Variable pricing is a hot topic in hospitality, but does it work in the spa business?

In an exclusive Thought Leader column for Spa Opportunities, Lindsay Madden-Naddeau, director of spa integration and operations for FRHI, considers whether a model that works for the resort industry can translate into spa.

Does variable pricing work in spas?By Lindsay Madden-Naddeau, director, spa integration and operations, FRHI

At the latest Professional Spa and Wellness in Dubai we had a fantastic interactive panel that touched the surface of variable pricing. It was very thought-provoking, as each panellist came from a different business structure that was unique. So I left with the question…does variable pricing work? Can we compare the luxury of a spa treatment to the art of booking a hotel room or seat with an airline?

After much thought, I felt that we needed to compare necessity versus luxury, and by luxury I mean we don’t need this service, we want this service. Airlines and hotel companies utilise the strategy of demand pricing, where prices change from one minute to the next, but these requirements are based on schedule and convenience, whereas when booking a spa treatment or a “treat,” time is more flexible.

If we look at the resort model, where we have seasonal peaks of steady business, I agree we should look at increasing the prices during this time to maximise on revenues in peak season. In the off -season, when business demand on property drops along with hotel rates, I can understand having to adjust our pricing to be in line with our current guest mix. Having seasonal prices is less likely to upset the guest compared to coming in on a Monday and having a treatment at one price and then again a couple days later getting charged a higher rate.

I asked one of our spas in California who practices weekday versus weekend prices and wanted to understand if guests were ever upset that they had to pay different prices. The answer was no, and they felt this was based on the way they explained it to the guest. Their normal asking price was the weekend rate; however, during the week they provided a lower selling rate, which was perceived as a discount.

It definitely made me stop and consider the different spa models and what works in particular environments. If you are utilising your discounts properly in off-peak periods and practicing yield management in peak times with a RAM strategy, this can also be interpreted as variable pricing. Food for thought!