Dynamic Revenue Management

Marisa Dimitriadis, Managing Director, The Spa Consultants, South Africa, lays down a few ground rules for revenue generation. Read on to know how to maximise your bottom line.

T he right product, at the right time, at the right price! This is the core principle of revenue management.

Do you find your spa is underutilised and sometimes maybe even empty? It is time to start managing your spa business in a more strategic manner. Most salons/spas offer their treatments on a first come first served basis meaning that during high demand times a very profitable treatment could be turned away because the treatment room is booked with another treatment which is much less profitable. in order to optimise revenue, you need to look at ways to attract clients during low demand times and then at the same time boosting profit during high demand times

In order to implement revenue management strategies, let’s look at what information you need before you can make any decisions.

1. Revenue Contribution: Draw a report showing highest to lowest profit treatments and then the contribution of these treatments to total spa revenue.

2. Productivity Analysis: What day of the week and times of day have the highest demand? What months produce the highest revenue? And which treatments are sold the least?

3. Retail Analysis: Do you have a strong retail focused team? Is it something that can be improved? What other impulse buys can you add to your retail offering? When is your Average Docket Value highest?

4. Managing Costs: Do you have an effective cost control system in place? Are there areas you feel you can cut costs without compromising experience? Do you have a system in place where you actively promote higher profit treatments?

The above information will give a clear picture of the opportunities to optimise revenue. Before I share some ideas on how to revenue manage your spa business, let’s first agree that running a ‘discounting’ business is not a long-term revenue boosting solution but rather can have a negative result in how customers perceive the value they are getting. Customers will begin to expect discounts all the time.

Alternative options

Instead of setting your treatment prices based on highest demand level and then discounting to fill up quiet days and times, rather consider the following: 1. Type of treatment room: Pedi lounge vs private treatment room; and standard treatment room vs outdoor room over the lake with private bathroom facilities and Jacuzzi. 2. Treatment booking times: Last minute bookings vs advance bookings, time of day, day of the week and of course duration of treatment. 3. Type of treatment booked: Plain and simple most profitable treatments are offered during higher demand times and least profitable treatments and shorter treatments are offered during lower demand times. 4. Effective utilisation of spa facilities to support treatments: This means booking up the least in demand rooms first, leaving open the higher demand rooms during peak periods. So, a pedicure example again, you would book a pedicure in a lounge area before booking a treatment room leaving it open to perform a more profitable treatment like a massage.

Some ideas on where to get started with a term a little new to our Industry. Dynamic pricing as defined in the dictionary is the practice of pricing items at a level determined by a particular customer’s perceived ability to pay. a) For starters, Saturday bookings should be restricted to higher profit treatments first at peak prices compared to a Tuesday morning for example. b) Offer maintenance type of treatments like manicures, pedicures and waxing on a Monday to Wednesday morning for example at special prices to drive bookings on those days. c) Early bird booking pricing to encourage advance bookings d) If you are a spa in a hotel, encourage pool side or on the deck massage treatments to maximise the treatment room space in the spa. If a guest is offered this option, they will most likely take up the offer so they can relax by the pool while having a massage. e) The reservation desk has a clear list of treatments listed from most profitable to least profitable and all bookings start with the most profitable offered first. Ensure all staff who take bookings are aware of this.

It is vital to move ahead with these types of revenue management ideas in order to get and maintain growth in the spa business. This type of dynamic pricing is not new to the consumer so do this with confidence. 

About the author: Marisa Dimitriadis started her career in South Africa’s spa industry at the age of 19. With The Spa Consultants, she is answering a need in the market for a turnkey consultancy to drive spa projects from the ground up. She has also formulated her own skin (SIX Skincare) and body (Spalicious) ranges. During the pandemic, she launched an online retail platform -Send me That- for spas and salons. Her latest project Spa Professionals Guild is a global online platform for ongoing business coaching and transformational management courses. She is also a part of the Sustainable Spa Association, a non-profit organisation established to assist the spa operators in becoming an environmentally friendly force for change.