Striking the Right Balance to Maximize Revenue
Liftopia collaborates with hundreds of ski areas on everything from pricing strategies to online marketing best practices. This case study highlights a real situation from two Liftopia partners, showing what happens when one ski area sets pricing to increase yield and another follows a balanced approach of driving sales volume and protecting yield. Keep reading to see the results.
Does Protecting Yield or Balancing Yield and Sales Volume Drive the Most Revenue?
Different ski areas have different pricing strategies. Some skew higher to focus on yield. Others skew lower to focus on sales volume. We talk a lot at Liftopia about finding the right price for every day of the season—some might mistake this as simply lowering prices to drive sales. In reality, we have the same goal as our partners: to maximize revenue.
Before the season begins, a New England partner (Partner A) chooses to focus on increasing yield year-over-year (YoY). To achieve this, they set pricing for the entire 2013/14 season higher than the 2012/13 season.
A midsize partner in the Lake Tahoe region (Partner B) adopts Liftopia’s recommended pricing strategy, which automatically determines the best price based on demand for that day. The plan offers lower tiers of pricing than in years past to attract more skiers.
By late January, it’s apparent that Partner A’s YoY unit sales are dramatically down. They drop prices starting in February to try to make up for lost sales volume. While adjusting pricing mid-season helps Partner A recover some lost sales, their revised pricing strategy still prioritizes yield, and they aren’t able to end the year with positive YoY revenue growth.
By choosing a pricing strategy that balances yield and sales volume at the beginning of the season, Partner B is able to increase YoY revenue by 33%. Overall, the strategy is a success. Even with lower tiers of pricing, yield on a single day lift ticket drops less than 1%, and unit sales for the season are almost universally up, resulting in YoY revenue growth. Choosing to sell appropriately priced tickets lets Partner B increase revenue, even when the Lake Tahoe region is experiencing the worst snow year in recent history.
Even a strong strategy can always be improved. Take a look at the disproportionate drop in Partner B’s sales volume on individual days where yield is even only slightly more protected. Now imagine the potential outcome of applying a yield-protecting strategy to your entire season!
The Key Takeaway
To maximize revenue, it’s important to price appropriately every day of the season. That means finding the delicate balance between protecting yield and driving sales. While pricing tickets higher can protect yield, it creates a disproportionate drop in sales volume that can be impossible to recover from, even mid-season.
Liftopia’s Automated Pricing model works with each ski area to build a plan that appropriately prices tickets based on demand. Starting the season with a pricing strategy that balances the goals of yield and sales volume generates more revenue, even when prices are lower than years past—and even in the face of a poor snow season.