Ms. Fenard

Spas, Health & Fitness

Tips on Analyzing and Driving Spa Revenue

By Elaine Fenard, Partner & Chief Operating Officer, Europe and U.S., Spatality

The relatively young hotel and resort segment of the spa industry continues to develop and mature as guests become more spa savvy and managers are held responsible for achieving higher performance. As owners/developers invest more heavily in spa facilities, and property managers become more aware of spa revenue opportunities, everyone is taking notice of this once quiet sector. While simply having a spa doesn't necessarily drive revenue, being smart about its development and operations can mean the difference between a profitable spa and an amenity spa.

Analyzing the Business

First and foremost, tracking and measuring the appropriate data is critical for ultimately creating effective plans to drive revenue and increase operational efficiencies. Spa management software platforms are effectively transforming the industry, providing both on-site and remote management teams with the real time data necessary to understand the performance of the business on a daily basis. However, as with any system, its effectiveness relies entirely on the training and utilization of those using it.

Spa Management Software
First, the training. We have discovered that while many spas have some sort of spa management software, too often the spa's management team has little understanding of the complete functionality and possibilities of the system. To combat this, ensure that the software vendor provides comprehensive training in addition to convenient technical support services. They also should be available to provide annual refresher training, as well as assistance with any significant software updates. And before any training begins, it is important to have an idea of the specific date you wish to track and how this data will be used. Limited data can stall your understanding of the business, yet too much data or useless data is equally damaging. Identify the most pertinent data, and see that your system is set up to deliver it.

The Data
Using the correct metrics will provide great insight into the performance of your spa program relative to comparable programs within the industry. In an attempt to unify the industry, spa industry leaders have identified benchmarks and consistent metrics which allow managers to consistently track and compare performance against comparable programs and standards. Below are a few of these metrics.

Revenue per Square Foot (Meter)
Revenue per square foot is a meaningful metric that allows the spa program and facility to be measured on the basis of productivity given its space allocation. This information is particularly useful in benchmarking against comparable spa programs. A common ambiguity lies in what spaces are included/excluded within the total square footage, with spaces such as spa gardens and fitness areas falling within the grey area. Don't let this confound you. Determine first what areas of the spa are actually considered a part of the revenue-generating enterprise.

Revenue & Capture by Guest Segment
Each property provides a unique guest mix from which the spa draws its primary customer base. For example, leisure or FIT guests demonstrate substantially different spa usage and capture-patterns than group or convention guests. Tracking the usage patterns of each guest segment will allow the management team to determine guest segments which may have latent demand for spa services. In addition, such tracking will help forecast usage based on projected fluctuations in occupancy and guest mix of the property.

Treatment Room Utilization vs. Guest Room Occupancy
A spa program is a microcosm of the property itself where fluctuations in guest room occupancy can be expected to have an impact on the spa's bottom line. Understanding the spa facility's ability to accommodate demand fluctuations is critical for proactively addressing compression issues, be it from peak demand periods such as evening and weekends and lower demand periods, such as early weekdays Treatment room occupancy data should include weekly, monthly and annual statistics of each type of treatment room or nail/beauty station where applicable. Those spa programs which are most effective at accommodating peak demand periods without being overbuilt demonstrate treatment room occupancies between 40%-50%.

Turn-Away Reports
Understanding latent demand can be difficult, yet identifying these opportunities can be highly lucrative. Turn-away reports can take many forms, but ultimately you are trying to understand: Where is the spa losing revenue? Is additional treatment room inventory necessary to accommodate demand? Are groups utilizing the spa facility or are they being directed elsewhere (to competing spas in some cases)? Turn-away reports are among the most commonly neglected data, yet provide insight into opportunities to drive additional demand.

Average Retail Spend Per Guest
Spa retail programs are critical elements of the highest producing spas. The smart ones are actually very sophisticated retailers as well as operators. Tracking average spend per guest, in addition to tracking the productivity of individual SKU's offer critical insight and opportunity for refinement in spa retail programs.

Driving Revenue

Armed with salient analyses of the productivity of your spa program, the next step is identifying actionable items to drive departmental revenue. As stated earlier, the most effective spa management teams are those which can identify opportunities which create additional value and introduce new revenue streams, effectively broadening the appeal for spa services. Below are some effective tools to drive demand for service and experience.

New Revenue Streams
New revenue streams address latent demand for spa services. Common opportunities include more aggressively marketing to wedding business, enhanced or added salon services including gentlemen's barber shops/services, pool-side services, self-guided services and personal concierge services. Effectively introducing additional revenue streams require careful consideration regarding estimated demand, training initiatives to ensure service provides understand and buy-in to the rationale and benefits, and ROI analysis taking into account the negative impact that construction will have on the ability for the existing spa program to function properly during the construction period.

The Experience
Consumer expectations have evolved with respect to spa, with experiential environments, services and rituals setting the standard for the industry. It can be tempting to simply raise prices to drive additional revenue, but raised prices should be complemented with additional value-added experiences beyond the treatment or service. Research suggests that there is a direct correlation with the rate a spa can charge for a service and the value-added amenities and services offered. Some of these value-adds are, on the surface seem unremarkable; but remember, it is the experience in its totality that helps make a positive brand impression to guests.

Arrival and departure rituals frame the guest experience, and further define the character of the spa in the minds of guests. Examples of such rituals which have enjoyed positive guest feedback include footbaths, signature beverages offered upon arrival, wishing wells in which guests place stones or coins for good luck and take-away gifts such as a signature flower or an indigenous fruit. Such rituals offer low cost, high return opportunities to impact the perceived value of the spa experience.

Engaging waiting/relaxation spaces can provide visually striking design elements and experiential services supporting a more memorable experience. Valued added services and experiences in these spaces may include I-Pods for use in between treatments, expanded healthy beverage and snack options, and design elements which provide focal features through lighting design, art work and even the use of Chromatherapy. In addition, gender specific spaces offer exceptional opportunities to feature design elements and services which are highly targeted by gender preference. Simple acknowledgements to gender preference such as magazine choice, signature scent choice and color palette ensure that each guest relates on a personal level to the environment.

Retail
Spa retail must evolve beyond behind the counter displays tucked behind or to the side of the arrival spaces. The most effective spa retail programs create environments which encourage guests to linger in the retail space through residential design, seating options and even complimentary beverage service. The spa retail space itself becomes a signature experience of the spa visit, creating a boutique shopping experience with opportunities for interaction between guests and therapists who provide product advice and recommendations. In short, the longer you can keep your guests in contact with the retail program, the greater your ability to increase average retail spend per guest. A diverse and lifestyle oriented product mix is critical to supporting a shopping experience.

Education, Training & Incentives
Cross training is critical and often overlooked, but can have an immediate impact on the ability for the spa to maximize capture of in-house guests. Consider including the group sales or concierge staff who may not be familiar with the spa program. Create a wholistic, organization-wide sales force by training anyone who has the potential to positively impact spa traffic. Once trained, check-in periodically with your defacto sales force to learn anecdotal information regarding turn-away or feedback regarding the spa and guest experiences. Creating these mutually beneficial bridges to in-house, non-spa staff can make a significant and positive impact on spa revenue.

Yield Management, Capturing Demand from the Local Market
A hotel or resort spa is first and foremost a tool to drive the overall perceived value of the in-house guest experience. Research conducted by SmithTravel Research quantified that within the luxury segment of the industry, spa programs are having a positive impact on ADR and a lesser impact on occupancy. As such, the demand generated from in-house guests must be treated as a priority. However, lucrative opportunities exist for many spa programs to establish a loyal customer base from the local market. A loyal day spa customer base can mitigate fluctuations in demand from in-house guests, effectively stabilizing overall demand. Paired with effective yield management, local day spa guests can balance demand on a seasonal, weekly and even hourly basis. In some cases, local day spa business can represent 40%-50% of the spa guest mix. Keeping a fresh menu of treatments, services and retail programs, and marketing them locally, will help revenue stability. Noteably, establishing a local customer base does NOT happen overnight, and requires a commitment in some case of 2-3 years to fully mature.

Co-author Marchello Chimenti directs spa market research and feasibility and development services for emerging hospitality brands, existing global luxury brands and portfolios, as well as individual properties throughout the world. Utilizing an extensive database of proprietary historical financial data and research data along with the collective knowledge and experience of the Spa Strategy team, Chimenti and his team lead the industry in providing hotel and resort spa feasibility services.

Elaine Fenard is an integral partner in Spa Strategy, one of the world's leading spa consulting and design firms. Joining in the Spa Strategy quest to create innovative and profitable spas, Elaine brought to the team more than 25 years experience in spa development and operations with one of the world's largest hotel companies and the leading international spa operations company. As an industry pioneer and recognized expert, Elaine is a frequent speaker at many conferences, and is a regular guest speaker at Cornell University. Ms. Fenard can be contacted at 303-573-8100 or Elaine@spastategy.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.