REVENUE MANAGEMENT
6 Is pricing a powerful driver of customers ’ purchasing decisions in the industry ? In the spa industry , pricing has a clear effect on guests ’ purchasing behavior . Because of this price sensitivity , spas can develop strategies that provide guests with lower-priced service options during off-peak periods as a way of driving additional revenue .
Profitability Analysis for Spas Performing a profitability analysis is one of the most basic ways to evaluate the performance of the various items on a spa ’ s treatment menus . Conducting this kind of analysis is also an essential part of developing a revenue management strategy : To optimize the amount of profit a spa makes on the services it provides , spa leaders must know definitively how profitable each individual treatment or service is .
Spa services have two primary costs tied to their delivery : the cost of labor and the cost of the products required to perform the service . Note that linens ( and their laundering ), the space required for the treatment , cleaning products and special equipment must be factored into product costs to gain the most accurate picture of a service ’ s true cost .
Profit margin is usually expressed as a percentage of
In the Know : Spa Revenue Terminology
FIVE TERMS ARE IMPORTANT to understanding the concepts of revenue management . In increasing order of operational maturity and complexity , they are :
l STATIC PRICING : Service prices remain constant , regardless of demand . l
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VARIABLE PRICING : Service prices are adjusted on a fixed schedule — such as seasonally or based on the day of the week or time of day .
DYNAMIC PRICING : Service prices are adjusted based on real-time demand . The same service , at the same time , will have its price adjusted either up or down to allow the spa to maximize revenue while also avoiding underutilized treatment space or practitioners .
DYNAMIC AVAILABILITY : Services are made available or removed from availability based on customer demand , in real time . Often , higher-margin services are made more available ( or even exclusively available ) during peak demand periods , while lower-margin services are offered during off-peak periods . Typically , guests who visit during peak spa hours are more willing to pay convenience pricing for services , while guests seeking the lowest prices are more willing to visit during non-peak hours .
YIELD MANAGEMENT : To maximize profit — or yield — on inventory ( including both products and services ), revenue managers attempt to perfect the practice of “ selling the right inventory , to the right customer , at the right time , at the right price .”
18 PULSE n OCTOBER 2023