With so much focus on getting heads in beds amidst the constant drama of COVID-19, hoteliers can forget that there are other profit makers built into their properties that need their attention. A siloed approach to revenue generation – where every department head within a hotel doesn’t factor in how their operation affects others – just won’t cut it for the decade ahead.
Specific for this discussion, let’s focus on the spa, although the same principles here can also work for other revenue builders. The spa represents a prominent ancillary revenue stream that is long overdue for a rethink, and one that can offer lasting lessons on lean hotel management for 2021 and beyond.
As properties started to reopen in early summer, many opted to keep several of their key facilities shuttered. The business case was simple; opening an outlet like a spa would be unfeasible given the new rules for sanitization and physical distancing which would in essence halve the total number of possible appointments in any given day.
With an eye for platform integration, though, a property’s spa can now be managed cost effectively and safely in order to drive day visitors as well as give hotel guests a powerful reason to visit. Furthermore, applying the revenue management concept of yield to your spa can help to optimize peak demand periods (a concept we’ll explain in full later).
Besides the sales and marketing benefits, one key advantage of having your spa software talk directly with a PMS is that you can save on spa management labor costs. With guests able to easily find open timeslots with practitioners through an online interface and many important back-of-house tasks also automated, you can run this operation without nearly as much overhead in order to make it profitable even only half the volume. Just think of all the time spent on phone calls that can be saved using an digital booking portal.
The Halo Effect of Amenities and RevPAG
While the cost savings of integrated technologies are plain to see, the main rationale for why hotels must keep their spas’ doors open is that it gives guests a reason to visit.
This is what we call the ‘halo effect’ in that amenities like spas, golf courses or prestigious restaurants will act as a primarily driver of hotel bookings, especially in contrast to home sharing accommodations, such as those listed on Airbnb, which typically do not have onsite amenities. Thus, building a tech environment that enables your property to relaunch the spa without drastic cost overruns should be a foremost task for the months ahead.
To explain this symbiotic relationship a bit further, we reached out to Frank Pitsikalis, CEO of ResortSuite, a developer of integrated hotel, resort, wellness center, spa and club management software. He added, “From research as well as from past customer data, we know that the more guests use the various facilities at a property, the more satisfied they will ultimately be. So, you get more revenue per visitor by having them book at your restaurant, spa or whatever else you offer onsite, as well as a boost to loyalty, word of mouth and their chances of coming back during off-peak periods when you need their business the most.”
This notion of optimizing revenue per visitor – otherwise known as revenue per available guest (RevPAG) – will be critical for the next few quarters when leisure travel continues to dominate while event and corporate customers have yet to properly return.
However, even if these two segments do ramp back up by Q2 2021, thinking in terms of RevPAG will still be instrumental for all guest type for the coming decade because of how fundamentally the world of hospitality has changed. Operating and marketing costs are constantly blooming while customers have an increasing number of other competitive options at their disposal. In the hotel of the future, you will need to derive incremental revenues from all guests in order to make the whole venture worthwhile. Luckily, there are a few other ways that technology can come to rescue.
Revenue Management Means More Than Just Rooms
In the pursuit of RevPAG and a go-to-market strategy for a hotel spa operating in the new normal, we dove into a ResortSuite product demonstration with Pitsikalis. What he emphasized regarding modern spa management software is “dynamic availability.”
In a spa that is yield-managed much like a hotel’s room inventory, you have to protect your high-demand hours and days while trying to fill the low-demand ones. After all, once a time slot has passed, it’s gone forever. With such a ‘fragile’ product like a spa, you have an opportunity cost whereby you wouldn’t want to fill your peak times with lower margin treatments.
The example that Pitsikalis showed us was a traditionally busy Saturday 1pm through 4pm period, where the same aesthetician was able to complete a bikini wax or a facial. Both were 30 minutes in length, yet the latter treatment earned the hotel $25 more in profit. With the right software in place, the resort could then prevent users from reserving lower margin options during a high-demand period like a Saturday afternoon, instead directing customers to book at, say, 9am, 5pm or on another day.
You might be saying to yourself that it’s only a $25 difference. But the next decade will be defined by being able to find those pockets of revenue. In our current Covid-crazy world, such a granular analysis of opportunity costs is crucial when you have to maintain reduced timeslots and physical, or even temporal, buffers between all individuals for proper social distancing.
Bespoke Packaging and Offers
Next, it may seem rudimentary by now but the merger of spa customer data with hotel guest data can produce tremendous results, particularly with regard to packaging and one-to-one marketing in the fall, winter and spring. RevPAG starts right from the rooms reservation engine whereby a subsequent prompt to book a spa treatment can not only advertise to incoming guests that the facility is indeed open – crucial in these uncertain lockdown times – but can also ensure that hotel guests get the timeslots they want.
Now connect the dots with past purchase history and you can develop promotions where a quick weekend getaway or workcation getaway with a deal on a previously enjoyed spa treatment may go a long way to building occupancy. Moreover, having past spa purchase data integrated with the main hotel guest profile will tell you who not to market to so that, for instance, you don’t offer an expensive, complementary treatment to customers who hasn’t proven themselves to be within a suitable high RevPAG range (for you to resolve the sunk costs of the freebie incentive).
In this sense, working to develop a tech-first spa can also apply to any other onsite revenue stream in that you can give your sales and marketing teams more information by which to target returning customers as well as build highly specific profiles for promoting to new guests. Start by envisioning a scenario where relaunching your spa or any other facility becomes viable with a good technological backbone and you can then realize greater financial health for the years ahead.
About the Author
Larry Mogelonsky is the Principal of Hotel Mogel Consulting and is one of the world’s most published hospitality authors. His writing reflects more than 35 years of experience working with hotels of most every size, segment, affiliation and brand. Larry also sits on several boards advising hotel technology companies.