To Yield or Not to Yield
Is There Really a Question?
by Josh Corman

MANY IN THE SPA INDUSTRY are not strangers to the concept of yield management, a pricing strategy that allows spas to make the most of those times—weekends, holidays and so forth—when their services are most in demand. As with so many things, however, the COVID-19 pandemic has elevated the questions of whether to utilize the practice and how to implement it effectively to the front of spa leaders’ minds.

In its simplest form, yield management is often described as “selling to the right customer, at the right time, for the right price.” For spas, the practice most commonly takes the form of adjusting prices to correspond with the varying levels of demand on certain days of the week, or even at certain hours of the day. When executed effectively, yield management can have a significant impact on revenues and even increase bookings. Though the process of implementing a yield management strategy can seem daunting—especially if a spa has traditionally used a static pricing model (where services are offered at a flat rate to guests, regardless of when the service is provided)—those interested in the approach can have success if they plan carefully.

Know Thyself (and Thy Competition)
Before deciding to enact a yield management strategy, it’s crucial that spas thoroughly evaluate their menus and honestly assess their place in the market. When the Spa at Four Seasons Philadelphia opened in 2019, Senior Spa Director Verena Lasvigne-Fox was certain that she wanted to utilize the same kind of yield management approach that she had employed in previous positions “without hesitation.”

The first step was an in-depth evaluation of the treatment prices at the spas she considered to be in direct competition with hers. “I visited our competitors, which allowed me to understand where we stood in the market. From there, you can get a clearer vision on where you want to set yourself in terms of positioning. In Philadelphia, we saw our spa being the leader in terms of what we were going to offer product- and service-wise,” she says.

But because Lasvigne-Fox was also aware that the local community had a reputation for loyalty to their preferred businesses, she knew that her spa’s prices needed to both reflect the quality of their guests’ experience and remain competitive in the market so as not to price themselves out of their desired clientele. As a result of this evaluation, the spa ultimately elected to offer services priced within a range that started slightly above the competition—between US$10 and US$40 more per service, depending on the day of the week. That range gave the spa the flexibility to price treatments and services at the upper end of the range during their busiest days, while also offering guests the opportunity to book services for less during off-peak hours without resorting to discounts or diminishing the brand.

Know Thy Guest Too
A thorough understand of guests’ habits is also a crucial part of a spa’s approach to yield management. In fact, keeping close tabs on his guests’ habits and mindsets has led Shane Bird, director of spa operations at Skana Spa, to adjust his spa’s yield management strategy in a way that has made its pricing more effective. Though, like many spas, Skana offers services on Friday and Saturday at the high end of their price range, Bird has elected to price services at basic rates on Sundays. That decision allows guests to enjoy a massage, for example, at a below-premium rate on a weekend. It has another important effect too: “Sunday is kind of a big checkout day [at the resort],” says Bird. “So my philosophy there is, can we them around longer? Can we extend their time and get them to leave their bags at the bell desk and spend their day at the spa? Get anotherlunch or dinner or whatever? It’s almostless of a financial decision and more a psychological one.”

By carefully evaluating guest behaviors, as well as closely examining which services book most heavily at which times, spas can not only increase revenue by identifying periods of high demand, they can also fill in bookings at the edges of their service schedules—so-called shoulder hours—all while extending the benefit of lower rates to guests who may seek that additional value. That’s not something Bird has tested yet, but it’s something to which he’s given thought. “Maybe in the future we yield prices for our shoulder hours. You know, you’re looking at your morning hours and your evening hours that might tend to book last because 10 to six is your sweet spot—do I yield those down and fill them in a little bit better? Should I maybe incentivize to get people into my shoulder hours?”

Bird is also quick to point out that yielding doesn’t have to mean enormous price swings and advises spa leaders to give serious consideration to the impact of yielding prices down even slightly during off-peak hours. “I think sometimes, when operations folks think about yielding, they think sometimes of what a hotel does, where one night is $199 and the next night its $299,” Bird explains. “You’re using a scalpel more than a shotgun. Even if you said, ‘My services after six pm are five dollars less,’ you’d be amazed what five bucks does for a consumer! And you’ve booked those hours that maybe aren’t as bookable—it’s amazing what that will add up to over time.”

Don’t Sleep on Software
One potential hurdle to refining a spa’s yield management strategy—or implementing one in the first place—is the detail-oriented work that goes into evaluating booking patterns and determining when and by how much to yield prices. But both Shane Bird and Verena Lasvigne-Fox note that improvements to booking management software has made those evaluations much easier to undertake.

“One big factor [to yielding successfully] is your software. Can your software do what you need it to do when it comes to yielding?” Bird asks, while noting the improvements many programs have made in just the last few years. “As recently as five years ago, some were struggling to be as valuable as they needed to be when it came to pricing.” If a spa hasn’t done a thorough review of available software in a while, now may be the time to dive into the ways in which a new program might make yield management simpler and more efficient.

Verena Lasvigne-Fox cites a thorough understanding of booking software and its capabilities as the first step in adopting, or simply fine-tuning, a yield management strategy. “Some software supports dynamic pricing by the hour of the day—Friday mornings I have a lower price and Friday afternoons I have a higher price, for example—but others only work by the day of the week. So the first step is to really understand your software, get a full training on how yield pricing may work
and support you.”

A thorough grasp of booking software also allows spas to remain nimble and make those surgical adjustments Shane Bird mentioned above. As Verena Lasvigne-Fox explains, however, spas should also expect “glitches” to occur when developing and implementing a yield management strategy, treating any missteps or even negative guest feedback as an opportunity to learn and improve. “Stay flexible and adjustable,” she says. And if guests question the adjustments the spa has made? “Be generous with those guests because they help us make this entire
system stronger and more streamlined. At the same time, take that feedback and look into ways to improve communications in order to avoid issues in the future.”

As Always, Communication is Crucial
That final point about communication is as critical a part of successfully implementing a yield management strategy as any other. After all, no matter how well a spa has analyzed its booking data and guest profiles, failing to communicate shifts in pricing clearly and effectively can lead to plenty of frustration for both spa leaders and guests.

Part of that communications plan, says Shane Bird, is about planning ahead, so that any adjustments made to the spa’s pricing structure doesn’t carry a prohibitive cost. “Twenty-two years ago, when I started, all we had were paper menus. But nowadays, if you’ve got your menu on your website, and you’ve got your menu virtually available on a mobile device, and your guests can book online, and you also have printed collateral, you’d better make sure that you’ve got those boxes ready to check,” he says. “Do it in a way where there’s plenty of time because it usually involves a sales and marketing team, and an IT team, and it might be a printing team. And then obviously there’s getting your own team trained. Because you’re going to get that one guest who comes in and says they saw a different price on your website. It’s like, ‘Oh no! We forgot the website!’”

Assuming that all of those boxes are checked, there’s no doubt that yield management can have a serious impacton a spa’s financial well-being. A minor adjustment Verena Lasvigne-Fox made recently at Four Seasons Philadelphia illustrates that impact perfectly. Because Friday business at the spa has recently begun to rival Saturday and Sunday levels, she yielded service prices up US$20 from their present levels and made a US$10 adjustment to Thursday’s prices in response to increased demand on that day. “It took me 45 minutes to update our software system, and I added a bit over $40,000 to our bottom line for this year.”

At a time when demand for spa services is ramping back up ahead of the economy’s wider reopening throughout 2021, it seems clear that spa leaders should give yield management a serious look to make the most of their recovery.