the desired results for the evening.
No doubt it becomes a balancing act but with practice, the campground will capture the needed revenue in order to remain in business and not be forced to sell out to developers looking to tear down the facility for other purposes or the resort becomes private by selling off the lots. More and more demands are being made by RV’ers to improve campgrounds and add services. We can do that but we must capture the appropriate revenue in order to remain profitable. For those looking for budget travel opportunities with fewer frills, the state parks are still a viable option.
2 David Gorin // Apr 27, 2008 at 8:59 pm
Peter: Glad you’re keeping the discussion going on yield management. As the industry changes and as more and more corporate owners appear and as brands proliferate, the relationship between camper and campground will most likely change to more and more reflect other industry groups. Yield management, on line reservations, data mining and other technology based business management techniques are likely to take hold in the park industry.
3 PeterK // May 22, 2008 at 2:21 pm
Thanks for your comments and your time writing them.
4 rv discounts // Feb 19, 2010 at 5:18 am
the topic of yield optimization is quite new to me, but you simplifies it and i can now understand it fully. At the start of the article i was at the side of different rates with different customers but the reason which u have given for rv parks and why this system cannot be applied to rv parks industry is quite good and followable. so at the end, i reached the point, that not all the principles can be same for all the business and people should think way too now.
5 Gina // Feb 23, 2012 at 10:29 am
I side with Peter on this one.
One thing hotels don’t do that campgrounds do – is mail out brochures with published rates to thousands of guests. These are also handed out and trade shows and the rates are published on websites.
Awfully hard to say to the guest who walks in that their rate is going to be more – even though they are standing there with your published rates in their hand.
Not very customer friendly.
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