Lessons from the travel industry

The term revenue management can be quite confusing, and many mistakenly believe it is the same as dynamic ticket pricing. However, there are many facets to revenue management, and many ways to go about pricing.

The travel industry has always pioneered revenue management, so let’s take a look at some of the terminology, and how it could be applied to the world of stadiums and sports. 

The different considerations or criteria that define a price are called “fences”. Fences define the conditions your fans must meet, in order to qualify for a certain price or product. 

Product and Service Related Price Fences

The characteristics of the product that your fans are buying.

Airline pricing has changed quite a bit in the last couple of decades, and today it follows the base+fees strategy, where the lowest price is given to the most basic unit (seat), and then fees are being charged for anything extra – legroom, front of the aircraft, checked-in luggage, or even having the ticket printed at the airport. The airline fees industry is already estimated at $4bn.

We can find quite a lot of similarities with a stadium in the sense of the different physical traits of the product:

The location of the seat in the stadium, defining the quality of viewing, legroom, seat width and sitting under a roof, defining comfort, would usually command with a higher price point. The same goes for access to added value services, such as food, VIP lounge, transport or parking which influence the price.

Another aspect affecting demand, and pricing as a consequence, is the “quality” of the game, which is defined by a combination of importance (the higher the stakes, so is the interest in the game), and the identity of the rival (some rivals command a higher price, being “big” teams or with a history of a special rivalry between the teams).

Fan Related Price Fences

Fans who belong to a specific group are eligible to different price points.

These usually relate to age (senior citizens, children, youth, etc.), fan clubs or other membership and loyalty schemes, just like with frequent flyer programs operated by airlines.

Controlled Availability Price Fences

Clubs can allocate certain quantities of tickets to be distributed under specific price points. This could be done through coupons, or the more common use case – complimentary tickets given away to different people.

Naturally, giving away too many complimentary tickets will always have a negative impact on your RevPAS, so make sure you keep the allocation under control.

Transaction Related Price Fences

Now let’s take a look at price fences, quite popular at hotels and airlines, but less frequently seen in a stadium.

  • Quantity of tickets bought – a group or a family would sometimes be eligible to a lower price than just a single ticket. So would a package of tickets to multiple games, such as season tickets or mini-plans.
  • Place of purchase – there could be a difference between buying a ticket online or at the box office.
  • Ticket flexibility – this one is very common in airlines – if you wish to be able to change anything – from date, to route or get a refund for not using it – you would pay a higher price, or an “insurance”.
  • Opaque pricing – this is an interesting exercise, demonstrating the actual importance of the product-related fences to the fans. Would they be willing to buy a ticket, which some of its characteristics are unknown at the time of purchase, for a discount? It’s quite similar to the Hotwire or Priceline services around hotel bookings, where you don’t know the exact hotel until after having paid for your booking.
  • Time of purchase – most of the debate around ticket pricing in sport revolves around this issue. On one end of the spectrum you will find fixed pricing, where timing has no influence on price, whereas on the other end there is dynamic pricing, allowing for price changes according to demand in real time. In between, there is a wide range of pricing policies, which allow for some price flexibility, while mitigating the risks associated with full-blown dynamic pricing.

As it seems, most sports clubs intuitively apply the product and service related fences, as well as the fan related and controlled availability ones. However, there is still room for innovation with regards to the transaction related fences in sports.

Want to discuss your pricing strategy? Give us a shout.