Ms. Fenard

Spas, Health & Fitness

Spa and the Three Star Hotel Market

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

In the last decade spa has become synonymous with luxury and upper- upscale hotel markets, building a five star resort without a spa is now unthinkable and has become a standard of entry into this market segment. While growth of spas within the five star hotel markets is expected to continue, the four star hotel markets has also steadily begun to incorporate spa into the facility footprint; especially in resort markets. Furthermore, spa is beginning to emerge in the three star hotel market.

The reason for this is that spas today are viewed as an integral part of people's lives; at home and when on the road.

In 1994, Faith Popcorn, founder and CEO of the trends research firm Brain Trust, predicted that "entertainment and travel will be health and longevity obsessed." She was right! Spa has become part of a lifestyle phenomenon. Consequently in the past decade the spa industry has experienced unprecedented growth. The driving force behind the growth is consumer demand from a broadening demographic with disposable income. This has opened the door to a whole new generation of spa-goers who have limited time and money to embark on destination spa experiences, yet who do look for short term, quality spa experiences. As a result, it also has become quite evident that each of the spa markets feeds the others. Day spa guests aspire to the destination experience and enjoy the resort experience while destination spa goers use day spas for maintenance therapies. These guests frequently visit hotel spas as a treat or while on business.

So what does spa in the three star hotel market look like? And the big question, how can spa impact the three and four star market and to what degree? Is spa something that will impact a guest's choice of hotel company and will it dictate the rack rate?

In order to help answer these questions we asked ourselves if spa continues to be a part of the lifestyle trends of today. The findings continue to astound us as the numbers speak for themselves:

According to the International Spa Association North American spas, including those located within hotels and resorts have seen an average annual growth rate of 16 % between April 2004 and August 2006. In 2005 U.S. spas drew $ 9.7 billion in revenue, proving spa is a thriving industry and can greatly impact other markets to a large degree.

The ISPA 2006 Consumer Trends Report indicates:

Furthermore, Smith Travel Research indicated during their presentation at the 2007 Global Spa Summit that luxury hotels experience a lift in occupancy when they offer a spa versus those without. Additionally, hotels with spa recovered slightly faster after 9/11. While these are both very telling, the most exciting information gathered by the research group came in their rate premium findings; there is a stunning rate premium for hotels with spas that has been steadily growing over the last ten years. Smith Travel Research found that luxury hotels without spa year to date in 2007 had a $222 ADR, where as luxury hotels with spa had a $298 ADR, representing a $76 rate premium. With overall findings that indicate that spa is a valued amenity to both guests and the hotel operator, Smith Travel also found that hotel occupancy levels increase over weekends in hotels that offer a spa.

Pulling from these valued resources and our own research database, it can be concluded that spa guests stay longer and spend more money.

While the luxury market is beginning to include spa as an essential for supporting rates, there is still substantial opportunity in the three and four star markets. With a large majority of guests falling into this category, three and four star hotels can introduce spa as an amenity platform that will differentiate the hotels and aid in exceeding guest expectations. Because of this, you can expect to see a substantial increase within this segment, particularly in urban markets.

In order to accurately target this segment, it is essential to look at the guests core values. So what is this guest looking for; simplicity and affordability are the keys to appealing to this guest. Their objective is to achieve goals based on their interests, time and budget. Vacations are often shorter, three - four days, taken more frequently so they want to maximize their opportunities to relax and enjoy life in a manner that is meaningful to them. By taking more frequent, shorter breaks, this guest is changing the way that we vacation with the weekend break becoming more popular and viable. Smith Travels' findings indicate that weekend hotel occupancy increased in those hotels that offered spa.

With shorter time periods for rest and relaxation, guests will look to names that they know and trust to provide them with a quality experience. Therefore consistency with a hotel or spa brand will be a critical consideration.

Additionally, guests are using all of their resources (friends, articles, internet, etc.) to become more knowledgeable and savvy in their vacation decisions. Online accessability and the overall ease of booking both hotel accomodations and spa treatments is vital to this traveller. They are looking for major travel portals that will enable them to get the most out of their time on property.

So what are the next steps? Spa facilities are often associated with high investments so how can spa providers achieve the best possible return on investment?

Planning, planning, planning! The single most important aspect in spa development is market research and feasibility; this should be the first step when deciding if adding a spa is right for you. If you have a sound business plan you will realize the best returns while also developing a realistic understanding of how long it will take. Spending the money upfront to do market research will always save you money in the long term.

While market research will ultimately answer the pertinent question "will the spa stand alone as a profit centre?" It will also help to determine the demographic and density of the surrounding area as well as guest bases and feeder market which are essential for yield management efficiencies. Market research should also include a five year pro forma model to help you in the preparation of an effective and usable business plan. While you should consider the lift in occupancy and ADR, this alone is not enough to build a spa, you must also consider the spa an ancillary revenue source; the last thing you want is an expensive amenity.

The final piece of an effective market research study is the development of a program based on the demand analysis and occupancy benchmarks and metrics. A feasible and operationally sound architectural program is absolutely essential. The number of rooms in the hotel should be a factor to consider in the demand anaylsis, but is not always an indicator that should be used to define the size and scope of the facility. As a general rule of thumb, for the "3-Star" property the spa should average 3,500 to 7,500 sq. feet including a minimum of six treatment rooms. With 3,500 sq ft the hotel will provide guests with a typical day spa model were the emphasis is on service standards and providing exceptional treatments in a safe environment, while the 7,500 sq ft model will allow the operator to add facility amenities that will differentiate the spa from the day spa market.

In addition to considering the overall number of treatment rooms, the program of space will need to be specifically defined to cater to the needs of the property as it applies to occupany and ADR. Developing a program for effeciencies of space and operatinal productivity is the key to creating a spa that fits within a confined footprint, yet generates an exempliary guest experience.

Taking all of this into consideration spa will clearly become a trend and not a fad for three star market. Spa is definitely something that will become integral to three and four star hotel strategies. According to PKF Hospitality an increasing number of corporate and leisure travelers are now putting spa facilities only second to location when choosing a hotel.

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...

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