103-Variable Pricing to Shift Demand and Increase Revenues

There is a new pricing sheriff in town. In the right industry, this new approach to pricing can increase revenues and reduce demands on capacity. It often works well in industries such as airlines and hotels. Sometimes it doesn’t work without some careful adjustments. Here is an industry that needed the adjustments

Posted 5/11/09

One of our local snow ski areas has started offering a “no wait” pass for snow skiers on busy days. The pass costs $20. This $20 comes on top of the normal day pass the skier has purchased. This additional pass allows the skier to avoid lift lines by going through the “ski school” entry. Other ski areas have begun charging substantial fees for “close-in” valet parking, while letting most skiers park for free at a further distance from the lift lines.

This variable pricing both reduces demand pressures on some services and increases revenues. These variable price mechanisms have become much more common over the last few years. We see them in airlines, at hotels, sporting events, movies and plays and other venues.

Now the concept has come to art museums. Some years ago, some of the largest art museums in the country learned that it could charge substantial admission fees for special shows. Now some museums are bringing the variable pricing concept to day-to-day operations. Some museums are considering charging a premium for the first hour of every day and on weekends when demand is greater than at other times. Others have noted that special exhibitions become more crowded as an exhibition comes to its end. So, these museums are considering increasing prices as the end of the special exhibition nears. Others are considering charging a fee for those museum-goers who purchase their tickets online in order to avoid lines.

Really, not bad ideas when you consider that many of these museums are under severe financial pressures these days due to the poor economy and falling attendance. And, across-the-board price increases are likely to drive even more patrons away. These, and many other pricing concepts, are available to help you develop your new pricing ideas. Please see the many brainstorming pricing ideas at www.strategystreet.com/improve/pricing.

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Update 2022:

Most large ski areas in 2022 belong to one of the major season ticket groups, which include many other ski areas. The price for these season passes allows the skier to breakeven after five days or so of skiing at his or her home ski area, with a few blackout days. These major ski areas no longer seem to need to offer special pricing for high demand periods.

Most museums continue to charge premiums for special exhibits.  These extra charges might also bring somewhat higher prices for special entry times as well.  Before Covid, many museums had already moved from an admission price concept of “pay as you wish” to firm admission prices.

As the Covid pandemic forced museums into lockdown, several institutions tried to supplement lost income by selling tickets to experience their exhibitions online.  Visitors to the Louvre and British museums’ websites grew dramatically.

Over the last 15 years or so, many industries have become proficient in using the optional components of a price to raise their prices on some segments but not all the segments in the market. Here are some of those optional components of price:

In a rising price environment, the company may choose among the following Optional Price Components:

• • An extra fee on top of the normal variable charge. Illustrative Examples>> The company charges a fee on top of its normal variable charge to improve margins. This extra fee usually reflects a separately identifiable cost in the company’s Performance offering.
  • Shorter than normal payment term. Illustrative Examples>> By reducing the time the company allows the customer to pay for the product, the company reduces the capital assets it must carry for the customer.
  • Minimum purchase requirements. Illustrative Examples>> This price component assures the company of a minimum amount of sales to each customer or on each transaction. These components require the customers to increase their minimum purchases and pay for any product that they do not take or use.
  • Discount Elimination. Illustrative Examples>> Virtually all customer relationships involve some discount offer to the customer. The company may raise its effective prices by eliminating some forms of discount.
  • Limits on the usage of the product. Illustrative Examples>> The company may raise its effective prices, especially with customers who use the product intensively, by setting limits on the amount of product the customer may use during a period of time.

For more information on using the four potential components of a price as strategic tools go HERE.

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Update 8/26

The last update to this post, back in 2022, made a simple prediction: once the big resorts consolidated around season passes, they wouldn’t need special pricing for high-demand days anymore. Four years later, that call was half right. The passes won. The special pricing didn’t go away — it just moved to a different product.

The 2009 version of this post was about Optional Components of the Price — a no-wait pass here, a valet upcharge there, bolted onto a fixed ticket price. What’s running now is a different animal: the walk-up lift ticket itself floats, day to day, sometimes hour to hour, based on demand, weather, and how many days out you’re buying. Call it what the industry calls it — demand-based, or real-time, pricing. It’s the same tool airlines, hotels, and ticket resellers use, applied to a lift ticket.

How Much of the Business Is Actually Priced This Way

Before getting to whether this works, it’s worth asking how much of the ski business it even touches. Not as much as the headlines suggest.

Nationwide, season pass holders now account for roughly 52% of skier visits, single-day ticket buyers about 37%, and the rest is employee and comp access. Only that 37% is exposed to real-time pricing at all — a season pass buyer locks in a Price Point (Pattern: a product defined by a combination of performance and price, differing from other price points by more than 10%) months before the season starts and pays nothing more no matter how crowded opening weekend gets.

And that 37% overstates the real-time share. Vail’s own pricing calendar shows a clear early-season ramp into fixed weekday/weekend price levels — set well in advance, not adjusted minute to minute — and the company is now pushing 30-plus-day advance-purchase discounts of 30% or more specifically to pull buyers out of the walk-up window. Several Vail-owned resorts eliminated same-day walk-up sales entirely. Add it up and the slice of total skier days getting anything close to true real-time pricing — priced close to or on the day of the visit, with no advance-purchase discount applied — is probably well under 20% of total volume, and shrinking every season as the resorts push harder on advance purchase. This is a headline product, not a volume product.

The Benefits — For the Resort, Not Necessarily the Skier

Real-time pricing does three things well for the operators running it:

• Extracts revenue from the least price-sensitive customer in the building — the last-minute destination visitor with no flexibility on dates.
• Smooths some demand into shoulder days, since the pricing gap between a Tuesday in January and Presidents’ Day weekend has never been wider.
• Funds the capital-intensive side of the business — the lifts, the snowmaking, the grooming fleet — with dollars extracted from the segment that isn’t already locked into a pass.

None of that helps the skier paying the fare at the window. Walk-up rates at the destination resorts are now routinely north of $250, with peak days over $300 — one report put a single day at $356. That’s not a Capacity (Pattern: the total unit volume a facility can produce annually at its highest practical operating mode) problem being solved efficiently. It’s a price being set as high as the market will bear on the one customer segment with no better option that day.

The Risk — Trust, Growth, and Now Antitrust

Three separate problems are stacking up on the risk side of this ledger.

First, it’s alienating exactly the customers the industry needs most. The 2024–25 Kottke report found 73% of U.S. skiers and riders get to the mountain five days a season or less — precisely the group for whom a season pass makes no economic sense and a $300 walk-up ticket is a real deterrent to trying the sport at all. Resorts are now scrambling to build separate beginner and low-frequency products (Vail’s “Epic Friends,” multiday packs) specifically to undo the damage the walk-up price did to that segment. That’s an expensive way to find out you overshot.

Second, the Customer Buying Hierarchy (Pattern: the order in which customers evaluate alternatives — Function, Reliability, Convenience, then Price) is working against the resorts here, not for them. Eliminating walk-up sales outright, as several Vail resorts did, trades away Convenience — the ease of just deciding to go skiing on a Tuesday — for a few extra points of yield. That’s a bad trade against a Price Leader alternative sitting right next door in the form of a smaller, independent, non-dynamically-priced mountain.

Third — and this one is new since 2022 — a class-action antitrust suit filed in August 2026 alleges Vail, Alterra, and other operators coordinated pricing through a shared ticketing platform (Aspenware). Using the same software isn’t illegal by itself. Sharing competitively sensitive data through it is. Whatever the merits, the suit puts a legal price tag on real-time pricing that didn’t exist four years ago, and it’s the kind of headline that makes a general counsel start asking pointed questions about how the pricing algorithm actually works.

Is It Likely to Last?

Not in its current form. The resorts themselves are already correcting course. Vail’s December 2025 move — cutting walk-up prices by 30%+ for anyone buying a month ahead, and letting customers convert an unused lift ticket into next year’s pass — is a company admitting its own walk-up pricing went too far and is now actively re-routing customers back toward advance purchase. Ski Area Management’s trade press is blunt about it: “we have reached peak lift ticket.”

That’s a tell. Real-time, day-of pricing only ever touched a minority of skier days. It is a Performance Leader (Pattern: a competitor or product offering higher-than-standard performance for a higher-than-standard price.) Product appealing to a shrinking minority of Small and Medium customers, who, in total, usually make up less than 25% of the total unit sales volume in an industry. The industry is now reducing apparent margins to shrink that minority further rather than lean so unreasonably heavily on it. The Performance Leader day price has outpaced what the segment would tolerate, followed by the operators pulling it back before it did permanent damage to volume. The antitrust suit adds pressure to correct faster, since the cleanest way to defuse a coordinated-pricing allegation is to decouple the shared platform or dial back how aggressively it moves. My guess: real-time pricing survives as a bounded, advance-purchase-tiered tool rather than the true minute-to-minute pricing like the airline and hotel industries employ. The season pass, not the algorithm, remains the Standard Leader product doing the real work in the industry.

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