Miami Spice serves up food for thought about pricing
08/03/2014 3:56 PM
08/04/2014 7:47 AM
South Florida’s beloved Miami Spice culinary festival has just launched for 2014, running through August and September, and this year promises to be the tastiest in the event’s 13-year history, with more sponsors and special programs than ever.
While Miami Spice offers an opportunity for some great meals and great values, it also offers important lessons in pricing and revenue management. The event is exciting from a culinary perspective, but it’s a mixed bag from a pricing perspective.
Miami Spice is organized by the Greater Miami Convention & Visitors Bureau and is aimed at stimulating demand during a soft period for South Florida tourism. The Bureau’s timing is perfect. With heat and humidity peaking and kids heading back to school, the second half of August and all of September are the doldrums for Miami tourism.
So extra stimulation of local demand is quite welcome for Miami restaurants, many of which are in hotels experiencing their lowest occupancy rates of the year.
But from a revenue management perspective, the event’s pricing leaves a lot to be desired.
Lunches are $23 per person. Dinners are $39 per person. Drinks and tips are additional. For consumers, that’s simple to understand. But as I’ve said in this column before, a one-price-fits-all approach to revenue management doesn’t work well, especially when there are more than 150 restaurants involved.
The problem comes in because there are participating restaurants that Yelp Miami rates as two-dollar signs, three-dollar signs and four-dollar signs. So the fixed, one-price-fits-all approach creates a big gap in relative value from a customer’s perspective and places severe constraints on participating restaurateurs that typically operate at high price points.
A $39 per person, three-course dinner is an outstanding value at expensive restaurants such as Azul, in the Mandarin Oriental Hotel in Brickell Key, BLT Steak in the Betsy Hotel in Miami Beach, Zuma, in the Epic hotel and db Bistro Moderne at the JW Marriott hotel, both in downtown Miami. But the same $39 rate at more moderately priced restaurants is much less motivating and not as effective at stimulating incremental demand.
The one-price-fits-all-approach is a real revenue constraint for Miami’s best and most expensive restaurants. Some, such as Azul and db Bistro Moderne, have jumped into the festival whole-heartedly, offering an exciting and varied menu every evening they are open.
Other restaurants cope with the pricing restrictions by limiting their Miami Spice menus to standard fare, which invariably includes chicken, salmon and skirt steak. They’re hoping that some Miami Spice traffic can be steered to more profitable menu selections.
So what’s my advice? If you’re looking to make the most of this year’s culinary festival, go to ilovemiamispice.com, look at Miami’s best and most expensive restaurants, determine if their Spice menus are appealing and offered on days that fit you social calendar. If so, then book a table right away, before it’s too late.
For the festival’s organizers, I’d recommend implementing a more robust pricing plan for next year. Perhaps going back to a two-tier pricing approach based on a restaurant’s standard pricing. Mid-range restaurants could keep the current pricing. High-priced restaurants could charge a bit more.
Differential pricing for weekdays and weekends would also benefit participating restaurants. Or, consider a different structure all together. The best tool in the demand stimulation arsenal is to offer something for free. A free first course sounds appetizing. Free dessert sounds sweet as well.
Reach Adam Snitzer, president of Peak Revenue Performance, at email@example.com, or at PeakRevenuePerformance.com.
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