Creating a Spa in a Flag Hotel or Independent... There is value in Each!

By Gayle Bulls Dixon Owner/Founder, Breathe Spa Management Company | October 28, 2008

When a hotel owner/operator and spa operator are considering uniting at a particular property, there are many things to consider in the relationship. If your spa is a non-branded spa, the potential advantage of locating within a flag hotel would be the association and draw of the hotel flag. There is no doubt that a successfully branded hotel will build strategic awareness for a fairly unknown spa brand. In this scenario it is imperative that the spa company values and service level closely match the hotel brand. Horst Schulze, Founder and CEO of West Paces Hotel Group, told me, "Your brand is your promise." If the brand, or promise, is consistent within the hotel group or chain, then the spa owner/operator may feel comfortable that there will be a consistent relationship regarding the support of the promise to the customer throughout the hotel's relationship with the spa. It is critical for the spa company to confirm this commitment. With this alignment there are many positive influences and outcomes for both parties. The closer the match of service levels for the spa and hotel, the more successful the relationship of brand to profitability for both. Without this, it is equally damaging.

The service level of the hotel, whether branded or independent, drives the pricing for the hotel guest. This pricing will have a direct impact on the pricing of the spa within the hotel. When a spa is located within a hotel that is known for exceptional service, there is an inherent expectation from the guests that are loyal to the hotel brand that the spa will fulfill their expectations as the hotel would. The spa in a hotel, whether flag or independent, will inherit the customer loyalty that the hotel is able to capture. Therefore, it is an easy transition to place a spa in a hotel that has an extremely loyal client base. You may assume a certain percentage of these guests will be loyal to the spa, as long as the spa delivers that same level of product or service that the hotel delivers. If the flag draws a clientele that expects a very different level of service than the spa provides, whether that is higher or lower, you may find yourself discounting services beyond that which is profitable, in order to appease a client paying a lower daily rate for the hotel room, or failing to deliver a level of service high enough to satisfy a client that has paid a high rate for the hotel room and expects a equal level of service throughout the hotel.

The ability to fend off competition is stronger for both the spa and hotel owner when the brands or service levels strategically align. When successfully matched, they work closely together in a symbiotic fashion to draw spa guests to the hotel and hotel guests to the spa. We know that the number of guests searching for hotels that offer true spa experiences has been increasing steadily for the past five years, so, for the hotel owner, you want to be able to offer a spa as a service in your property. The spa owner, on the other hand, is looking for a hotel partner that draws the same guest to its properties that would choose the service level offered in the spa. If the hotel draws guests that fit the profile of the spa-goer, then there is a wonderful impact to the ease with which these guests transition their hotel stay to include a spa experience. This along with the sales/marketing support of the hotel to the spa is likely to drive the number of appointments within the spa. We have found that a spa supported and encouraged by the sales team and hotel management directly experiences a higher number of spa guests and in many cases a higher ticket per guest in the spa.

It is our opinion, at Breathe Spa Management Company (BSMC), that it is actually more beneficial to an independent hotel to choose a branded spa. Ten years ago spas were not considered a huge draw for the hotel guest. There seemed to be more emphasis on amenities such as restaurants, tennis, golf and fitness. Today's spa goer is savvy and is looking for a specific experience with regard to that segment of his/her hotel stay. If a guest is unfamiliar with an independent hotel, but is familiar with the spa brand, that guest will immediately associate the spa brand, or promise, to the hotel.

As the hotel owner/operator, you may very quickly understand the profitability model of a branded spa, based on the historical data the spa company is able to provide. The most common mistake that hotel owners/operators make is assuming that the spa is a loss leader within the hotel/resort. With a strong spa brand, the spa operator has clear expectations as to the profitability requirements of the spa directors and staff, and manages the staff to meet or exceed this expectation. A strong spa brand has solid financial review processes that closely match top line revenues and the flow through to the bottom line. They will have trained professionals as directors that will be experienced in quickly altering expenses to meet a profitable bottom line, based on expectations set forth by the brand company.

Another mistake made by hotel/resort owners/operators believes that it is not worth paying a management fee to associate with a branded spa. They believe they can achieve the same outcome as the spa expert by simply hiring a good spa director. This may circumvent a loss for a while, if the spa director is as good as you think, but what about the profits left on the table? The truth in our hotels is that the branded spa highly outperforms the spas that are managed in-house. We experience greater profits after paying the management fee with the branded spa than the spas within our hotels that are not managed by a spa brand company. The spa company is the expert in the spa, the same as a hotel operator is the expert in hotel management. Another thing to consider is that spa directors often change jobs, and the time between hiring another great spa director is a very vulnerable time for the spa profitability. With a branded spa, the same financial review processes will take place during the time without a spa director, and the company will provide the leadership while looking for the permanent replacement for the director.

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