Many hoteliers of city properties, resorts, conference hotels and upscale countryside bed and breakfasts are adding a luxury spa to their property.
Why? Because by adding a spa to their hotel they will:
- Create a competitive advantage.
- Increase the guest experience.
- Drive up the ADR, Revenue but also profitability.
- Generate additional revenue streams.
- Raise the value of the property.
But unfortunately we notice that most of the time, the spa is underutilized or even empty. As a result spas in hotels often represent an additional cost factor, instead of an incremental revenue source.
The spa product needs to be managed more strategically!
Hotel spas just like the rooms experience periods of high and low demand. At the stage of high demand you will often see a more profitable treatment has to be denied to guests, because the treatment room is booked for a low profitable treatment or several short treatments.
As demand fluctuates and busy and high demand periods can be easily identified, there is a large opportunity for hoteliers to generate incremental income and profit by implementing revenue management techniques to their spa product, just as the optimize the revenues of their hotel rooms.
Remember the spa is not only a way to add value to the hotel and increase the guest experience. It is vital product to generate an incremental revenue stream.
Even though hoteliers are using tactical pricing techniques like spa packages, discounts, two-for-one treatments, gifts, etc, to try and sell the treatment rooms during periods of low demand, very few have developed a strategy that allows grouping these techniques in a policy of revenue management.
Most spas sell their treatments on a “first come, first served” basis. Revenue management will help spa hotels to attract extra clients during low demand periods by offering attractive treatment deals and growing revenue and profit (or yield) during strong demand periods by optimization strategies.
During various spa revenue management courses we have given,we have noticed a very perceptive attitude and openness towards these ideas. However we also noticed that hotel and spa manager were challenged with where to start-
In brainstorming sessions on spa revenue management opportunities we have come to agreement with spa specialists that the key of success in applying revenue management lies in:
- Contribution analysis: Where are your incomes coming from? Which treatments are more profitable for your spa? What is the contribution weight of a treatment within your total spa income? Do you have reasons to keep selling a 30minutes massage, for example?
- Productivity management: What is the period where incomes are the highest? Which is the treatment least sold? What day of the week has more demand?
- Additional sales follow-up: Besides the treatments, can you get your client to spend more in products, gifts and accessories? Do you have a proper system to keep track of extras by type of client? Is your team prepared to sell?
- Cost management: How to better control costs? How to reduce the time between 2 treatments? How to promote the treatment with higher profitability?
Revenue management will help you manage these four elements and thus allow you to increase the income generated by the spa.
You will need to build reports, just as with hotel room revenue management, to provide you with data to help you to make better decision on your spa pricing strategy and sales strategy.
NB: Get more revenue management tips and advice from Xotels.
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About Patrick Landman
I don’t know why most hotel services are priced so high compared with businesses in its vicinity. Is it the convenience or the superiority of their service? I’m not really sure. We stayed recently in a First Class Hotel and Beach Resort. I was really surprised when we found out that the prices of their spa services are at par with local businesses. So we just availed of their service instead of going out. Maybe other hotels should follow suit so that they can compete with local businesses.
In 2011 a wellness experience is one of the major trends among travelers both in the U.S. and abroad. It always surprises me when a hotel does not offer some type of a wonderful spa treatment, but I believe that for many American hotels this is unfamiliar territory.Aside from bringing in additional revenue having an outstanding spa or offering excellent spa services adds a certain cache to the hotel that can be used in their marketing and branding efforts. For a lot of hotels that have existing spas and are not seeing profitable returns they probably need to revisit the service menu and review exactly what their technicians are doing to heighten their customer’s experience.
Hi Patrick, interesting article. Spa is definetely a component of Total Hotel Revenue Management and many companies could greatly benefit from a more structured and scientific approach to demand forecasting, managing and pricing. However, not surprisingly it is also very high on the RM complexity scale when looking at the core components of RM – Data accessibility, Forecasting, Pricing & Managing demand and overlaying managing ressources by massage type, treatment room occupancy and the fragmented Spa software landscape which makes a strategic and long term approach involving tools, processes and people crucial to achieve the ROI and expected benefits.
Very interesting article Patrick! I think the biggest problem is the lack of proper marketing strategy. According to my experience, many hotel-spa facilities are just no good enough. They way too expensive, especially when you think of the quality delivered by their beauticians.. who are rarely carrying a proper education. That is why many hotels just can not compete with the local beauty saloons, fail to make their customers happy and fail to make bigger profit.