yield management frankpitsikalis

8/6/2019 Yield Management Frankpitsikalis

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Yield ManagementYield Management

in the Spa Industryin the Spa IndustryWhat to Expect and How to PrepareWhat to Expect and How to Prepare

ByFrank Pitsikalis

ResortSuite


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IntegratedIntegrated

TeamworkTeamwork


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Yield ManagementWhat is it?

Yield Management is amethod of selling:

the right inventory tothe right customer at

the right time atthe right price.


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Yield ManagementHistory

Pioneered by American Airlines Airline Deregulation in 1979

AA saved $1.4 Bill ion from 1989-92

Net Profit for same Period was $892 M il lion

Today it is an accepted strategy by bothoperators as well as customers


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Yield ManagementAirline Example

Full Price ($1000)

Reduced Price ($500)Unoccupied

100 x $1000

= $100,000

25 x $1000

= $25,000

20 x $1000

80 x $500= $60,000

25 x $1000

65 x $500= $57,500


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Yield ManagementQualifiers?

Perishable Inventory Variable Demand, Fixed Capacity

Sales via Reservations

Multi-Pricing Capability

Low Variable Costs

Pricing is a Powerful Driver


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Yield ManagementDoes the Spa Industry Qualify?

Perishable Inventory Every hour that goes by with an empty

treatment room is a lost revenue

opportunity

YesYes


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Variable Demand, Fixed Capacity Most spas have a fixed number of

treatment rooms and experience variable

demand (weekend vs weekday, time of dayetc.)

YesYes


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Sales via Reservations All spas make reservations in advance

Weeks and Months ahead

Many reservations also madeat the last minute

YesYes


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Multi-Pricing Capability Market Segmentation

Published Price List

YesYes


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Low Variable Costs Fixed:

Construction Costs, Admin Personnel

Variable:

Service Provider

Room Cleaning, Products

YesYes


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Pricing is a Powerful Driver Pricing influence behavior

Increase in revenue can have a dramatic

effect on overall profit

YesYes


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Yield ManagementHow to Implement in Spas?

How can you change the price of a service onthe fly? (Dynamic Pricing)

Better solution required for Spas

(Dynamic Availability)


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Yield ManagementHow to Implement in Spas?

Dynamic Availability Offer only premium services at peak times

Push packages to off-peak times

Package overflow effect

Dependant on forecasted occupancy

Spa Menu Structure

Spa Design


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Yield ManagementSpa Example 100% Capacity

$7,400100$5,400100

$3,60030$6005$120$150Mud Wrap

$2,00040$4,50090$50$100Swedish Massage

$1,80030$3005$60$90Aromatherapy Massage

ProfitServiceHoursProfit

ServiceHoursMarginPrice

With Yield ManagementWithout Yield Management

37% Increase in Profit37% Increase in Profit


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Yield ManagementSpa Example Variable Capacity

$3,90070$2,90050

$50010$0N/A$50$75Last Minute ClubMassage

$6005$6005$120$150Mud Wrap

$1,50030$2,00040$50$100Swedish Massage$3005$3005$60$90Aromatherapy Massage

$50010$0N/A$50$80Package Massage

$50010$0N/A$50$75Early-Bird Massage

ProfitServiceHoursProfit

ServiceHoursMarginPrice

With Yield ManagementWithout Yield Management



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Yield ManagementFinancial Impact - Example

Before YM$100K Revenue

$10K Profit (10%)

After YM

$105K Revenue (+5%)

$2.5K Increase in Profit



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Yield ManagementBeing Done Today in Spas?

Book in Advance Discounts

Weekend vs. Weekday Pricing

Time of Day Pricing

Last Minute Club

Specials and Promotions


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Yield ManagementProperty Wide

Yield across multiple departments

Rooms, Spa, Golf, Group

Tying Forecasted Demand to Hotel

Multiple Channels (CRS, WEB etc.)

Understanding Guest Value


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Yield ManagementChallenges?

Ethics Technology

New Frontier

Short Term Gain, Long Term Pain?

Customer Relationship


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Yield ManagementWhats Next?

Yield Management is already here How prevalent will it be in the Spa Industry?

Further Analysis Required

Trial and Error

Technology Evolution

Wide Adoption

No one size fits all


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Yield ManagementYield Managementin the Spa Industryin the Spa Industry

What to Expect and How to PrepareWhat to Expect and How to Prepare

ByFrank Pitsikalis

ResortSuite

Questions?Questions?

yield management frankpitsikalis

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