Download - 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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Yield ManagementDoes the Spa Industry Qualify?
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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Yield ManagementDoes the Spa Industry Qualify?
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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Yield ManagementDoes the Spa Industry Qualify?
Multi-Pricing Capability Market Segmentation
Published Price List
YesYes
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Yield ManagementDoes the Spa Industry Qualify?
Low Variable Costs Fixed:
Construction Costs, Admin Personnel
Variable:
Service Provider
Room Cleaning, Products
YesYes
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Yield ManagementDoes the Spa Industry Qualify?
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
34% Increase in Profit34% Increase in Profit
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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
25% Increase in Profit25% 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?