The Science of Spa Revenue Management
By Greg Miller Executive Vice President of Operations, Enchantment Group | July 02, 2017
When hiring a great spa director you look for qualities that will lead to a successful business. Hiring emphasis was always placed on candidates that exhibited good inventory control, staffing efficiencies, training prowess and the ability to extend the spa experience into guest product sales. All amazing qualities, right? So, you would think that is where the fairytale starts - you've hired an amazing spa director with all the important skills which will work magically for the hotel's good. But, alas, sadly, this is only often where the breakdown begins. The enviable skill sets of spa directors past may be a thing of beauty on slow Monday - Thursday but pepper in a handful of busy Saturdays, success in group sales, spring break, high season and throw in a citywide for good measure, and you may be singing a different tune.
Historically, the spa has been viewed as an amenity - like a pool or a gym - something your hotel just needed to provide simply to keep competitive. As we all know, spa times have drastically changed. In an article from December 14, 2016, CBRE stated, "In 2015, hotel spa department revenue grew at a faster pace compared to other sources of hotel revenue. According to the recently released 2016 edition of Trends® in the Hotel Spa Industry, U.S. hotel spa departments were able to increase their revenue by 5.6 percent from 2014 to 2015. This compares favorably to a 3.3 percent rise in rooms revenue for the properties in the survey sample, and a 5.5 percent increase in total hotel revenue." And over the same period that 5.6 percent increase in revenues was converted into an almost 18% improvement in spa department profit.
Now I Have Your Attention - Don't I?
Good news. If you are a spa director or if you have a spa director on your team, learning about the science of spa revenue management can vastly improve your ability to not only drive top line spa revenue but also increase efficiency that translates into departmental profits. Today, watching the departmental revenues on the profit and loss statement is not enough. There are key metrics that you should be reviewing every month to ensure that you are moving in the right direction. Old fashioned capture rate just won't cut it these days.
A Great Spa Director is a KPI Ninja
Today's spa director needs to be a master of the dashboard - reviewing key metrics to maximize both efficiency and profits. Measuring and reviewing your spa revenue per occupied hotel room and analyzing it by day of the week, season, and hotel market mix (group to transient mix, for example) is fundamental to good business decisions. This can be especially useful if your spa has another revenue source such as non-hotel local clientele. Equally important is analyzing the spa utilization ratio or SUR. Do you know what percent of the time your treatment rooms are utilized? Do you measure lost business to fully understand potential demand? This data is a measure of your spas overall health. For example, if you are operating a 10-treatment room spa which is open from 7 am to 9 pm and you sold 45 hours of treatments, the spa utilization ratio for that day is 32% (45 hours divided by a possible 140 treatment hours). Compare that to previous years and benchmark data.