Hotel Spas: The Potential Challenge in Profitability

By Michael Haynie, SR. President, Parkway Hospitality Management | July 22, 2012

More than a decade ago, spas in general were "in." Like low-calorie menu items and personal trainers, everyone wanted to talk about and be seen at the spa. Hotels soon followed the trend, and spas began cropping up in hotels all over the country. Many establishments tried to expand the health club concept which they had adopted in previous years, upgrading their workout facilities to transform them into the latest trend at that time - the health spa kick. The profitability model for these never seemed to make sense nor be achievable, but many operators and companies looked at this amenity as just that: a potential loss leader which would attract additional market share because it was an amenity the property had.

Fast forward to 2012 and the current economic situation, and everyone is watching their wallets a little more closely. For some, spa services might be seen as a necessity for health or beauty reasons, but for most people, they are still a luxury. With the ever-increasing cost of air travel and gasoline prices, travelers need to cut corners. Marketing to outside customers, providing complementary services and partnering with local spas and treatment professionals are just some of the ways that hotels can provide their guests the spa services they want without having to sacrifice profitability.

Marketing to Outside Customers

Just like a good signature restaurant, a hotel spa must have the ability to attract transient or outside customers and not be wholly reliant on hotel guests. Resort hotels have a much better opportunity to capture hotel guests within the spa, as many resort guests go to the resort exclusively to experience the amenities such as a spa, pool or health club. It does make perfect sense for an actively marketed "resort" hotel, which is typically a four- or five-star property, to consider a spa among its amenities. The key ingredient to the resort spa's success is the ability to market the services to transient customers and hotel guests alike.

In hotels that are geared more toward business travelers, many guests are off at meetings during the course of the week, and thus have very limited opportunity to go to a hotel spa. That's why it is crucial to market to customers outside of the hotel. Offering locals discounts for spa services is a great way to attract new customers and create a solid customer base who can become repeat customers.

Incentives for locals can include discounts off of certain spa packages; frequent customer cards which allow them to buy a certain number of services and get the next one free; and "slow day" discounts to draw customers in on the least busy days of the week. As an offshoot of the frequent customer cards, the hotel spa can create a rewards program for customers, in which every dollar spent can equal points. When customers get to a certain number of points, they can be "cashed in" for free services at different levels. Direct mail and email blasts to locals offering them a "welcome" discount (or a "welcome back" discount for past customers) can help encourage people to visit or revisit the spa.

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Eco-Friendly Practices: Corporate Social Responsibility

The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.