It’s not often I get to talk about the two loves of my life in the same sentence, but, today, the opportunity has arisen and I’m grabbing it by the proverbials. Music and hospitality, in case you were wondering…
The newly announced Oasis reunion tour hit the headlines for all the wrong reasons after tickets went on sale because of so-called “dynamic pricing” – though, strictly speaking, in this particular situation, it should be referred to as surge pricing.
According to Britannica (which is now online, who knew?!), “dynamic pricing” is not the same as surge pricing. Contrary to popular misunderstanding, dynamic pricing isn’t just about raising prices when demand exceeds supply – that’s “surge pricing”. Dynamic pricing also includes lowering prices, “both when demand declines and during supply overages”. (is overages even a word?)
Now, just to clear a couple of things up on behalf of the Gallagher brothers, the decision to use this pricing model won’t have been theirs – pricing sits with management, promotors and venues – it’s highly unlikely that Liam and Noel sat down with a calculator and ran through the figures. But, the counter argument is that they should have made it their business and should have “read the room” better and protected the fans from being ripped off by asking the question of their management at least.
But what has this to do with hospitality?
Apart from the massive boost that pubs, bars and restaurants near the gig venues will get on gig-day, of course. Well, I’ve long been interested in how dynamic pricing could work in pubs, bars and restaurants – and yes, I do mean dynamic, not surge pricing. In my mind, we don’t use pricing enough in hospitality to drive footfall – not without just discounting our way to the bottom, having time-specific great value offers or margin-eroding promotions.
Price has clearly become a bigger driver of customer behaviour over the last three months, with nearly half of those surveyed as part of KAM’s quarterly Plan to Plate study, conducted in conjunction with NFS Hospitality, saying they’ve consciously tried to spend less money when they’re out in pubs, bars and restaurants, and one-in-three saying they are choosing cheaper food items and one-in-four picking cheaper drinks as a direct result.
It’s an age-old problem in the area of eating out – most consumers want to eat out on the same days and at the same times – meaning that the week can be a bit feast/famine – with dead periods and super-busy times. According to the Plan to Plate study, Friday and Saturday are still the most popular days of the week to eat out although Sundays increase in popularity as the winter months draw in, no doubt influenced by the great British Sunday lunch. We see the weekdays also being popular with the 55-plus age group and Fridays particularly popular with 18 to 34-year-olds.
So, what if we implemented “airline-style” pricing?
KAM asked 1,000 consumers whether they would be willing to move their dinner reservation to a less popular time for a discount – and the response was overwhelmingly positive – particularly with the younger demographic. A total of 71% of 18 to 34-year-olds said that they would be likely/very likely to, while 51% of 35 to 54-year-olds and 37% of those aged 55-plus would accept a less popular dining time in exchange for a discount.
Clearly this won’t work for every business – and hospitality must realise that there is an incredibly thin line between dynamic pricing and ripping off customers. A recent move by a pub in the Midlands to charge more for a pint after 11pm has gone down badly with locals who see it as opportunistic – complaints have included allegations that the owner thinks that once several beverages have been consumed on a Friday night, customers won’t notice the additional cost. The owner counteracts that by saying that, after 11pm, there are additional costs – door security for one.
Any pricing adjustments are likely to attract public scrutiny, making it essential that such strategies are fair, transparent, and mutually beneficial to both operators and customers. The last thing we need in this tough economic climate is our customers looking back in anger on their hospitality experience.
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