Yield management is a flexible pricing marketing technique used in services characterized by a strong presence of fixed costs and a certain inertia of the proposed capacities (public transport, hotels, etc.). Also called revenue management or real-time pricing, yield management was designed in the 1980s by the former CEO of the airline Delta Airlines.
In order to optimize marketing, airlines were the first to develop these techniques, which are now used by other interested parties in tourism, such as hotel companies, but also by other service providers, such as car rental agencies, public transport, golf courses, or others.
And what do ski resorts have to do with flexible pricing?
This is a problem that obviously all touristic actors share, including ski resorts that try to make their work tool sustainable and develop their activity. Especially since the goal is not only to earn more money, but also to implement a strategy that allows you to better satisfy your employees and customers.
With about 115 resorts in the world that adhere to this approach, Tony André, manager of the European market in the Liftopia company, explains the need for ski resorts to be involved in flexible pricing: ‘in the strategy of yield management, the weather does not count. We will give a discount to those who buy in advance for a specific date and we guarantee that the price will not go down’.
In this context, the ski resorts are not competing, ‘here, the main competitor of the resorts is the client who has not skied,’ Tony André confides.
Switzerland: the European laboratory for dynamic pricing
Yield management has been developed mainly in North America, where Liftopia was a pioneer in the dynamic pricing in the ski industry. But also in Japan, New Zealand and now in Europe (Switzerland, Germany).
Faced with a decrease in attendance, Switzerland established many promotions a few years ago without much success. The Swiss ski resorts have gradually moved towards the dynamic pricing technique to soften their attendance numbers and satisfy their need for flexibility.
According to the KOF Institute, from Zurich, the price level of one and six-day ski passes has increased by around 1.3% this winter, according to the Swiss Mechanical Lifts (RMS). More and more lift companies offer flexible rates to customers, although conventional fixed price cards remain the basis of the market. Some ski areas have abandoned the fixed prices, like Zermatt.
After 2/3 years of conclusive returns, next winter marks a massive display of yield management in most resorts, including the largest ones (St Moritz, Arosa Lenzerheide, Zermatt or even Crans Montana).
“In Europe, the most impressive example is undoubtedly the Arosa Lenzerheide ski resort, which jumped to the pool during the 2017/2018 season and decided to implement a comprehensive YM strategy.”
It has also gone through the marketing review, with the creation of the ‘First Minute Deal’ and the reorientation of marketing budgets (without increasing the budget) for this product and upward communication in social media.
Their online sales increased from 200,000 Swiss francs in 2017 to almost 5.3 million Swiss francs in 2018. Online sales are expected to be around 9.5 million Swiss francs this season (+ 75% compared to the previous season),’ says Tony André.
Yield management is becoming widespread in Switzerland, and we should witness a change in attitudes and the shift from ‘what is yield management for?’ to ‘how do we do it?’ says Tony Andrew.