The Hotel Spa's Valuable Contribution to Revenue Management
By Marcela Trujillo Senior Revenue Consultant, Total Customized Revenue Management | July 07, 2019
Spa Day! A day of indulgent pleasure, an array of luxurious treatments and pampering, and if onsite at the hotel, even better!
In the realm of hotel management, Revenue Management has found its voice. The core of Revenue Management remains constant – delivering the right product to the right person at the right time at the right price. But don't stop there! This principle can be applied to other revenue driving outlets to maximize incremental revenue, going far beyond rooms to additional players in the field of ARG, such as food and beverage outlets, event spaces, catering, gift shop, golf and the spa.
Respected Revenue Stream
In the realm of strategy and optimization, the hotel spa is achieving distinction as a recognized revenue stream. This valuable outlet attracts the full spectrum of guests, from the leisure traveler to the frenzied, ever-traveling business person. The potential of this outlet in terms of financial gain is directly affected by how the hotel and spa management teams utilize this opportunity.
Hotel Spa Revenue Management is critical to the success of the spa itself, also leading to increased profitability for the hotel. Rather than focusing solely on the expenditure of the guest or consumer, applying Revenue Management principles to the full space of the spa can upgrade its performance from producing minimal revenue to driving incremental revenue.
A Revenue Manager is no longer just the strategist behind pricing and monitoring of inventory. Their role includes being a source of knowledge that expands beyond room revenue into all other revenue streams within the hotel. The first step to applying revenue principles and techniques to the hotel spa is communication between Spa Management, Hotel Operations, and the Revenue Team.
Next, and this is the real game changer, is for the hotel spa management team to essentially view each treatment room as another type of guest room which needs to be occupied as often as possible at the best rate possible. Treatment room occupancy, or RevPATR (Revenue Per Available Treatment Room) and spend per treatment, as well as ancillary spend on additional services and products, provide the ATR (average Treatment Rate) – the measure of the success of the spa itself. Much like strategizing to sell a guestroom at the best possible price, the team must implement strategies to attract guests. A guest who pays a higher rate for a hotel room will be more likely to spend at the hotel. This is revenue that makes a positive financial contribution to the asset.
The hotel spa is a unique revenue stream, with its own revenue management methods and related key metrics. The hotel spa is the perfect place to apply general revenue management thoughts and practices. Spas provide hotels and resorts lucrative incremental revenue and add value to both the property and guest experience. Having a successful spa can elevate the perceived value of the hotel and, if managed in conjunction with hotel revenue teams, can increase the average rate per night, attracting a guest profile that is likely to spend more on property in more than one outlet.
Revenue Management Strategies for Spa
Rooms Revenue Management and Strategy is based on extensive analysis, including historical data, demand and supply, occupancy levels, pricing strategy, and market trends. Several of these points can be transitioned into Spa Revenue Management. As an example, demand can be measured by most expenditures by time of day, day of week, and time of year. The occupancy of the hotel will have a direct affect on the demand levels of the spa. Low occupancy equals less guests, which translates into less potential spa profit. Therefore, it is crucial for strategy meetings to include Hotel Revenue Management to communicate these low demand times in order to save on expenses, or conversely to confirm high demand dates when the Spa Director will be able to yield spa revenue.
Key players in the development of strategy and its deployment include the Directors of Marketing, Sales, Hotel Operations, and Revenue. The Finance Department should also be included in the evaluation of spa revenue to assess profitability.
In addition to hotel occupancy, spa occupancy of treatment rooms as well as the average square footage when compared to guest spend or spa revenue provides hotels with intelligence on spa profitability. The spa occupancy can be evaluated with the time between clients in order to maximize the number of treatments per available treatment room. Within a hotel or resort environment, the measure of success would be how much revenue was generated in the spa by a hotel guest.
Like Room Revenue Management principles, spa revenue can then be broken down into spa revenue per occupied guest room. The hotel spa is a key revenue stream that can drive profitability, and as such, strategy to increase that occupancy or utilization of all available space is the key to the financial success of the hotel as an asset.
The evaluation of the treatments that are offered and their respective popularity can be another way to yield more revenue by maximizing the price per treatment. Combined with the analysis of occupancy, revenues can be driven during low demand times by offering lower-rated treatments, and then altering the pricing over peak treatment times. Once the offerings of the spa are evaluated in their popularity, they can then be marketed and advertised to both in-house guests and arriving guests to attract more spa traffic in the future. Hotel and resort spas can also provide special offers to local consumers when there is considerable down time in the hotel or the spa itself.
Spa Competitive Set
An important factor to take into consideration is the market – the spa competitive set. As revenue managers and hotel operators, the competitive set is clearly defined and evaluated. Competitive sets should be similar, regardless of whether working with Rooms, F&B, Spa or any other outlet. Analyzing the competitive set for hotel spas provides a deeper understanding of the property's own strengths and weaknesses compared to other spa experiences available to the consumer. Are there spas within the other hotels listed? What are the ratings and the reviews, what are they offering and at what price?
In order to properly position the spa inside the hotel, understanding the level of competition is crucial, especially looking at how the spa is marketed in conjunction with the hotel. Analyzing trends in hotel spas can extend into subscribing to reporting tools similar to those used by Revenue Managers to understand the full scope of trends in a market – historical, actual, and forecast in key metrics of occupancy, rate, and of course RevPATR (Revenue Per Available Treatment Room). Benchmarking reports assist in analyzing spa competitors by location, revenues, and expenses for the spa.
Similar to a rate shop for hotel room pricing, reviewing the websites of hotels with spas, whether they are in market or in other markets, can be very helpful when developing packages and promotions that could impact spa and hotel revenue. Although health has always been important, both physical and mental wellness have become a daily part of life. Hotel packages that include spa services fulfill the dual purpose of benefiting the spa and the hotel. Targeting various types of getaways, such as Spa Weekends, Bachelorette groups, and the increasingly popular Babymoon package which pampers expectant moms and dads, ensure the hotel's relevance to different audiences.
Spa treatments can also be offered on hotel websites and booking engines as a possible add-on to individual reservations. There are many marketing opportunities for the hotel spa on the website. Digital experts, the spa manager and the revenue manager should work together to ensure that the website is rich on spa content. The more robust the verbiage and details, the more visitors the website is likely to attract based on spa services alone.
Promoting Spa Within
Operations teams such as the front desk can also be involved in boosting spa revenue. Pre-arrival emails sent to guests to reconfirm their reservation can highlight all of the amenities offered at the hotel. This communication is an optimal time to sell the spa and the treatments that are offered. In addition, it can promote various products sold at the spa to build awareness of the services that could extend to purchasing products after potential treatments.
Hotel front office teams can be trained and be well-versed in everything that spas have to offer. Revenue Management utilizes the teams to offer upsells to generate incremental rooms revenue. This is often tied to an incentive for the front office team. Assisting in highlighting the spa and the services can drive guest spa revenue. The team can also make the appointments on behalf of the guests. This elevates the level of customer service and the overall guest experience.
There is clearly room to promote revenue strategy for the hotel spa beyond the usual routine. Like Revenue Management as a discipline, revenue ideas, tactics, and analysis for different revenue streams in a hotel are continuously evolving. Applying Total Revenue Management to an array of different outlets will lead to increased revenue and financial success, leaving management and ownership alike with a feeling of calm and confidence – just like another day at the spa.
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