Trent Munday shares several golden rules in SPA operation and management
Trent Munday is the Vice President of Steiner Spa Consulting. He joined Steiner Leisure in January 2005 after 14 years in the hotel business, with Six Senses Hotels & Resorts, where he opened the company’s first Evason property in Hua Hin, Thailand as Resident Manager and COMO Hotels & Resorts where he was the opening General Manager of Uma Ubud, Bali. Having worked in Australia, USA, Thailand, Maldives, Indonesia and Malaysia, he has gained considerable experience in the hospitality industry across numerous, diverse cultural environments. SpaChina shares three spa knowledge articles from Mr. Munday.
Pricing in any business is always tricky and spas are no different. It’s not just a case of taking the cost of a treatment, adding on a profit margin, then rounding up to give you a nice round number.
The best approach to pricing is one of cost plus market rate. Simply put, this means you look at covering the costs associated with the treatment then consider how much you can expect the market to pay. As well as the cost of products and labour, you should factor in the cost per room of laundering linen and electricity as well as rental costs. You should also consider the spa director’s salary, marketing, and website maintenance, dividing your monthly spend on these items by the total potential treatment hours per room.
Once you have established the true costs of each treatment, you should then see what others in your market are charging for similar services. Ask yourself, honestly, how your offering compares to theirs. If yours is better, then you should be able to charge more. I firmly believe in letting market forces determine pricing.
What if a competitor’s treatment is almost identical but you want to charge more? The key is to consider what you are selling – a treatment or an experience? Do you provide a relaxing ambience, a detailed consultation, and welcome and farewell rituals? Can you charge more if you do? Absolutely.
Your market will soon tell you if you are priced too high. Guests simply won’t come if you’re too expensive. Better to go with a higher price and offer discounts when business is slow. Potential guests will compare your prices to others’ and will make quality comparisons based on price. If your price is too low, they’ll assume you don’t offer the same quality.
As an international company, Mandara Spa’s prices vary considerably from one country to another. They have to, because business costs between countries vary greatly, and guests understand this. Even before we look at product-related costs, we have to think about labour – the market rate dictates we pay our therapists three times the salary in the Maldives that we do in Bali.
Fluctuating exchange rates can also impact on any spa that has international guests. If their home currency has devalued, your guest’s perception will be that your prices are expensive, even if they’re in line with market rates. Should you lower your prices if you rely on the US market and US currency value has dropped 20%? Maybe, but be careful. You could be setting a dangerous precedent. Remember, if the value of the currency has dropped, there will probably also be a drop in travellers from that country, so you may need to find a new market.
Spa operators should also consider seasonal pricing. Hotels have peak-rate periods. Why not your spa?
Yield Management in Spas
Way back in 2006, the good folks at Spa Business invited me to share my thoughts on maximising yield in spas. In the time since that story, I’ve visited countless spas in dozens of countries and still haven’t seen even one example of yield management in spas.
The concept is simple enough. When the demand for your spa is greater than the supply, you have a scarce product. Customers are generally willing to pay more if they know there’s only limited availability.
So, if your hotel spa is always fully booked between 6pm-9pm, why not charge a higher price for treatments during this time? You do the same thing with your hotel rooms during peak season, after all. To the time-starved corporate traveler, paying 10%-20% more, just for the convenience of having a treatment when she wants it, is money well spent.
Yield management has worked so well for airlines and – though to a lesser extent – hotels. Why then aren’t we seeing more (read: any) yield management in spas?
Part of the problem likely rests with your spa team. A great spa employee is, by their very nature, someone who cares about the guest. That same caring, nurturing employee may well have trouble taking the hard-nosed business approach required for yield management. They feel guilty about charging more in peak times.
I know many of you have faced the same conundrum with getting your spa staff to sell retail too. More on that in a future post.
Ultimately, this is a problem of perception. They think they’re overcharging their guests. You need your spa team to focus on the maximum price at peak times as the ‘normal’ price.
Two ways to achieve that are…
- Print your menu with the peak times and prices stated on it – just like you would with your hotel rooms rate card.
- Print your menu with only the peak price (ie: normal price) and allow your spa team to discount these prices, but only during off-peak times.
The second part of the problem is much harder to deal with. It’s also a problem of perception but this time it’s the guest’s perception of value.
If I’m expected to pay more at peak times and due to my busy schedule I’m only free during the spa’s peak times, then I need to really value that spa treatment in order to pay extra. You can counter this, to some degree, by adopting Pricing Strategy #2. As the guest only sees the one price, they have no perception of peak and off-peak rates.
However, there is always a risk that the guest may have earlier enquired for a different time slot and been given the cheaper off-peak rates. Alternatively, their colleague may have booked a different time and been given a cheaper price. If so, they are now likely to feel that they’re being played.
For this reason, I actually prefer to adopt Pricing Strategy #1. It’s upfront, honest and very clear to all. It’s easier for your spa team to work with and avoids the potential fallout of Pricing Strategy #2.
Peak/off-peak pricing is not a new concept. It’s a perfectly acceptable pricing strategy in many businesses. So, why not in spas?
Every Spa Menu Needs a ‘Cheeseburger’
So you’ve just done your latest competitor analysis and you’ve found that your two closest competitors have spas that offer both Reflexology and an Aromatherapy Massage. Just like you do.
Quick! Call the spa manager! We have to change our menu. We can’t offer the same as them. We need some new treatments. Something to differentiate us.
Well, here’s the thing. Your competitors probably have a Cheeseburger on their Room Service menu. Are you going to remove that too? Of course not.
If you can create the best cheeseburger in town, then you could actually turn this into a competitive advantage. If you can’t, it’s unlikely that any guest is going to discriminate against you just for having the same offering.
Same goes for your spa menu. In fact, I’d argue that the duplication is even less significant when it comes to your spa because many of today’s hotel guests don’t really know the difference between an Aromatherapy Massage or a Balinese Massage.
There’s a good reason for having a cheeseburger on your menu. Your guests expect to see it. It’s their fallback position. If they’re not sure about the rest of your menu or can’t find anything else they like, a cheeseburger will do.
Same goes for spa. That familiarity factor is probably more important in the spa because we spa people have a tendency to try to make the treatments on our spa menus sounds like some magical spell from the world of Harry Potter.
By all means, you can have one or two “signature” treatments that give you an added PR boost and look good in a Honeymoon Package. But don’t think that having a menu full of unique treatments will make your spa any more popular with your guests. You may even find the opposite is true. Choices create indecision. The more choices you give your guests, the more reasons they have not to make any decision at all.
Of course you need your signature dishes, but you need your staples too. In our experience, anywhere from 60%-75% of your spa revenue will come from those staples.
Variety may well be the spice of life but it’s still hard to beat a great cheeseburger! Chew on that!