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    This document discusses yield management in the spa industry. It begins by defining yield management as selling the right inventory to the right customer at the right time for the right price. It then discusses how yield management originated in the airline industry and was pioneered by American Airlines. The document evaluates whether the key criteria for applying yield management are present in the spa industry, concluding that the spa industry does qualify given factors like perishable inventory, variable demand and fixed capacity, sales via reservations, and pricing as a driver of revenue. It provides examples of how yield management could increase profits in a spa by up to 37% through techniques like dynamic pricing and packaging. Finally, it discusses challenges and the potential for wider adoption of

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    This document discusses yield management in the spa industry. It begins by defining yield management as selling the right inventory to the right customer at the right time for the right price. It then discusses how yield management originated in the airline industry and was pioneered by American Airlines. The document evaluates whether the key criteria for applying yield management are present in the spa industry, concluding that the spa industry does qualify given factors like perishable inventory, variable demand and fixed capacity, sales via reservations, and pricing as a driver of revenue. It provides examples of how yield management could increase profits in a spa by up to 37% through techniques like dynamic pricing and packaging. Finally, it discusses challenges and the potential for wider adoption of

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    Download as PDF, TXT or read online from Scribd
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    16 views22 pages

    Yield Management Frankpitsikalis

    Uploaded by

    Ary Suwantari
    This document discusses yield management in the spa industry. It begins by defining yield management as selling the right inventory to the right customer at the right time for the right price. It then discusses how yield management originated in the airline industry and was pioneered by American Airlines. The document evaluates whether the key criteria for applying yield management are present in the spa industry, concluding that the spa industry does qualify given factors like perishable inventory, variable demand and fixed capacity, sales via reservations, and pricing as a driver of revenue. It provides examples of how yield management could increase profits in a spa by up to 37% through techniques like dynamic pricing and packaging. Finally, it discusses challenges and the potential for wider adoption of

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 22

    Yield Management

    in the Spa Industry


    What to Expect and How to Prepare

    By
    Frank Pitsikalis
    ResortSuite
    Integrated
    Teamwork
    Yield Management
    What is it?

    Yield Management is a
    method of selling:
    the right inventory to
    the right customer at
    the right time at
    the right price.
    Yield Management
    History

    ƒ Pioneered by American Airlines


    ƒ Airline Deregulation in 1979
    ƒ AA saved $1.4 Billion from 1989-92
    ƒ Net Profit for same Period was $892 Million
    ƒ Today it is an accepted strategy by both
    operators as well as customers
    Yield Management Full Price ($1000)
    Reduced Price ($500)
    Airline Example Unoccupied

    100 x $1000 25 x $1000 20 x $1000 25 x $1000


    = $100,000 = $25,000 80 x $500 65 x $500
    = $60,000 = $57,500
    Yield Management
    Qualifiers?

    ƒ Perishable Inventory
    ƒ Variable Demand, Fixed Capacity
    ƒ Sales via Reservations
    ƒ Multi-Pricing Capability
    ƒ Low Variable Costs
    ƒ Pricing is a Powerful Driver
    Yield Management
    Does the Spa Industry Qualify?

    ƒ Perishable Inventory
    • Every hour that goes by with an empty
    treatment room is a lost revenue
    opportunity

    Yes
    Yield Management
    Does the Spa Industry Qualify?

    ƒ Variable Demand, Fixed Capacity


    • Most spas have a fixed number of
    treatment rooms and experience variable
    demand (weekend vs weekday, time of day
    etc.)

    Yes
    Yield Management
    Does the Spa Industry Qualify?

    ƒ Sales via Reservations


    • All spas make reservations in advance
    • Weeks and Months ahead
    • Many reservations also made
    at the last minute

    Yes
    Yield Management
    Does the Spa Industry Qualify?

    ƒ Multi-Pricing Capability
    • Market Segmentation
    • Published Price List

    Yes
    Yield Management
    Does the Spa Industry Qualify?

    ƒ Low Variable Costs


    • Fixed:
    • Construction Costs, Admin Personnel
    • Variable:
    • Service Provider
    • Room Cleaning, Products

    Yes
    Yield Management
    Does the Spa Industry Qualify?

    ƒ Pricing is a Powerful Driver


    • Pricing influence behavior
    • Increase in revenue can have a dramatic
    effect on overall profit

    Yes
    Yield Management
    How to Implement in Spas?

    ƒ How can you change the price of a service on


    the fly? (Dynamic Pricing)
    ƒ Better solution required for Spas
    (Dynamic Availability)
    Yield Management
    How to Implement in Spas?

    ƒ Dynamic Availability
    • Offer only premium services at peak times
    • Push packages to off-peak times
    • Package overflow effect
    • Dependant on forecasted occupancy
    ƒ Spa Menu Structure
    ƒ Spa Design
    Yield Management
    Spa Example – 100% Capacity

    Without Yield Management With Yield Management

    Service Service
    Price Margin Hours Profit Hours Profit

    Aromatherapy Massage $90 $60 5 $300 30 $1,800

    Swedish Massage $100 $50 90 $4,500 40 $2,000

    Mud Wrap $150 $120 5 $600 30 $3,600

    100 $5,400 100 $7,400

    37% Increase in Profit


    Yield Management
    Spa Example – Variable Capacity
    Without Yield Management With Yield Management
    Service Service
    Price Margin Hours Profit Hours Profit

    Early-Bird Massage $75 $50 N/A $0 10 $500


    Package Massage $80 $50 N/A $0 10 $500
    Aromatherapy Massage $90 $60 5 $300 5 $300
    Swedish Massage $100 $50 40 $2,000 30 $1,500
    Mud Wrap $150 $120 5 $600 5 $600
    Last Minute Club
    Massage $75 $50 N/A $0 10 $500
    50 $2,900 70 $3,900

    34% Increase in Profit


    Yield Management
    Financial Impact - Example

    ƒ Before YM
    $100K Revenue
    $10K Profit (10%)
    ƒ After YM
    $105K Revenue (+5%)
    $2.5K Increase in Profit

    25% Increase in Profit


    Yield Management
    Being Done Today in Spas?

    ƒ Book in Advance Discounts


    ƒ Weekend vs. Weekday Pricing
    ƒ Time of Day Pricing
    ƒ Last Minute Club
    ƒ Specials and Promotions
    Yield Management
    Property Wide

    ƒ Yield across multiple departments


    ƒ Rooms, Spa, Golf, Group
    ƒ Tying Forecasted Demand to Hotel
    ƒ Multiple Channels (CRS, WEB etc.)
    ƒ Understanding Guest Value
    Yield Management
    Challenges?

    ƒ Ethics
    ƒ Technology
    ƒ New Frontier
    ƒ Short Term Gain, Long Term Pain?
    ƒ Customer Relationship
    Yield Management
    What’s Next?

    ƒ Yield Management is already here


    ƒ How prevalent will it be in the Spa Industry?
    ƒ Further Analysis Required
    ƒ Trial and Error
    ƒ Technology Evolution
    ƒ Wide Adoption
    ƒ No one size fits all
    Yield Management
    in the Spa Industry
    What to Expect and How to Prepare

    Questions?
    By
    Frank Pitsikalis
    ResortSuite

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