Why Hotels must apply Revenue Management to their Spa
|Many hotel property owners and hotel management teams of city hotels, resorts, conference hotels and upscale country side B&B’s are adding a luxury Spa to their property. Why?
Because by adding a spa to their hotel they will:
- Create a competitive advantage
- Increase the guest experience
- Drive up the ADR, revenues and profitability
- Generate additional revenue streams
- Raise the value of the property
But unfortunately we notice that most of the time, the spa is underutilized or even empty. As a result spa’s in hotels often represent an additional cost factor, instead of an incremental revenue source.
The Spa Product needs to be managed more strategically!
Hotel spa’s just like the rooms experience periods of high and low demand. At the stage of high demand you will often see a more profitable treatment has to be denied to guests, because the treatment room is booked for a low profitable treatment or several short treatments.
As demand fluctuates and busy and high demand periods can be easily identified, there is a large opportunity for hoteliers to generate incremental income and profit by implementing Revenue Management techniques to their spa product, just as the optimize the revenues of their hotel rooms.
Remember the spa is not only a way to add value to the hotel and increase the guest experience. It is vital product to generate an incremental revenue stream.
Even though hoteliers are using tactical pricing techniques like spa packages, discounts, 2x1 treatments, gifts, etc, to try and sell the treatment rooms during periods of low demand, very few have developed a strategy that allows grouping these techniques in a policy of Revenue Management.
Most spa’s sell their treatments on a "first come, first served" basis. Revenue Management will help spa hotels to attract extra clients during low demand periods by offering attractive treatment deals and growing revenue and profit (or yield) during strong demand periods by optimization strategies.
During various spa revenue management training courses given by Xotels, we have noticed a very perceptive attitude and openness towards these ideas. However we also noticed that hotel and spa manager were challenged with where to start. In brainstorming sessions on spa revenue management opportunities we have come to agreement with spa specialists that the key of success in applying Revenue Management lies in:
- Contribution analysis: Where are your incomes coming from? Which treatments are more profitable for your spa? What is the contribution weight of a treatment within your total spa income? Do you have reasons to keep selling a 30minutes massage, for example?
- Productivity management: What is the period where incomes are the highest? Which is the treatment least sold? What day of the week has more demand?
- Additional sales follow-up: Besides the treatments, can you get your client to spend more in products, gifts and accessories? Do you have a proper system to keep track of extras by type of client? Is your team prepared to sell?
- Cost management: How to better control costs? How to reduce the time between 2 treatments? How to promote the treatment with higher profitability?
Revenue Management will help you manage these 4 elements and thus allow you to increase the income generated by the spa. You will need to build reports, just as with hotel room revenue management, to provide you with data to help you to make better decision on your spa pricing strategy and sales strategy.
Next month we will talk about how hoteliers can apply Revenue Management to their Spa.
Patrick Landman @ Xotels
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