August 27, 2012

Why spas should be added to the revenue management department of hotels?

Many directors of development/feasibility consultants for business hotels, conference hotels, resorts and upscale boutique are adding a spa to their property/projects:

because by adding a spa to their hotel/project they will:

* Create a competitive advantage,
* Increase the guest experience,
* Performs better ADR, Revenue and also profitability,
* Generate additional revenues (retail...),
* Stand in a better way within the direct market competitors,
* Raise the value of the property,

But unfortunately, I noticed that most of the time, the spa is underutilized or even empty. Looking at the previous post on that subject, spas in hotels often represent an high cost factor (Spa Receptionist + Spa Therapists x 2 + cleaning costs + retail products + investment), instead of an incremental revenue. Probably the reason why some large hotels outsource the spa, to create a lease revenue, rather than exploring possibilities of managing it effectively.

The spa product needs to be managed more strategically! it does not only require to have 25% occupancy per day or cut deals with Groupon and Cobone, but it's need to be thought as a perishable structure. A AED 199.00 (USD 55.00) for a 90 minutes massage with manicure / pedicure does not always drive return clients, because the experience is not performed by real professionals, and the time allocated is not suitable.

Hotel spas just like the rooms, the restaurants, the banquet rooms, experience periods of high and low demands. At the stage of high demand, you will often see a more profitable treatment has to be turn away to guests, because the treatment room is booked for a low profitable treatment. Lack of profitability planning!

As demand fluctuates by days of the week (Sunday-Saturday), and time of the day (10am-10pm), busy demand can be identified quite fast. Automatically there is large opportunity for hoteliers to generate incremental income and profit by implementing revenue management solutions to their spa product, just as to optimize the revenues of their hotel rooms. If you manage well your weekdays (85% occupancy) vs. your weekend (45% occupancy), you may fluctuate your offers according to demand. If you are full on the weekends, manage your treatment offers in a different way.

Even if majority of hoteliers are using tactical techniques (25% off credit card, spa packages, the entertainment book discount, two for one treatment, group deals...) to try to sell during the low demand periods, very few have developed a strategy that allows grouping these techniques with their market segments to apply revenue management principles.

Most spas sell their treatment rooms on a "first come, first serve" basis. Revenue Management will help spa hotels to attract extra clients during low demand periods by offering attractive treatment deals, growing revenues or yielding during the high season with optimization strategies. It requires an analytical person, because most spa managers do not have the time to do it and do not feel very comfortable of creating excel spreadsheets. The best way to team up is the revenue manager along with the spa manager, because they may end up analyzing lots of information. Both understand the spa profit margin concept, however they will have different functional skills. One will have to go through lots of data, cross with market segments and pricing, and the other one will have to share his operational constraints.

For our spa managers/assistant readers, i know that you may say, this is a great way to increase my revenues, but what shall I start with?

In brainstorming sessions with Spa professionals in Dubai, on the subject of spa revenue management opportunities, we came out with the following points in applying revenue management lies in:

1) Contribution analysis: Where are your income coming from? Which treatments are more profitable for your spa? How did you calculate the duration time of your 30-60-90 spa treatment?

2) Productivity Management: What are the periods where revenues are the highest? Which is the least treatment sold? What day of the week has more demand? What time of the day is the most demanding?

3) Cost Management: How to better control your costs? Do you have a detailed standards of operations for your treatment? Who is managing the availability booking? How effective is my spa menu?

4) Retail Selling: When was the last time you trained your team on selling techniques? What types of product information your team has to sell the retails products? How many brands product do you sell?

5) Guest History: Do you have an email database? How far do you update your guest profile in your spa software? Where are your clients from? Do you use specific market segments?

6) Marketing Strategy: how do I communicate with my clients? Does Social Media help to convert Likes into Effective clients?

Revenue Management will help you manage these six elements and will allow you to increase the income generated by the spa.

So like room revenue management, you will need to start building effective historical data reports analyzing your transaction through your software or manually, to provide you with data to analyze to help you to make better decisions on your spa pricing strategy and packages availability.

Get more revenue management tips and advice from RSVP Hospitality.


  1. One of the many things that hotel guests can get out of a hotel spa is accessibility and convenience since they won't have to travel to another area to experience it. However, not all hotel spas are well-advertised and it make these vicinities less flocked by people. Hence, advertisements are needed to fill these spas.

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  3. I fully agree with you, advertisements should also start in the hotel, (elevators, reception leaflets, in the rooms...). On a proactive side, the hotel team should sit and review the arrival list, because it provides lots of information such as gender, number of occupants, market segments, length of stay, and it will help you to target spa offers for:
    - A business man who is staying 4 nights at your hotel: he might qualify for a 90 minute massage,
    - A female client who spends 3 nights at yur hotel: she might qualify for a mani / pedi,
    - A cabin crew that is staying 48 hours, she has a pocket money allowance, so she might not be the client for USD 150.00 treatment, however since the Spa has high and low demand, you may consider this segment for the time you are empty,
    - A in house incentive group: you may want to propose an activity for 30 mn coffee break, and thai massage relaxation with 3 therapists,

    It's all depend how you understand your client's behavior and know your cost factors, then you can advertise pro actively.

  4. Nice blog....completely agree with you.

  5. Thank you Duncan, I think there should be some Master Degree at the University only focus on Revenue Management, because this is the key to leverage money investment into a new direction. Clients are so versatile, so different, thus you cannot have a single price strategy for all your clients.

  6. Great post on Revenue Management. the information is given in a simple way.

    This post is quite a bit different in that the information is up to date.





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