‘Dynamic surging’: Idea to increase beer prices at popular times slammed

A move overseas to increase the price of beer at certain times has been slammed by leading business academics.

Leading business experts have slammed a move, seen overseas, to introduce surge pricing for drinks at pubs — saying it is unlikely to take off in Australia anytime soon.

Many pubgoers in the UK have seen increase to the price of their pints at times of increased demand.

Beer prices in Australia generally rise when the alcohol excise tax rises.

There are two excise increases every year in February and August.

Most pub operators put their prices up in line with excise tax increases as this is CPI-based and closely aligned with rising operating costs.

But in the UK, the New York Times reports, about 800 of the 4000 pubs owned by the company, Stonegate Group, are either using “dynamic pricing,” in which prices rise at times of increased demand, or may use it in the future to help cope with higher staffing and licensing costs.

Stonegate owns the popular pub chains Slug & Lettuce and Craft Union in the UK.

Beer prices in Australia generally rise when the alcohol excise tax rises. Picture: Tim Hunter.

A spokesperson told the New York Times that the timing of surge pricing, in which a pint of beer would cost about 20 pence (40 cents) more, would vary by pub, but that generally prices would be higher on weekends and evenings.

Surge pricing is common among a variety of industries such as retail, ridesharing and travel.

But business academics who spoke to news.com.au questioned its merit when it comes to beer.

Johannes Dumay, a professor of accounting and corporate governance at Macquarie University, described it as a “bad business strategy”.

“Putting surge pricing in place is like telling people not to come when it is busy,” he said.

“It is similar to pubs and restaurants (or any business) charging a credit card fee when paying – it is just plain rude and an obvious way of getting more than the advertised price.”

He said Australians would be “up in arms” if price surging was introduced here in relation to beer. He warned that businesses could lose their customer base.

“Many pubs and clubs already use happy hour (or weekend surcharges) to achieve the same without having an ‘in your face’ price rise,” he said.

“People love discounts more than they like surge pricing. It is just how you sell it.”

Professor of economics at Charles Sturt University, John Hicks, also cautioned against the idea describing it as “interesting and novel” — but questioned whether it made good business sense.

“Those people who normally attend could go elsewhere,” he said.

“But if the pub is that popular for reasons other than the price of their drinks it is quite a feasible thing to do because the costs aren’t going up and they can raise revenue reasonably.”

Aussie business experts have slammed the idea.

Prof Hicks said it was “unlikely” it would be introduced in Australian pubs.

“It’s not impossible but it would have been done by now,” he said.

“You need to be able to track what is happening in the market... you need to be able to pick up on changes taking place relatively quickly.”

Andrew Grant, a professor of finance from the University of Sydney told news.com.au it would require a “number of providers” introducing price surging to “change behaviour”.

“If every pub did it and the price was centrally managed it could be quite effective,” he said.

The Australian Hotels Association has been contacted for comment.

Last month Australian beer drinkers were slugged with another tax rise.

The beer tax will increase from $57.79 to $59.06 per litre of pure alcohol, making Australia the third-highest taxed country in the world behind Finland and Norway.

Brewers Association of Australia chief executive John Preston said punters and families would be the ones to lose out.

“While the Treasurer inherited these automatic half-yearly beer tax increases, we’re calling on the government to step in and take some action before a trip to the pub or a dinner out with the family becomes an unaffordable luxury for most Australians,” he said.

Mr Preston said increases to the excise, which rises every six months, had not generated more money for the Treasury, with revenues “stuck” at about $2.5bn a year.

-with Duncan Evans