The recent boom of spa services offered through the Internet by discount and daily deal sites like Groupon is one of the most controversial issues surrounding the spa industry today. Many professionals within our sector have argued against online deals saying that they affect the reputation, margins and profitability of the spa industry. However, a recent report issued on Spa Business Online, sees this phenomenon as a business opportunity the industry can take advantage of.
A natural step in the industry’s evolution
Whether we like it or not, discount sites are just a natural step in the evolution of the spa industry. Just like budget spas, online discount deals have also been used by the spa industry in the same way they were adopted at some point by the hotel and airline industries. In fact, today’s businesses selling time-based experiences attract 40% of their business using daily deal sites.
According to Spa Business, “the use of deal sites by spas is a sign the industry’s finally starting to get to grips with yield management”. Along those lines, a recent survey elaborated by the International Spa Association (ISPA), found out that 28% of spas are already using deal sites, and 8% are using flash deals. Thanks to this phenomenon, spas are now in a position to take advantage of data regarding the way customers use deal sites in order to improve their menus, marketing strategies, and the development of new deals.
Implementing the right strategy
A significant portion of the benefits spas can get from online deals depends on the strategy they use to implement these offerings. For instance, the original ‘buy one, get one free’ model has been switched to a more effective ‘two-for-one’ (‘bring a friend’) approach, which has increased the appeal of these offerings by bringing a social dimension to it.
A key element of dealing with online deals, relies on the capacity that spas have of getting the right balance between the needs of their regular clients and deal customers. On the one hand, spas must prevent existing customers from being upset by seeing better deals popping up in deal sites. On the other hand, it is wise for spas to include a portion of premium time slots into deal offers, so buyers are not made to feel second rate.
Besides the type of deals and the right balance between regular customers and deal clients, spas also need to take into consideration additional elements such as timing, profit margin, the cut negotiated by the deal site and the capacity of their structures to absorb the extra volumes generated by the deal. According to Spa Business, a successful deal needs to find a “formula which creates a margin for the spa and deal site while making a compelling offer for the customer”.
During the last years, the spa industry has learned many things about discount deals. For instance, managing the extra volume generated by deals is one of the first things a spa should consider before jumping into a deal. To this regard, Rene Freling, General Manager of local deals UK at Travelzoo, asks an important question stating that “it is crucial that spas have a strategy of how to handle this extra volume. Do they have enough space?”
Referring to the same issue, Lopo Champalimaud, Co-founder of Wahanda, argues that his company “always advises operators to be aware of capacity, because, if they can’t cope with the numbers, that leads to bad reputation”.
As far as profitability goes, Justin Musgrove, Group Spa Director at Bannatyne Fitness Ltd. says that “operators shouldn’t be seduced by high head counts unless there’s a profitability at the bottom line”. In the same way, Nicky Noble , Co-founder of Scin Beauty Spa, states that it is important to have a balance in the strategy because “running your whole business on deals doesn’t make financial sense”.
In the end, it is very important for the spa to get a real feeling of the benefits that online deals can provide. Without a clear strategy, online deals can create more harm than good. As Nicky Noble puts it, “each spa or salon is different and owners need to think about what they’re trying to achieve and what will work for them”.
A business alternative to be used wisely
At Spa Balance we have always been slightly reluctant or against sites like Groupon as it normally decreases the perceived value of spas. However, the insights provided by Spa Business create room to think that these deal sites are not that bad if they are supported by a comprehensive strategy.
Before a spa jumps into an online deal, it really needs to understand how it works, what margins it is looking at, how much extra volume it can absorb, what it is looking to achieve, and at what stage its business is at. Once all these aspects have been carefully analyzed, discount deals may be an interesting business option to consider.
Source: Spa Business