Thursday, February 26, 2015

Dynamic Pricing of Ski Lifts

With the wealth of e-commerce data, ski resorts have begun setting prices based on expected demand. It is hoped that "Dynamic Pricing" can increase visits when the weather is bad and demand is low and increase prices when the snow is good and demand is high.
The rise of e-commerce and more sophisticated data collection have propelled the concept [Dynamic Pricing] into new arenas. National Football League teams began deploying it last year, following those in the National Basketball Association and Major League Baseball. Golf courses use it to price tee times.

What other products might benefit from dynamic pricing? You need a pretty variable demand, some form of capacity constraint, and the ability to forecast expected demand from, say, an e-commerce site.


  1. Travel-related industries have been using dynamic pricing for many years now. Companies such as Expedia, Priceline and Trivago use dynamic pricing for vacation packages, weekend getaway flights, hotels, and rental cars. Technologies have advanced so much for ticket pricing many professional sports teams are turning to dynamic pricing. Dynamic Pricing: The Future of Ticket Pricing in Sports. Pricing strategies vary as supply and demand changes. Public utility companies set electric rates based on high and low peak demand usage. Consumers know when the rates will increase and therefore can adjust their usage during critical peak demand times. Many types of suppliers will use time based pricing for forecasting seasonal demand changes in order to take advantage of industry changes (e.g., movie theaters, recreational type vehicles such as boats, snowmobiles, RVs, etc.).
    The ski resorts are not the only companies implementing dynamic pricing due to the weather conditions. A free snowmobiling weekend to be held in communities across New York on March 7 and 8 for all out-of-state and Canadian snowmobilers geared toward boosting Upstate winter tourism. Town registration fees will also be waived March 7-8 for all in-state, out-of-state and Canadian snowmobilers, including in the town of Webb, in Herkimer County, and the town of Inlet, in Hamilton County. Dynamic pricing allows consumers the flexibility to acquire significant savings on just about everything today and e-commerce sites are only one source to use.

  2. Sporting events are not the only activity held in arenas. Concerts, theater, movies and entertainers tour cities and offer multiple show times. Ticket sales are limited to the seating capacity. Certain days and times are more preferable and would command a higher price. Other examples are travel (air, train, boat, bus), hotels and rental cars. Destination sites may also have capacity constraints, such as amusement parks, historic buildings, national parks and campgrounds.

    Restaurants have a variable demand and capacity constraints. Restaurants must forecast how long diners will remain seated for a meal when booking reservations; empty tables equates to lost revenue and seating delays equate to unhappy customers.

    Shopping malls also have a variable demand and capacity constraint. At peak holiday season it can be difficult to find parking near a desired store. Store managers have searched for effective methods to entice shoppers to purchase early or at off peak time.

    Consumer products may also benefit from dynamic pricing. A new vehicle can have preorder sales and discounted pricing for the slower selling models. Color preference and desired features would command a higher price.

    E commerce and technology will continue to alter the efficiency of the market by providing consumer access to product availability with discounted pricing.

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  4. Here in Central New York, some ski resorts have been using dynamic pricing for years. Take Plattekill Mountain as an example, this small, family-owned ski resort is open only Fridays, Saturdays and Sundays. However, the resort takes advantage of additional demand by opening every day during the President’s Day holiday (during school vacation) and families are more apt to ski during the week as opposed to only on the weekend.

    The resort also offers Powder Daize, “a term coined by Ski Plattekill owner Laszlo Vajtay for the opening of his Catskill ski and snowboard mountain whenever a foot or more of new snow falls midweek. Normally closed Monday through Thursday, Vajtay has fired up the lifts on Powder Daize since 1997 at a reduced-rate ticket price. He leaves the groomers in the garage, presenting a powder smorgasbord for cost-conscious snow junkies from throughout the Northeast.”

    Considering other industries that are dependent on weather and are seasonal, I can see many other family-friendly activities taking advantage of dynamic pricing. In the summer, water parks, mini-golf and golf courses, state parks and beaches could all adjust their prices to maximize on demand.


    1. Another industry that has prices that vary depending on the time of year and the weather is the house rental industry. We just went to Colorado for a ski trip and the house we stayed in would have been twice as expensive if we had rented it during a school vacation week. Because the demand goes up, so does the price during desirable times for skiing.

      Houses located on the beach raise and lower their rental prices as well, according to the forecast weather as well as times of high demand due to vacations and holiday.

      The three rules for pricing in real estate are location, location, location. When the house’s location becomes more desirable due to weather, school vacations, holidays, or available activities, then the rental price will fluctuate accordingly

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    3. It should be noted that the more desirable weather for certain vacation activities is responsible for the shift in the demand curve for the vacation houses. When both quantity demanded and price increase, that is an indication that something has occurred to shift the demand curve (Froeb, et al., 2014). That something, for vacation rental homes, can be either weather or school vacations. The curve shifts back when the weather is not conducive to vacation activities for that location, as well as during undesirable vacation times. Because the demand curve is constantly shifting, the ideal price point is also constantly shifting, enabling the industry to utilize dynamic pricing to maximize profits.


      Froeb, L.M., McCann, B.T., Shor, M., Ward, M.R. (2014) Managerial Economics: A problem solving approach. Third Edition. South-Western Cengage Learning: Mason.

  5. Broadway also uses dynamic pricing to keep theatres full in the slow months. Typically, seats can be found for Broadway shows that have long runs offer big discounts during January and February. After Christmas tourism is over, Broadway experiences a slowdown in ticket sales. Very often reduced prices can be found at on Living Social (an internet site that sends discounts to members who sign up), other sites such as Groupon and at the box office as well. Restaurants offer deals to theatre goers in the slow months as well to lure them in before or after the theatre.

    The opposite is true of a show producers feel will be a big hit. When Hugh Jackman was on Broadway in 2011, producers raised the price from $155 to $175 for the 10 week run (NYTIMES, 2011). In fact all premium seat prices went up an average of $25.

    By increasing and decreasing prices based on the popularity of a play, Broadway has been able to weather the economic downturn. The Book of Mormon, Wicked all maintain top box office profits with ticket prices changing week to week based on perceived demand for tickets.

    Healy, Patrick. “Broadway Makes the Most of Premium Pricing.” New York Times. November 24, 2011

  6. How to Keep Profit from Eroding
    The present situation of our economy has changed with the ways customers spend as well as the way they think. Customers really want to get their money worth, so they examine every expense under a microscope. One of the crucial and vital concerns of most business today is the falling of the profit margins. Business is also concern that they do not really sell the product anymore, but rather the prices. For instance, I work for the waste service industries, when some ordered a sorting system (baler and conveyor) they do not so concern with the quality and the output of the system; they are mostly concern with the price.
    Without any major change in business profit erosion can occur and this can threaten future plans for business or even prevent them from keeping their doors open. Although sales may increase and revenue may increase, it is still possible for profit to decline and this is a result of profit erosion. This can happen, due to:
     High overhead cost
     High production cost
     Increased in debt to service cost
     Too many sales discounts
     Capital invest with long term payback

    1. Frobe, McCann, Ward and Shor (2014) Managerial Economics - A Problem Solving Approach.

    2. Macmillan, Paul (2014) Ivy Business Journal - Winning strategies for the solution economy

  7. On the east coast, dynamic pricing would certainly benefit a number of area Ski Mountains and Resorts. Given the unstable nature of Northeastern weather in recent years it could be vital for the Ski Industry to take advantage of desperate and enthusiastic skiers. Decreasing snowfall totals create panic situation for hardcore skiing enthusiast; I predict most have enough disposable income to be willing to pay almost any price; they would also be willing to take risks and gambles for a marginally cheaper ticket. The ski industry in Utah is taking advantage of Yield Management hotel style pricing. Yield Management requires resorts to fill to capacity as long as MR > MC at capacity; therefore by using discounters who hedge against cancellations, ski resorts are able to at least get the consumer there so that they can spend money on other high margin categories like food and souvenirs. Northeast ski resorts already participate in indirect price discrimination tactics such as offering discounts to email club members and offering online coupons on particular days in which volume may be at lower levels. As the article mentioned, as is the case with physiological pricing, the trick is making the consumer feel as though the pricing is fair, if skiers feel as though they are being taken advantage of, it could discourage them from paying the higher priced ticket. Further, what I think would benefit the east coast resorts is if Dynamic pricing could change depending on real time weather conditions. For example, I recently took a ski trip to an east coast mountain, the weather was low 30’s, blue bird skies and packed powder from a recent fresh snowfall; I am confident that I would have paid a higher price without consideration based off of conditions alone.


  8. Dynamic pricing refers to the setting of prices for a good or service based on the demand for said good or service at the moment and the availability of supply” (

    There are all kinds of dynamic price schemes, which cause prices to fluctuate, this is all based on complicated algorithms, “ CA’s are like road maps for accomplishing a given well defined task”( Market researchers constantly track our personal individualized shopping habits and the market status. Its is based on our shopping habits, that dynamic pricing comes into play to maximize revenues, while trying to get us to change or try new products. Raising the price of products that we buy at certain times.

    The hospitality and travel industry are no strangers to dynamic pricing, where as the ski and snowboard industry are somewhat new to this type of selling.

    Liftopia, has introduced dynamic pricing to the ski resort industry in that it will “start pricing ski lift tickets like an airplane seat. “Three tiered pricing: value, value plus and flexible type tickets are available”( The biggest discount will be within the value tiered type, these are the first people to purchase at the earliest possible date. Today’s purchases of ski lift tickets could be made as early as 6-12 months in advance. As a winter skier, I find that I’m buying my tickets for BC earlier each year so that I can reap the huge savings.

    “Dynamic pricing is nothing new in that its just entering new markets. Here’s to a season full of fresh powder and intelligently priced ski lift tickets” (

  9. by Tiffany ESC id 0954241

    Product pricing is one of the most important aspects of marketing that directly influences a business's ability to make profit and succeed. If a company sets prices too high, customers might choose to buy products elsewhere, while low prices may lead to a suboptimal amount of income. Dynamic pricing is a pricing method where businesses adjust prices based on consumer demand in an attempt to boost sales, which can be positive for the business or potentially lead to several negative consequences for the business and their customers.

    Hamel, G., (2015) Disadvantages of Using Dynamic Pricing.

  10. With the quick onset of Dynamic Pricing, the pace at which prices change can seem dizzying to consumers.
    It seems that the products that are most ideal for this pricing model can vary depending on that actual consumers’ habits (what they have been willing to pay in the past) and the retailers reaction to those habits. Forbes describes the concept of Econ 101, but with pricing as a “moving target” changing almost in real-time depending on what is happening in the market at that moment. While Cummings asserts that the price “consumer a” pays for a product versus what “consumer “ pays for the exact same product can differ based on personal data collected through loyalty card programs, and that, retailers are basing their prices on the behaviors and habits of their shoppers. This is especially true in product lines or services where profit margins are tight.
    The classic example that seems to be at the top of everyone’s list is Uber. If it’s raining or snowing, chances are more folks will want to take a taxi. The demand for taxis goes up and the supply of available taxis goes down. Uber knows through its stored data, that consumers are willing to pay more during these times, so they raise prices accordingly. It seems like an “all win” scenario. The consumer is able to get in from out of the cold and Uber makes a better profit. One possible downside here is for consumers that count on previous knowledge of pricing for planning purposes. For instance, if “consumer a” has paid $20 for Uber in the past during pleasant weather, they may plan to pay the same the following day when it is raining. It may be surprising and off putting to “consumer a” when they are asked to pay more than he or she may have budgeted for based on his or her pricing the previous day.
    When all is said and done, the concept may work as long as consumers become more educated and use the data they have available from past experiences with retailers as effectively as retailers have begun to use data collected from consumers.
    Cummings, T., (2013), Everything You Need to Know About Dynamic Pricing.
    Morphy, E., (2014), Dynamic Pricing in a Post-Uber World.

  11. Travel certainly benefits from dynamic pricing. For example prices are much lower traveling to Hawaii and the Caribbean Island’s when it is hurricane season. Even when it comes to purchasing airfare there’s certain days of the week that offer cheaper prices as opposed to others. This is due to timing during the week when airlines increase prices when coming into work during the week. Social media is another channel companies use to advertise lower rates of airfare (“The Best Day to Buy Airline Tickets”, 2014).

    Being one that is a regular snowboarder, I think this is a great marketing tactic. One that both the company and consumer can benefit from. Year over year I watch the prices of lift tickets climb higher and higher. It’s only recently that mountains offer discounts by purchasing in advance, or online. By using Liftopia and depending on which option is chosen, the mountain could stand to profit highly from those that opt for the cheaper (less flexible) options. This could be due to poor weather conditions, and unforeseen personal circumstances. However, without this option the mountains/resorts would be missing out on this added revenue. Typically in the past they primarily get their season/year sources of revenue from those that purchase full season passes in late spring/early summer for the coming season. This method of dynamic pricing gives the resort the opportunity to spread out their income more proportionately thought-out the year.

    McCartney, S. (October 2014). “The Best Day to Buy Airline Tickets”. Retrieved from:

  12. Almost any market your enter into can benefit from dynamic pricing. Some point in time, each market industry will have lull in sales, this is when dynamic marketing can be the most beneficial. Because I enjoy going on vacations, this seems very apparent to me. I try to travel when prices are generally low and it is the off season. Your entire vacation can be cheaper then traveling in the summer or when there is school break. This goes through the entire travel industry from flights, to car rentals, and hotels. The industry tracks when there are lulls and creates marketing promotions so they are still able to fill flights and room, but at a lower price.

  13. Amusement parks would benefit from using dynamic pricing unless they are located in a warm climate area.
    It is common knowledge that when the spring and summer hit that is when the amusement parks and water parks start increasing the price of tickets because they know the demand is there. Most people that have school aged children take their vacations in the summer because their kids are out of school. Furthermore most parents will pay any price for the tickets just so they can satisfy their children. Amusement parks know when their busy season is even if they are in a warm climate area. Also when the busy season approaches the end the amusement parks begin to offer a reduced price so they can sell that very last ticket. The season pass is actually genius; the tickets are more expensive than the daily ticket which produces more revenue, the park is already open so it’s not costing the park additional money, and the customer is satisfied.

    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2014). Managerial Economics; A problem solving approach (3rd edition). Mason, OH: South-Western Cengage Learning.

  14. I think those involved in coordinating events, such as wedding coordinators would benefit from dynamic pricing, especially those involved in planning events located in outdoor venues. Although there is some debate on when the peak season for wedding is, generally speaking, March through October or spring through early fall is considered peak season for weddings. Dynamic pricing might involve higher pricing during peak season when demand is likely to be less elastic and lower in the winter season when demand for wedding is lower. The importance factor in taking advantage of dynamic pricing is information. Having accurate information regarding customer habitats in vitally important when using a dynamic pricing strategy. Without this information, dynamic pricing would be ineffective. Firms with access to technologies to exploit this type of information present opportunities for competitive advantages.

  15. Dynamic pricing can be implemented on any product or service that is dependent on fluctuating or wavering conditions such as weather, seasons, holidays, school breaks, etc. It has been used for years at places like Disney and on products such as chocolate during the holidays. Try to make reservations at a hotel during spring break someplace sunny and you will pay a much higher price than you would during the “off” season.

    The only difference between now and then is the ability of both organizations and consumers to access the information more easily. This creates more competition and makes organizations more savvy at drawing people in with lower prices, only to find out later there were hidden fees that made the seemingly lower price no better than any other offer. The hotel is still a good example of this, as some will offer breakfast or other amenities while those with a lower price may not. The savvy consumer must now read the fine print and be sure of what they are willing to trade for that cheaper price.

  16. Most airlines subscribe to the dynamic pricing model although it wreaks havoc for the general vacation travelers who all hope to travel at the same time and face sky high ticket prices. One particular airline changes prices so frequently that you can get different pricing by waiting 30 minutes. It’s one thing to have dynamic pricing to incentivize travelers to fly at certain times and days but the opposite is also occurring, raising prices to discourage travel on certain days. In these cases the airlines take advantage of travelers who cannot change their children’s vacation schedules and overly benefit.
    When you step back and look at most services, they are mostly modeled on dynamic pricing, whether it is by necessity (gas stations subject to fluctuating seasonal price changes) or by design where the supplier wants to stabilize its operation, e.g. keeping employees employed all year round so discounting goods at normally slow times. One company, Apple, seems not to subscribe to the dynamic pricing model. All of their products are tightly controlled and priced and whether you buy via a retailer, direct or any time of year, prices generally remain the same. It’s interesting how they don’t respond to holiday demand, fall when most schools and colleges start up and even in new product releases…prices are stable all the time.

  17. While reading this chapter I was reminded of golf in the Poconos Mountains of PA, an area ripe with all levels of golf. Golf fanatics can choose from an array of courses from small public 9-hole courses, all the way up to championship level courses nestled away on resort or private properties. All summer long it is basically impossible to get a weekend tee time on many courses and basically next to impossible during the week. Golfers need to reserve tee times several weeks in advance on prime weeks. If you can get a tee time it will cost you over $100 per round, without a cart. The demand is driven by the seasonal vacationers that stay at the many resorts or one of the ample supply of rental homes in the area. The demand is constant throughout the summer months, which is ok by the locals who don’t really have time to play golf during the summer months anyhow.
    When Labor Day rolls around the availability of tee times increases significantly and the price of a round reduces dramatically. On I can get a tee time 20 minutes from now on a premium course for $25, it’s Sunday 2:40 pm. In the summer I would have to be member to even play this course on a Sunday or any day before 3:00 pm, I would have to reserve weeks in advance and would have to $125 per round if I could actually get a tee time. If I want to play on a Wednesday, I can add a 3 course meal at the clubhouse for an additional $15. Now if I wanted to play at a 9-hole public course, I could get a round for under $10. It’s not that there are no vacationers in the Poconos this time of year, there are plenty. Most of the visitors this time of year are lured to the area to witness the fall foliage or to go pumpkin picking; activities typically enjoyed during the day, which is now shorter. You would think that courses would be packed with the locals who can now finally get a tee time, but since the summer is over many of them are now unemployed for the winter or working reduced hours. It’s all good though, they prepare for the winter all summer long. Golf is not a necessity when compared to spending on food or heat all winter long, but the dramatically reduced prices brings locals out in the fall; so do some of the promotions.
    So basically many factors affect demand elasticity and the pricing of golf in the Poconos, which is why it came to mind. Come fall there is availability, golfers can choose to play any course that they want; something impossible to achieve during the summer. The income of the locals is reduced in the fall, they simply won’t pay the peak season prices in the fall; this is further compounded by the reduction of dollars received from vacationers. Time is also a factor, the locals have time now and the fall foliage watchers do not have time. Anyway, now is the time to play golf in the Poconos if you are inclined to so, just check out By focusing consumers on prices, you make them more sensitive to price differences, which makes demand more elastic. When you make demand more elastic, you want to reduce the price to attract more customers. When you see this kind of promotion, you also typically see a reduction in the price of the promoted good (Froeb ET all, pg. 157, 2014).
    Froeb, L.M., McCann, B.T., Ward, M.R. & Shor, M. (2014). Managerial Economics: A Problem Solving Approach. Mason, Ohio: Southwestern Cengage Learning.

  18. Airline pricing is a perfect example of demand pricing. In their case they have a fixed cost whether they fly one person or 200, accounting for additional fuel needed for weight. They not only have a large financial incentive to fill the additional seats on low volume flights yet raise prices on high capacity flights so as to raise profit and possibly push fliers to the low capacity fights and increase volume.
    Like ski lifts airlines become overbooked / oversubscribed and then there is a negative consumer experience. By leveling capacity, empty seats are filled and fixed costs get absorbed with the increase in revenue.
    Since skiing is in short availability, those who wish to ski will generally pay whatever price as long as conditions are good. Being most people have weekends off, ski lift operators have a very short season to derive revenue. The northeast has approximately 125 ski days per year but most of ticket sales volume is concentrated into 32 days. Operators know that these are given days, provided weather is good so they need to ensure the bulk of their revenue is produced then. By raising prices on weekends, they have a captive audience and therefor reduce the risk of shortfalls. On the other hand, they can offer 50% off during non-prime times and shift some demand to these off periods. It still costs the same for operators to run the mountain so they may as well benefit by attracting consumers.