“ Aside from the obvious potential boost to spa profits , dynamic availability has the added benefit of being essentially invisible to guests , unlike revenue management strategies that rely on adjusting service prices rather than service availability .”
require a high level of confidence that guests booking on weekends will not be deterred by paying higher rates for services and that higher prices will not reduce existing demand on those days . Spas with robust and predictable demand and a guest base with lower levels of price sensitivity , then , may benefit from a variable pricing strategy , although clear , persistent guest communication ( including how service prices are listed and variations in price explained ) will likely be vital to its implementation .
Dynamic pricing — adjusting service prices based on real-time demand — is a similarly challenging revenue management strategy to practice in the spa industry . Unlike airlines , hotels and ride-sharing services , spas ’ offerings are less standard and feature lower margins than those businesses ’ offerings . So , in addition to the challenge of satisfying guest expectations around service rates , spas practicing dynamic pricing would take on the added challenge of managing the impact that fluid pricing will have on the overall volume of services sold while simultaneously evaluating the effect of the strategy on each service ’ s margin and overall margins .
MORE TO CONSIDER
To be effective , a yield management strategy must be implemented with a thorough understanding of current operations and only after careful evaluation of the respective margins on each of the spa ’ s services . There are other important considerations as well , however .
One such consideration is the management software used by the spa , which must be able to accurately measure things like capacity over time and utilization of resources while also allowing operators to establish parameters on service types and times that streamline the booking and scheduling processes . Understanding the capability your software has to collect and report out key pieces of data can simplify the initial evaluation process and make executing a revenue management strategy far simpler , so make sure you are up to date on everything your spa management software can do .
Every spa is different , and as such , each of their approaches to revenue management will vary . There are , however , a handful of questions that spa leaders can ask themselves to determine the best approach for their spa , including :
● How complex is the mix of services offered at the spa ?
● How many high-margin services and low-margin services share the same operational resources — rooms and staff ?
● During high-demand periods , what is the typical mix of bookings for high-margin and low-margin services ?
● How will performing a greater number of high-margin treatments during high-demand period impact the operation ? Can the spa handle that shift ?
● Are services performed during high- and low-demand periods typically standalone reservations or part of a service package ?
● Which services typically contribute to additional revenue through add-ons or retail purchases ? Beyond all the relevant data , the right software and the answers to questions like the ones above , spas must also have buy-in from their teams and a plan for implementing any changes to operations necessitated by the adoption of a revenue management strategy . No amount of mathematical maneuvering is likely to be successful if guests ’ experiences suffer as a result of poorly managed implementation . Be prepared , then , to track guest history , preferences , complaints and requests so that the new system ’ s impact can be measured by guest response in addition to dollars and cents .
COMING SOON
In next month ’ s issue of Pulse , we will conclude this series on revenue management with an in-depth examination of the revenue management strategies and experiences of ISPA members . ■
Special thanks to FRANK PITSIKALIS for providing background information and valuable feedback on this article .
20 PULSE ■ SEPTEMBER 2021