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Revenue management for spas — a win-win for spa operators and guests

19 Jul 2016
Like many sectors of the travel industry, spas have perishable inventory, says Frank Pitsikalis, founder and CEO of ResortSuite, but yet most don’t employ a revenue management system. In an exclusive Thought Leader column for Spa Opportunities, Pitsikalis suggests using dynamic availability can offer a solution that doesn’t mean changing your spa menu – and can be a win-win situation for everyone.

The airline industry, hotels and car rental companies would not dream of operating without revenue management as a core business practice.

Like the spa industry, they all have perishable inventory. If a day goes by and a hotel doesn’t sell a room, that revenue opportunity is gone forever. If a plane takes off with a seat unfilled, it is a lost revenue opportunity — the plane’s fixed costs to operate are still the same and the variable cost to fill one more seat is very low.

These are perfect candidates for revenue management and these industries do it masterfully. But why not the spa industry? Every hour that goes by where a treatment room is unfilled is a lost revenue opportunity.

The spa industry, like the others mentioned, has periods of variable demand. Sometimes the spa is empty, and at other times, the demand is so high that even if the spa had triple the number of treatment rooms, they could fill them all.

Yet the spa industry, with very few exceptions, continues to book all the services that they offer – at the same price – during their high-demand periods.

My philosophy is that people in the spa industry immediately think, “we have a published menu and it would be unethical to change the price” (known as dynamic pricing), and they dismiss the strategy before any further consideration.

But what if you could use dynamic availability instead? An example might be shortening your menu (to higher margin services) or not offering 90-minute or longer services during peak times – you will serve more guests in the spa, creating more retail opportunities, and likely earning more profit per minute on a shorter service than a longer one. You can do all this with the same published menu you have today.

The time has absolutely come that we reach our financial potential as an industry. The ironic thing is that airlines now serve a much wider demographic than before revenue management. So you can do right by your business and do the right thing for your guests too.

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