In terms of yield management and optimizing revenue, there is a lot the spa industry can learn from the hotel industry. Thanks to the similar complexity that goes along with the management of pricing and rate levels for hotels and spas, the new customer-oriented approach taken by the hotel industry looks like the ideal path to follow for the spa industry.
By integrating this approach, the spa industry can also move away from the uncertainty on how and what kind of model we can implement in terms of yield management. Although yield management was introduced about 10 years ago to the spa industry, it has been something spas have struggled with. The customer-oriented revenue management system that hotels are now adopting may be what the spa industry needs to start developing successful yield management strategies.
From revenue management to price management
The concept of revenue management, as a capacity-driven strategy, was shaped at the beginning of the 1980s after the airline deregulation of 1978. Because of the competition provoked by the new legal frame, airline companies developed all kinds of strategies in order to maximize profits.
Revenue Management Systems (RMSs), which used to rely on capacity-driven models, took into consideration different factors including a fixed amount of resources, the availability of those resources, the price travelers were willing to pay for their seats, and a segmentation of the products included on a flight.
This innovative and successful approach was soon emulated across different sectors including the hotel industry. By the 1990s, however, it became evident that what was effective for the airline industry was not completely appropriate for the hotel industry. The main reason behind this was the fact that the hotel industry offered a more complex scenario than the airline industry in terms of fares and customer profile.
Consequently, the hotel industry moved away from a revenue management system based on capacity to a new model where price was at the center of the strategy. This allowed the hotel industry to develop a more inclusive Best Available Rate (BAR) that was able to respond to the complexity offered by the hotel industry.
As a result of this approach, different variables such as the location of the customer, seasonal elements, and a better analysis of the competitors, were included into a broader strategy that was able to define more accurately pricing and rate levels. This was exactly the time when dynamic price management techniques made their debut shaping revenue management for the hotel industry.
Customer relationship management
The use of price management techniques provides various advantages for hotels. For instance, by applying these techniques hotel revenue can increase up to 5%, something that is quite significant for any given property considering the competitive world surrounding hoteliers today.
Considering the never-ending spectrum of technological innovations, hotels are now able to develop more detailed and complex analyses of
their activities. In particular, hoteliers now have access to valuable data regarding the preferences of their customers, which allow them to increase both revenue and guest loyalty.
By looking at past information related to booking, stay data, purchase rates, and guest activities, hoteliers can now create a uniquely tailored experience for different customers. In this context, the hotel industry is increasingly moving from price management to Customer Relationship Management (CRM), a new approach devoted to match the entire operations of a hotel with the expectations of the right customer at the right time.
Because of this, modern revenue management in the hotel industry is also moving closer to marketing. It is also in this direction that the hotel industry is moving into the near future. Considering the boom of social media channels and higher interaction between hoteliers and customers, the hotel industry will continue to improve its understanding of the customer with positive effects in terms of revenue management.
A suggested approach for the spa industry
The spa industry can also benefit from this customer-oriented revenue management approach. A successful strategy for the spa industry will include a detailed analysis of the services the consumer consumes, whether they buy any products, what treatments they like, and how often they get a treatment.
The majority of spas are already collating this information. However, they are not doing anything to analyze statistics and adapt their offering to the consumer’s buying patterns. This has been, in fact, one of the biggest obstacles the spa industry has faced for the past 10 years.
Just like hotels, the big challenge for spas is that of building a whole brand around the full range of services they provide. In order to do that, spas will need to deal with a full logistical approach, a significant use of modern technology and an active interaction with the customer. Although it may sound a bit overwhelming, this new challenge is also the greatest business opportunity for the spa industry today.