Sunday, February 10, 2008

Sales in the Pitts

What do donuts and hotel rooms have in common?...

They are each highly perishable. The donut has the advantage of being sold the next day at a steep discount but the empty hotel room is lost forever. Another disadvantage of the hotel room is the fixed nature of the product as the supply cannot be easily varied. While, donut production can be increased or decreased (within certain limits) with little in the way of fixed costs adding rooms to the hotel is accompanied by a dramatic increase in fixed costs. The trump card for the hotel is during peak demand periods since supply is limited then prices increase and therefore your profit margins. The fixed nature is a curse during slack demand periods but gives your much better leverage when the demand is high.

The University of Pittsburgh has plenty of room at Pay Money Here Stadium that they share with the Steelers. Given that they have plenty of room, a apathetic fan base and a lackluster home slate of games this year (except for the WVU fans) the best strategy is to, "Sell'em cheap and stack'em deep(er)." The bet is that the extra sales will make up for the loss revenue. The other thing to look at is that full seats may start a tradition and get the ball rolling. Or at the very least get people in the stands until they can sell the place out for next year's visit by Notre Dame and borrow a page form the OSU playbook.


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