Why Do Daycares Use Waitlists Instead of Raising Prices to Meet The Demand?

[Myst_Seattle]

I've been looking into the pricing of daycares here in Seattle and one thing was surprising to me - for some reason all daycares have huge waitlists, with some parents reporting they've spent up to three years trying to get a spot. There are also "waitlist fees" if you want to get on the waitlist in the first place.

Now, the fact that there aren't enough daycares in major metropolitan areas is well known and this doesn't surprise me. But why would daycares choose to use long waitlists instead of just raising the prices until supply meets the demand? I mean, other service providers generally don't force you to wait in line for years and just vary the pricing based on the number of customers.

So I was hoping that Daycare members could resolve my question and explain the reasoning behind such policies. Is it to ensure that no spots are ever vacant? Is it to avoid a backlash from angry parents? Is it to help out struggling parents who would be priced out otherwise?

[Cat Herder]

My waitlist is about 3 years, now. I charge what I need to earn to meet my financial obligations, keep an emergency fund and life insurance, take a couple of vacations per year and fund my IRA. It has nothing to do with whom is on the list. I also have no desire to earn more, more money = more problems in my experience. I love my life as it is.

My tuition rate is fixed, increases yearly (just like my clients' wages) and reflects inflation in my region. I am not sure what you mean by "vary the pricing based on the number of customers". It has nothing to do with the number of customers, that is a fixed number, too, set by my regulations. I did not choose it and feel it is low for my ability.

[lovemykidstoo]

With my daycare I was finding that most of my kids were starting to leave at 3 1/2 yrs old. How can you have a 3 year waitlist, wouldn't they be aged out by then? Or are they parents that are not yet pregnant?

[Cat Herder]

Originally Posted by lovemykidstoo

With my daycare I was finding that most of my kids were starting to leave at 3 1/2 yrs old. How can you have a 3 year waitlist, wouldn't they be aged out by then? Or are they parents that are not yet pregnant?

I have many parents TTC on the list, one of my current clients is still trying and keeping the slot. I won't have an opening for at least 3 years.

I also keep them until age 6. Redshirting is common here.

[lovemykidstoo]

Originally Posted by Cat Herder

I have many parents TTC on the list, one of my current clients is still trying and keeping the slot. I won't have an opening for at least 3 years.

I also keep them until age 6. Redshirting is common here.

Thanks! I was curious. Here it seems that as soon as those parents can get their kids to kindergarten (free), they do it no matter if the child is ready or not.

[Cat Herder]

Originally Posted by lovemykidstoo

Thanks! I was curious. Here it seems that as soon as those parents can get their kids to kindergarten (free), they do it no matter if the child is ready or not.

That was my experience as well for many years, then the mill and several large farms closed. New artsy, tourist, golf, resort and "event" markets opened. And finally, there was an influx of new subdivisions, condos and adult living. The community changed pretty quickly.

I am also the only star rated family provider in town right now.

[LostMyMarbles]

Originally Posted by lovemykidstoo

Thanks! I was curious. Here it seems that as soon as those parents can get their kids to kindergarten (free), they do it no matter if the child is ready or not.

This is so true. I had two parents sign wavers to get their children in a year early. The one is so behind as it is. The other has fits when she doesn’t get her way and is kind of mean about it. I’m absolute sick that the parents are doing this. My heart just hurts that they are already telling these parents their kids will get held back for kindergarten. My food program lady pretty much said it like it is. She said that the parents are only doing it for financial reasons. It’s so sad.

[Annalee]

Originally Posted by Cat Herder

I have many parents TTC on the list, one of my current clients is still trying and keeping the slot. I won't have an opening for at least 3 years.

I also keep them until age 6. Redshirting is common here.

Love the “redshirting” terminology. College football is upon us!

[jenboo]

Originally Posted by Myst_Seattle

I've been looking into the pricing of daycares here in Seattle and one thing was surprising to me - for some reason all daycares have huge waitlists, with some parents reporting they've spent up to three years trying to get a spot. There are also "waitlist fees" if you want to get on the waitlist in the first place.

Now, the fact that there aren't enough daycares in major metropolitan areas is well known and this doesn't surprise me. But why would daycares choose to use long waitlists instead of just raising the prices until supply meets the demand? I mean, other service providers generally don't force you to wait in line for years and just vary the pricing based on the number of customers.

So I was hoping that Daycare members could resolve my question and explain the reasoning behind such policies. Is it to ensure that no spots are ever vacant? Is it to avoid a backlash from angry parents? Is it to help out struggling parents who would be priced out otherwise?

Im confused. Are you asking why daycares don't raise prices until the majority of people can't afford it and then drop off the waitlist?

It why they don't increase prices to hire more staff so they can enroll more kids?

Apologies for not being clear enough. If there's a daycare like Cat Herder's where the waitlist is at 3 years, it should in theory be possible to keep increasing the price every year until the waitlist is at 6 months or less as more and more parents are being priced out of the daycare. But in practice daycares don't seem to do it or at least the ones in Seattle don't.

[Snowmom]

Originally Posted by Unregistered

Apologies for not being clear enough. If there's a daycare like Cat Herder's where the waitlist is at 3 years, it should in theory be possible to keep increasing the price every year until the waitlist is at 6 months or less as more and more parents are being priced out of the daycare. But in practice daycares don't seem to do it or at least the ones in Seattle don't.

So, what your suggesting is to price daycare services out of the realm of typical salaries and only cater to the elite who can afford extravagant prices? In order to trim waitlists?

Why wouldn't those customers just choose a nanny service then? It seems to be the likely outcome of price gauging.

[Blackcat31]

Originally Posted by Unregistered

Apologies for not being clear enough. If there's a daycare like Cat Herder's where the waitlist is at 3 years, it should in theory be possible to keep increasing the price every year until the waitlist is at 6 months or less as more and more parents are being priced out of the daycare. But in practice daycares don't seem to do it or at least the ones in Seattle don't.

That makes zero sense.

Daycare is a huge cost already for working parents so raising rates isn't going to be a benefit for anyone.

Those with bigger wallets have more options but regardless my issue is that I am limited to x number of spaces and despite the fact that my wait list is also pretty lengthy, raising my rates isn't going to change the maximum capacity the state allows me to have.

[Ariana]

Originally Posted by Blackcat31

That makes zero sense.

Daycare is a huge cost already for working parents so raising rates isn't going to be a benefit for anyone.

Those with bigger wallets have more options but regardless my issue is that I am limited to x number of spaces and despite the fact that my wait list is also pretty lengthy, raising my rates isn't going to change the maximum capacity the state allows me to have.

I think they mean that you will have higher paying customers on your waitlist since most would drop off if they couldn’t afford you. So rather than having 200 people waiting for a $50 a day space, you could have 10 waiting for a $70 a day space. It makes sense to me!

[Blackcat31]

Originally Posted by Ariana

I think they mean that you will have higher paying customers on your waitlist since most would drop off if they couldn’t afford you. So rather than having 200 people waiting for a $50 a day space, you could have 10 waiting for a $70 a day space. It makes sense to me!

No, it just means only those that have more money can find child care.

I charge a higher rate than most in my area and I also have the longest wait list so where is the correlation?

[Myst_Seattle]

Originally Posted by Blackcat31

That makes zero sense.
Those with bigger wallets have more options but regardless my issue is that I am limited to x number of spaces and despite the fact that my wait list is also pretty lengthy, raising my rates isn't going to change the maximum capacity the state allows me to have.

I fully agree that it won't let you increase your capacity, but in theory it should increase your profit margin. Let's say you are currently charging $100 per week and have a 3 year waitlist. If you increase it to $110 (for new clients) the waitlist might drop to 2 years. If you further increase it to $120 it might go down to 1 year. Therefore your revenue would increase by 20% without having to take up any extra work.

It would price out some parents out of the daycare market, but at the same time it would help parents who have recently moved into the neighborhood and haven't had a chance to sign up for the waitlist three years ago. That's an issue faced by many of my parent colleagues who are new to Seattle.

[Blackcat31]

Originally Posted by Myst_Seattle

I fully agree that it won't let you increase your capacity, but in theory it should increase your profit margin. Let's say you are currently charging $100 per week and have a 3 year waitlist. If you increase it to $110 (for new clients) the waitlist might drop to 2 years. If you further increase it to $120 it might go down to 1 year. Therefore your revenue would increase by 20% without having to take up any extra work.

This isn't actually true either. I raise my rates pretty regularly and it doesn't seem to make a difference as to the length of my waitlist.

The biggest issue in my area and the reason there is such a long waitlist is there are so many parents that want part time, sporadic care and want to pay only for the hours or days they use. That doesn't work well for a child care provider trying to earn an income themselves and while staying within ratios.

My waitlist has actually grown more as I've charged more. Go figure. lol! I can't explain that logic so I don't even try.

Originally Posted by Myst_Seattle

It would price out some parents out of the daycare market, but at the same time it would help parents who have recently moved into the neighborhood and haven't had a chance to sign up for the waitlist three years ago. That's an issue faced by many of my parent colleagues who are new to Seattle.

The thing about waitlists too that many aren't realizing or mentioning is it isn't first come first served so those last signing up to wait might sometimes be first served.

For me, it's about who FITS whatever opening I currently have. Does that make sense? So in reality a new family moving into the neighborhood and just signing on to the wait list might only wait 2 months for care verses someone on the list that has been waiting 3 yrs.

Best fit trumps first on the list.

Hopefully that makes more sense.

[LostMyMarbles]

Originally Posted by Myst_Seattle

I fully agree that it won't let you increase your capacity, but in theory it should increase your profit margin. Let's say you are currently charging $100 per week and have a 3 year waitlist. If you increase it to $110 (for new clients) the waitlist might drop to 2 years. If you further increase it to $120 it might go down to 1 year. Therefore your revenue would increase by 20% without having to take up any extra work.

It would price out some parents out of the daycare market, but at the same time it would help parents who have recently moved into the neighborhood and haven't had a chance to sign up for the waitlist three years ago. That's an issue faced by many of my parent colleagues who are new to Seattle.

Why do you assume that the waitlist would drop due to a rate increase? The need for childcare will still be there regardless of a rate increase.

[Ariana]

Originally Posted by Unregistered

Apologies for not being clear enough. If there's a daycare like Cat Herder's where the waitlist is at 3 years, it should in theory be possible to keep increasing the price every year until the waitlist is at 6 months or less as more and more parents are being priced out of the daycare. But in practice daycares don't seem to do it or at least the ones in Seattle don't.

No idea why! No idea why some providers insist on offering services for WELL below market value either, thus keeping rates low...or why providers don’t unionize, band together and increase pay and working conditions. My guess and I do not mean for this to sound offensive is that most providers are only in it for the short term and have low education/know very little about business.

[hwichlaz]

Originally Posted by Ariana

No idea why! No idea why some providers insist on offering services for WELL below market value either, thus keeping rates low...or why providers don’t unionize, band together and increase pay and working conditions. My guess and I do not mean for this to sound offensive is that most providers are only in it for the short term and have low education/know very little about business.

I charge average rates, and I do NOT want to unionize. Being self employed means making my own rules and setting my own rates...a union would only hurt, not help that.

The truth? Most of the providers here are legally unlicensed and don't have more than CDAs. They also don't want to do school prep. Who is going to pay high prices for that?

Many are also rude to parents and want (usually low paying) parents they can term left and right when they feel like pulling a hissy fit.

[Ariana]

Originally Posted by hwichlaz

I charge average rates, and I do NOT want to unionize. Being self employed means making my own rules and setting my own rates...a union would only hurt, not help that.

Yes I totally get it! Union jobs though offer higher wages, automatic raises with inflation and seniority, pensions, more time off and more benefits.

Originally Posted by Ariana

No idea why! No idea why some providers insist on offering services for WELL below market value either, thus keeping rates low...or why providers don’t unionize, band together and increase pay and working conditions. My guess and I do not mean for this to sound offensive is that most providers are only in it for the short term and have low education/know very little about business.

They don't want to follow standards. I'm a licensed teacher with an MA and have taught in public schools. Many of the posters here aren't qualified to be aides.

[Blackcat31]

Originally Posted by Unregistered

They don't want to follow standards. I'm a licensed teacher with an MA and have taught in public schools. Many of the posters here aren't qualified to be aides.

Was there a thread somewhere in which everyone shared their education levels? If so I haven't seen it but I don't think it matters anyways as many of the posters here ARE more qualified than you think and most know more about children and their development than many others do.

A degree does not make you better than anyone else.
Paper isn't worth whatever is printed on it IF it isn't in conjunction with hands on experience and quality.

SMH at some of the offensive statements I've read lately.

[LysesKids]

Originally Posted by Unregistered

They don't want to follow standards. I'm a licensed teacher with an MA and have taught in public schools. Many of the posters here aren't qualified to be aides.

That's where you are so wrong; many of us are very qualified & we have degrees... I myself was a Sub teacher in a rural area of in TN when my youngest child was 10 (they had more regular substitutes than actual teachers many days).

My clients chose me because I speak more than one language & I did teach my daycare babes. I had a very multi-cultural childcare home for many years (I closed last year), so don't state something you don't know for a fact. I worked in the Legal field for 15 years before teaching & childcare

[Rockgirl]

In the $100,000/week example, sure, it eliminates the waiting list. But who did it help, besides the Bill Gates person and the daycare provider?

As others have pointed out, our maximum allowed ratios do not change, no matter how high we raise our rates. This whole concept of raising rates to eliminate waiting lists is just ludicrous. The parents sitting at home waiting for daycare would still be doing that even if I doubled or tripled my rates.

[Myst_Seattle]

Originally Posted by Rockgirl

In the $100,000/week example, sure, it eliminates the waiting list. But who did it help, besides the Bill Gates person and the daycare provider?

By increasing the prices you're helping:

1. Yourself as the business owner, as your profit margins go up. This might additionally incentivize you to expand the daycare in the future.
2. Daycare employees (if there are any) might see an increase in salary
3. Parents will have more flexibility as they know wait times for daycare are short

Originally Posted by Rockgirl

As others have pointed out, our maximum allowed ratios do not change, no matter how high we raise our rates.

The ratios don't change, but your income per customer will increase.

Originally Posted by Rockgirl

This whole concept of raising rates to eliminate waiting lists is just ludicrous. The parents sitting at home waiting for daycare would still be doing that even if I doubled or tripled my rates.

If you double your rates a certain percentage of parents will no longer be able to afford your daycare and would drop off the waitlist. If you triple the rates even more parents will drop off. Nobody has infinite money Obviously this wouldn't address the problem of daycare shortage as the number of available spots won't increase, but it would address the issue of waiting lists causing issues for parents.

[284878]

Originally Posted by Myst_Seattle

By increasing the prices you're helping:

1. Yourself as the business owner, as your profit margins go up. This might additionally incentivize you to expand the daycare in the future.
2. Daycare employees (if there are any) might see an increase in salary
3. Parents will have more flexibility as they know wait times for daycare are short



The ratios don't change, but your income per customer will increase.



If you double your rates a certain percentage of parents will no longer be able to afford your daycare and would drop off the waitlist. If you triple the rates even more parents will drop off. Nobody has infinite money Obviously this wouldn't address the problem of daycare shortage as the number of available spots won't increase, but it would address the issue of waiting lists causing issues for parents.

Can you tell us your story? What happened to you, that makes you upset with the wait list? Are you currently waiting for for an opening?

[Myst_Seattle]

Originally Posted by 284878

Can you tell us your story? What happened to you, that makes you upset with the wait list? Are you currently waiting for for an opening?

I'm not waiting for an opening right now, but I would have to be if I decide to have a child in Seattle. I'm also surrounded by people who've recently moved to the city and are struggling to find daycare.

This isn't an issue when it comes to other expenses: for example its fairly easy to find a property to buy/sell, although it's very expensive compared to the rest of WA state. And there aren't queues in IKEA for baby cribs or other child expenses

[Josiegirl]

I don't see the answer to the Seattle kind of dilemma as pricing the normal income family out of the dc possibility completely or leaving them with the lowest possible standard dc that can be afforded. I see the dilemma as being solved by increasing the # of available quality child care options. When states stop making the hoops so difficult to jump through and start giving providers more support, more respect, in regards to being in the profession then maybe the dilemma will improve. When they can gather funding to help pay the costs of dc(which is already exorbitant in some places) more than they do currently, then things will improve.

States have taken away financial support while increasing their regulations and requirements in recent years, making it more and more difficult for a provider to be able to stay in business or *want* to stay in business. Nothing burns a provider out more than constantly giving giving giving of their time and money to stay in regulation.

[284878]

Originally Posted by Myst_Seattle

I'm not waiting for an opening right now, but I would have to be if I decide to have a child in Seattle. I'm also surrounded by people who've recently moved to the city and are struggling to find daycare.

This isn't an issue when it comes to other expenses: for example its fairly easy to find a property to buy/sell, although it's very expensive compared to the rest of WA state. And there aren't queues in IKEA for baby cribs or other child expenses

So is that what is bothering you? That you feel waitlist as turning children into names, not numbers? I get that, I would never want to feel like my child was a number to her teacher. (although they are assigned a number every year)

Well, it sounds like you may be very passionate about this, my question is, outside of posting here, what is your next step to fix the problem that you are seeing?

Others have suggested that you write the lawmakers, is that what you are planning on doing?

We have wait lists for my center openings based on the numbers we can have in attendance. There have been times when it has been up to 1 year based on the ages and number of kiddos in the families on our list. Sometimes parents will find an alternative that they are satisfied with and no longer need to be on our wait list and sometimes parents are just waiting it out until they can come into our program. If I do raise tuition it is because we have decided to raise tuition. It is not based on how many are on our wait list, since the wait list is only used to supplement openings we have. I think its great to have families on a wait list - it means you have a good program that others want to be a part of!