University of Northern Colorado Scholarship & Creative Works @ Digital UNC Dissertations Student Research 5-4-2016 Revenue Management in the Sport Industry: an Examination of Forecasting Models and Advance Seat Section Inventory in Major League Baseball Micah Seth McGee Follow this and additional works at: http://digscholarship.unco.edu/dissertations Recommended Citation McGee, Micah Seth, "Revenue Management in the Sport Industry: an Examination of Forecasting Models and Advance Seat Section Inventory in Major League Baseball" (2016). Dissertations. Paper 335. This Text is brought to you for free and open access by the Student Research at Scholarship & Creative Works @ Digital UNC. It has been accepted for inclusion in Dissertations by an authorized administrator of Scholarship & Creative Works @ Digital UNC. For more information, please contact [email protected]. © 2016 MICAH SETH MCGEE ALL RIGHTS RESERVED May 2016 UNIVERSITY OF NORTHERN COLORADO Greeley, Colorado The Graduate School REVENUE MANAGEMENT IN THE SPORT INDUSTRY: AN EXAMINATION OF FORECASTING MODELS AND ADVANCE SEAT SECTION INVENTORY IN MAJOR LEAGUE BASEBALL A Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Micah Seth McGee College of Natural and Health Sciences School of Sport and Exercise Science Sport Administration May 2016 This Dissertation by: Micah Seth McGee Entitled: Revenue Management in the Sport Industry: An Examination of Forecasting Models and Advance Seat Section Inventory in Major League Baseball. has been approved as meeting the requirement for the Degree of Doctor of Philosophy in College of Natural and Health Sciences in School of Sport and Exercise Science, Program of Sport Administration Accepted by the Doctoral Committee ______________________________________________________ Dianna P. Gray, Ph.D., Research Advisor ______________________________________________________ Linda A. Sharp, J.D., Committee Member ______________________________________________________ Susan R. Hutchinson, Ph.D., Committee Member _______________________________________________________ Hortensia Soto-Johnson, Ph.D., Faculty Representative Date of Dissertation Defense________________________________________ Accepted by the Graduate School _________________________________________________________ Linda L. Black, Ed.D. Associate Provost and Dean Graduate School and International Admissions ABSTRACT McGee, Micah, Seth. Revenue Management in the Sport Industry: An Examination of Forecasting Models and Advance Seat Section Inventory in Major League Baseball. Published Doctor of Philosophy Dissertation, University of Northern Colorado, 2016. Technological advances in data storage and processing have led to more sophisticated ticket pricing strategies in professional sport. Sport organizations are beginning to adopt a form of revenue management known as dynamic ticket pricing. Effective pricing strategies such as dynamic ticket pricing require an in-depth understanding of the nature of advance ticket inventory and accurate forecasting models to predict remaining inventory at various time horizons prior to game time. The purpose of this study was to gain an understanding of the nature of advance seat section ticket inventory. The study built on and contributed to work in sport revenue management. Although studies of sport revenue management have examined the applicability of revenue management in a sport context, there has not been a study of advance seat section ticket inventory despite the fact that sport organizations utilize price discrimination strategies at the seat section level. As such, this study provided additional insight into the applicability and potential effectiveness of a sport revenue management strategy. The methodological focus on forecasting models and accuracy enabled another contribution. A 3x3x6x7 full factorial research design examined the accuracy of various iii forecasting models under different data strategies, time horizons, model parameters, and levels of the values of T and K used in the moving average and exponential smoothing forecasting models. Statistically reliable differences existed between data strategies with the classical pickup data strategy providing the best forecasts of final game day inventory. Within the classical pickup strategy, no reliable differences in forecast models were detected nor were forecasts found to significantly differ when changing the value of T or K. Finally, forecast accuracy was shown to follow the theoretically predicted best to worst pattern as days out increased. A profile analysis of seat section ticket inventory showed seat sections exhibit different slopes and changes in slope over time. The general pattern of ticket inventory followed a linear trend but with varying slopes. Steeper slopes were found at 20, 10, and 5 days out followed by a leveling out between 5 and 3 days out which was then followed by steeper slopes from 3 days to game day. This finding suggested that optimizing a sport revenue management plan should include forecasting at the seat section level. iv ACKNOWLEDGMENTS Whether playing, coaching, or pursuing a doctorate degree in sport administration, sport has always had a way of challenging and humbling me. I owe many thanks to all my coaches, teammates, competitors, and most recently the faculty and students in the Sport Administration program at Northern Colorado for the many life lessons sport has taught me. Specifically, to Dr. Dianna Gray for helping lead me through the program and to finally finish my dissertation. It was your use of case study techniques in the classroom that sparked the idea of pursuing research in sport pricing that lead me to studying the broader domain of sport revenue management. Thank you for not only providing the interest in this topic but for always demanding my best effort and teaching me many pedagogical and research techniques I will use for many years. To Professor Linda Sharp, thank you for always demanding the highest standard of quality no matter what the assignment. For someone who believed he knew how to do research, you humbled me by continually challenging my work and forcing me to be better. I will take your standards of quality with me in the classrooms I teach in and the research I conduct. I owe thanks to Dr. Susan Hutchinson for demanding the highest level of methodological rigor. After the first course I took from you while earning my Master’s v degree in ASRM, I wanted to take as many courses from you as possible while earning my doctoral minor in ASRM. Your ASRM courses were some of the first courses I actually learned how to conduct research, not just crank the numbers. Thank you for pushing me to improve all aspects of my research while teaching me advanced statistical techniques. To Dr. Hortensia Soto-Johnson, I probably would not have even pursued a Master’s degree, let alone a Doctorate, had it not been for you. You were such a great advisor (and still are) when I was an undergrad and I am forever thankful for you convincing Roger to take me to dinner to discuss graduate school options. To have your support on my doctoral committee after all you have done for me meant the world. Finally, I can never thank enough my wife Heather and family for all your support through the good times and less good times. To mom and dad for driving me all over Colorado (and other states) to play in so many baseball, football, and basketball games you allowed me to pursue my passion for sport as an athlete and now as an academic. To Heather, no career path, sport, or anything on Earth can make me as happy as you do. Because of you, I can pursue a dream career in sport while knowing no matter what happens with a career nothing else is even in the same ballpark as the life we live for God and each other. vi TABLE OF CONTENTS CHAPTER I. INTRODUCTION ...............................................................................................1 Overview of Sport Ticket Pricing ................................................................3 Statement of Problem .................................................................................10 Research Questions ....................................................................................12 Delimitations ..............................................................................................12 Limitations .................................................................................................13 Chapter I Summary .....................................................................................14 II. REVIEW OF LITERATURE............................................................................17 Sport Ticket Pricing ...................................................................................17 Revenue Management: Theory and Practice .............................................26 Revenue Management Literature ...............................................................41 Chapter II Summary .................................................................................133 III. METHODOLOGY ........................................................................................135 Research Design.......................................................................................135 Description of Variables ..........................................................................143 Sampling Strategy ....................................................................................149 Data Collection