Are you in the fortunate position of using a sophisticated spa software that does turn away tracking and wait list tracking for you?
If not, bad news, as you may have to do this task manually in the future.
If so, congrats! However… are you actually using this information to your spa performance advantage?
Whether or not you can retrieve this information from your system in one report click, or you have to do it manually, this information is highly important to your bottom line.
Successful or poor managerial activities?
Why? Because you may be busy generating new business, for example
- by promotional offers
- by increased sales efforts
- by generating new clients
in order to increase revenues, instead of simply using your existing resources more efficiently, leading to the same result.
Without wasting time, money and energy or having to recruit new customers!
Let’s have a look first at the difference or similarities of ‘turn-away’ and ‘waitlist’ business:
‘Turn-away’ is basically lost revenue:
You are successfully offering a service.
You have resources available.
You have customers willing to pay the set price.
Still you cannot make the sale, as one resource (typically lack of service provider) is not available. You have to turn this business away.
‘Wait list’ is similar, yet in this case you may still have a chance to close the sale by filling up short notice vacancies with customers from your wait list. If not, those customers will turn into “turn-away”.
Limited or fix capacity in wellness businesses
In Spas we have fix capacity in many areas, limited by treatment rooms, opening hours and available service providers.
Above, services are highly perishable, meaning that we cannot store unsold items and sell them the next day.
One treatment hour, lets say between 3pm and 4pm, is perished after a certain time period if not booked, lets say around 3.30pm. This treatment hour revenue is lost forever.
Hence we need to carefully manage available treatment hours (ATH) with the aim of high average occupancy rates and a high average treatment rate (ATR=total treatment revenue in given period / total number of treatments performed in same period).
Are you wasting your resources on low profitable services?
A high occupancy with a low average treatment rate may be an indicator for underpriced or overtimed treatments.
Under specific circumstances this may require a re-design of the treatment menu.
Let me give you an example:
You have an occupancy rate of 70% at 100 available treatment hours /day (for example 10 rooms operating 10 hours a day).
Your average treatment rate is 80 Euro.
Max Revenue at 100% occupancy would be 8.000 Euro.
Av. Revenue at 70% occupancy is 5.600 Euro.
If you can only increase your average treatment rate by 10 Euros, your Revenue could be 6.300 Euros instead at 70% occupancy, and even 9.000 Euros at 100% occupancy.
This way you would not need to increase any resources, but simply sell a different set of services.
This is where your waitlist tracking and turn away tracking comes in handy:
Knowing how much business you are turning away will lead to the following managerial action:
- Re-allocating resources: Allocate all resources (service providers, treatment rooms, opening times etc) to match demand. Avoid empty slots one day and overbooking the next.
- Identify your cash cows: which of your services contribute to a high average treatment rate? Those are the treatments that you want to sell during times of high or full occupancy in order to maximise profits.
My 4 tips for avoiding turn away all together:
- Reward early booking: the longer in advance you are aware of demand, the better you can allocate resources effectively
- Stretch resources: expand opening times short term, increase service providers short term (i.e. seasonal staff, freelancers), establish multi-purpose treatment rooms
- Introduce Yield Management
- Understand turn away reasons: are reasons plenty fold or reoccurring? How can single reasons be avoided in the future?
How do you deal with ‘turn away’ at your Spa?
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