Yield Management for Campgrounds and RV Parks: Setting Rates for Maximum Profit
In the late 1960’s when I first became involved in this industry, the typical rate for a night at a campground was $2.50 for two people plus an additional 25¢ per person over two. Today the average rate is around $20.00 but most campgrounds still charge a rate like $18.00 for the first two people and an additional $2.00 per person over two.
Most parks also have a weekly rate that is normally the seventh day free and a monthly rate that more often than not appears to be picked out of the air. This pricing policy makes it very easy to quote a rate when someone calls your campground but it does not do much for the bottom line. I have visited well over a thousand campgrounds and with very few exceptions, I have never seen a park where all sites are exactly the same. However, the typical campground today charges the same rate for every site on the park of a given type every day they are open. Now stop and think about this. Is the best full hook up site on your campground worth the same price on the 4th of July as on the 4th of September? Of course not! Airlines, hotels, motels, car rental companies, and motorhome rental companies all use yield management to maximize their profits and so should you.
I can hear you now saying, I can’t use yield management, I’ll lose customers. Sure, you might lose a customer or two. Nobody said you could please all the people all of the time. If you have a 100-site campground and you charge an extra $2.00 per site for one day only, you could increase your income by $200.00. If some people decided you were too expensive and did not register and you couldn't replace them with new customers, you could have about eight empty sites and still be ahead. In reality as long as you provide value for the price charged people will not walk. Did you know that many major tourism companies with names known for quality raise their admission charges if they don’t receive at least a certain percentage of complaint letters about their prices being too high. When was the last time that one of your campers took the time to write to you to complain about your rates?
Now it’s easy to raise your rates but how do you tell the customer what the rate is when you have so many variables? There are several ways to approach it, one is to give them a range and be up front and tell them, not that the rate is higher on the weekend but rather that they can get a discount during the week. The 4th of July weekend is not being increased, that now becomes your regular rate but they can get a discount if they stay on a different weekend. Another plus is that now the senior citizen who is the loudest complainer about rates can be offered a less expensive site. When they check in, all you have to say is, If you feel our rates are too high I’ll be glad to reserve one of our Standard sites for you. That site is $4.00 a night cheaper than our Super site.
Now how do you keep track of all of these rates?
If you are on a manual system for reservations and registration it is very difficult to keep track of and I strongly recommend that you limit yourself to only a few of the different price points such as assessing a surcharge for major holidays and setting only two categories of site types. If you are on a computerized system however, the sky is the limit and you can experiment with what ever works best for you. Whatever you do, let's break out of the rut that was created way back in the 60’s and join the twenty-first century with at least a small amount of yield management.
Adopting a yield management pricing policy can add more than 25% to your bottom line but how do you go about it? It takes a lot of research to determine the different price points to use and how to set them up. If you approached it in the same manner as most hotels do you could have well over one hundred different prices for camping at your campground during one year. Most campgrounds will realistically end up with about half of that many price points. Staves Consulting is available to help you create this system. To manage it you will want to consider using a computerized reservation and registration system. If you are still on a manual system it is still doable but you will not be able to manage as many different prices.
The following is a list of some of the companies that provide campgrounds with computerized front desk systems. Please don’t construe this as an endorsement of any of the systems but treat it only as a resource.