YIELD MANAGEMENT Yield management could be introduced in a subtle way
by using dynamic availability – only offering treatments which generate the highest margins during peak hours
variable pricing between the weekends and midweek, but the difference in peak/ off-peak prices is not consistent – it varies between treatments from around 5-11 per cent. All of these spas print the differential prices on their spa menus. CHI, The Spa at the Shangri-La hotel
in Bangkok, Thailand advertises peak and off-peak spa treatments. The peak and off- peak prices vary from 13-38 per cent – a 1-hour 45-minute hot stone massage costs THB4,600 (US$149, ¤115, £95) off-peak and THB5,200 (US$168, ¤129, £107) during peak periods (a 13 per cent difference) while a 45-minute Rescue Release costs THB1,600 (US$52, ¤40, £33) off-peak and THB2,200 (US$71, ¤55, £45) in the peak hours (a 38 per cent difference). The off-peak period runs Monday to Thursday from 10am to 2pm. All other times are peak periods. Meanwhile, cruise ship spas sometimes
offer lower prices while the liner is at port when most passengers disembark. Some spas are attempting variable pric-
ing via deal/discount sites. According to Shane Bird of Sheraton’s Aji Spa: “The main weekday special that we have is Travel- zoo. We created a Travelzoo special that is specifically for its members – a Swed- ish version of our signature Aji 50 minute massage. Last year the business we derived from Travelzoo increased our weekday uti- lisation and summer business significantly. These deals are only valid Monday through Thursday, so it helps to drive volumes into times when we are traditionally slow”.
120 spa business handbook 2012 Consumer spending on deals – including
daily deals, instant deals and flash sales – in the US is forecast to grow from US$873m (¤659m, £548m) in 2010 to US$4.2bn (¤3.2bn, £2.7bn) by 2015 according to local media and advertising company BIA Kelsey. The lead- ing discount deal sites in the US, GroupOn and Living Social – where one in five deals are spa-related – have been joined by a fur- ther 600-plus players in recent years. Mourier says: “Spas within the hotel
industry for the most part are an underuti- lised revenue stream. While most have basic pricing techniques in place like spa pack- ages, discounts and gift cards, they lack a tactical revenue management strategy. Vari- able pricing is also an underutilised strategy for spas, as few fluctuations are made dur- ing high and low demand seasons.” On the whole, according to McCarthy,
spas have tip-toed round yield management and variable pricing because of fear of dis- counting. He believes that “spas are afraid of dynamic pricing strategies because they worry that discounting their services will lead to a devaluation of their offer. Thus, most spas rely on value-added promotions which are not generally sufficient to truly drive a yield growth strategy.” Further, spas are afraid of discounting as
it can lead to a mix of markets – resulting in conflicts between different customer seg- ments, ie full-paying clients and those on a discount – particularly in the communal areas. This can cause operational problems such as complaints and the need to sep-
arate the markets and can consequently have an effect on the brand. Also, in the case of hotels, the spa is often perceived as an important amenity for hotel guests, one that drives hotel room occupancy and aver- age daily rate, not just a profit centre in its own right. Thus, maximising the potential profitability of the department has perhaps not received the attention it could.
What’s next? Pitsikalis believes the spa industry will need a few pioneers for yield management to get established in a sophisticated manner. He suggests that yield management could be introduced in a subtle way by using what he terms dynamic availability – offering
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