I have just returned from a business trip to Australia.
While there, I noted two interesting opportunities for maximizing revenue.
QANTAS and the Empty Seat
I arrived two hours early for my QANTAS1 flight from Sydney to Brisbane, just as an earlier flight was boarding. I asked if there were seats available. There were, but because I had a less-than-exorbitant-full-fare ticket, they wouldn’t let me switch.
That’s their right.
But it’s a silly business decision.
The plane left with a bunch of empty seats. Once the cabin doors closed, those seats had zero value to QANTAS.
Big deal, perhaps you say. Moving me would simply have transferred an empty seat from the earlier flight to the later one.
That’s true only until something happens to disrupt the schedule or they get additional business. Air schedules are disrupted all the time.
By allowing me to take the earlier flight, they would have had one more seat in reserve later to handle overflows, walk-up passengers, missed connections, canceled flights, and so on.
If they had to turn away a walk-up passenger, they lost revenue. (My actual, later flight was 100% occupied, so lost revenue was a real possibility.) At best, they lost flexibility.
Good project managers focus on both revenue/profit/budget and flexibility. Often the two are at odds with each other, where increasing flexibility has a fiscal downside. Here, for once, they were aligned.
I see this with American airlines as well. I suspect their thinking is that businesspeople who want flexibility will buy full-price fares, and they don’t want to cut into that profit source. I would wager that the number of businesspeople who meet all three conditions is vanishingly small:
- Require this flexibility;
- Can afford to and are willing to pay full price even when discount fares are available; and
- Are willing to take their chances that they might get on an earlier flight because seats are available.
Steve Irwin and the Empty Golf Cart
I had a free morning/afternoon in Brisbane, so I went out to Australia Zoo, found by the late Steve Irwin (the Crocodile Hunter) and his dad and run by his family. (My kids threatened to disown me if I didn’t go. It was fun, too. Thanks, kids.) They brilliantly market and sell all sorts of add-on packages to raise additional revenue, both to pay for the zoo and to support their ongoing conservation efforts.2
One add-on is personalized guided tours of the spacious facility by golf cart. You get your own golf cart that holds five visitors, a guide, and five or six hours of being driven around and given an insider’s perspective for $450. Most of these tours are booked in advance.
However, if there is an unbooked cart+guide when the zoo opens, the price suddenly become negotiable. I heard you can get the tour for around half-price.
Note that this is the same situation as the QANTAS example above. If the zoo stuck to the asking price, the chances are good that they would receive no revenue for any unsold trips. So rather than receive no revenue, they negotiate to receive some revenue.
Is there a risk someone will be willing to spend $450 but will not purchase in advance to try to get a better deal? I doubt it; someone who thinks it’s the best way to see the zoo and is willing to spend that kind of money to enhance the experience will almost certainly book in advance to be sure a ride is available. Sure, there might be the occasional person who says, “It’s worth $450 to me but I’ll risk not doing it in advance because I might be able to get it cheaper.” However, given the amount of money in question here, I suspect this is a very small group — and has far less of an impact that the spur-of-the-moment purchaser with a family who says, “Man, it’s hot, and this place sure looks like a lot of walking, and my kids were already whining on the trip up here, and this golf-cart thing might be a bargain at $250!”
Is There a Lesson for Law Firms?
Is there a lesson for firms here? Good question.
I’m not positing a direct lesson — e.g., that law firms should sell their unbooked time at a discount or some such.
Rather, I suggest that these two stories offer a reminder that we need to keep examining our assumptions. Just because we do something, or have done it in the past, doesn’t mean that it’s the right thing.
Teri Irwin and the directors of the Australia Zoo understand that (as an attraction) they’re in the hospitality business. The Irwins are also very directly connected to the zoo’s revenue, not just in paying salaries but in supporting the cause Steve Irwin was so astoundingly passionate about.3 They can’t afford to leave money on the table.
Airlines are giant corporations with policies that themselves have policies. I wouldn’t think they can afford to leave money on the table either, but looking at some of their policies, I wonder.4
Are you leaving money on the table? (That final question, by the way, is yet another link to Legal Project Management. The better you understand your projects, the better your lawyers manage them, the more efficient you’ll be in the fiscal aspects of the business.)