There is a lot to learn from the Red Door Spa Holdings company, which operates as a day spa with a clustering model of 51 locations in the US. The company’s plans for growth and development—to introduce their freestanding spas into international markets, to expand their partnerships with hotel companies, and to open locations in every major city worldwide—are ambitious, even at a glance. But couple these goals with their implementation strategy and it becomes not only actionable, but admirable.

Red Door started by identifying influences for their expansion, just to be sure it was the proper move. When they indicated 7 motivators—customer data, demographics, psychographics, local retailers, business climate, site store factors, and competition—expansion seemed inevitable. In order to design the best plan of action, Red Door asked themselves a series of major questions:

• What are our customers’ profiles, and, as such, our target market?
• What are our top predictors of revenue?
• How can we use our research data to predict success in future locations?
• Why are we currently successful?

With these pivotal questions in mind, Red Door first decided to rank the markets based on demographics and psychographics by researching 1,000 of their guests. They used the MOSAIC Database to break down the population into 18 categories. Major discoveries about their customer profile included the following:

• 57% of guests are over the age of 35
• 58% of guests graduated with a Bachelor of Science or a higher degree from college
• Median household income of guests is $102k
• 81% of guests hold managerial/professional occupations
• 39% of guests earn over $300k per year
• Majority of guests live within a 5 mile radius of the spa—in fact, Coyle Hospitality Group’s Global Spa Report indicates that 42% of consumers choose a spa based on proximity

To uncover their top revenue-predictor and use it to predict success in future locations, Red Door used the “Bulls-Eye Model.” With 958 variables of success and data from all existing locations, they were able to determine their biggest predictor of sales revenue: location. They then defined their target revenue to be $3MM; those locations bringing in more than $4MM in revenue were classified as great performers, while those bringing in less than $2MM were under-performers. With a list of their best and worst operating locations, Red Door could start making informed decisions about their future, both domestically and internationally.

Red Door looked into their history to understand why they have been successful in the past. A major factor was their ability to persuade hotel companies to partner with them. They simply educated the hotels on the benefits of having a spa in a hotel: primarily, the fact that ADR and revenue will increase over time. Though this change will not be seen automatically, the spa is a profitable investment in the long-run. This became yet another useful tactic for Red Door’s future.

As for the company’s outlook in the global market, Red Door took into consideration a macro-view of the global hospitality industry, the political stability and industry growth of foreign markets, the language barriers in place, and the regulatory environment and legal structures abroad. These considerations, combined with the knowledge of their domestic locations’ history, allowed Red Door to proactively plan for their expansion outside of the US.

Red Door then brainstormed to determine the most attractive markets. They decided to focus on areas with these characteristics: countries with a focus on service over manufacturing, democratic nations, regions that offer the ability to form a joint venture to balance risk, and places that would enable them to employ the best people. The first quality, the focus on service, is monumental. As you can see in the chart below, taken from Coyle’s Global Spa Report, 85% of consumers return to a spa because of a positive word-of-mouth recommendation.

Guests who experience a successful spa visit will become repeat guests and will promote the business to other consumers. The final attribute discovered by Red Door, recruiting the best employees, is also key—a GM can make or break an operation no matter how perfect the site selection.

Red Door finally asked consumers to complete a survey. The responses indicated three important characterizations. First, Red Door was perceived as an older brand despite the fact that their average guest age is 38. They would have to strategize to eliminate that image. Second, they had a premium luxury reputation, so they needed to deliver on it. Finally, they were known to focus on the guest experience; for them, the size of the spa should not be as important for revenue purposes as guest satisfaction is. Knowing how they are perceived by guests allowed Red Door to finalize their plan of action.

To read more about the spa industry from Coyle Hospitality Group or to view Coyle’s full Global Spa Report, please visit www.coylehospitality.com.

Since technological advances created the age of free information, there has been a consumer revolution—purchasing habits have become independent, and consumers have become price-proof. In 2007, the market was centered around products; prices were based on competition and inventory control, and they rarely changed. At the time, interactions between consumers and suppliers were simple: consumers made purchasing decisions after being driven to the supplier’s website via search engine optimization (SEO). But 2008 showed a decline in this behavior—consumers began to search for user-generated content in favor of visiting the suppliers’ direct websites thanks to the sudden increase in social media, the impact of e-commerce, and the trust placed upon such user-generated sites.

The explosion of social media is evident across the globe. Facebook has more than 800 million users, and numbers continue to grow every day (see chart below). This chart, taken from Coyle Hospitality Group’s 2011 Global Spa Report, also shows that general website usage is increasing. Most notable is the 30% jump in the use of Groupon as well as the popularity of Living Social on the online scene.

The main point here is this: consumers can search product prices in real time, giving them the power to buy your product somewhere else for less. So, what can you do as a business owner to compete with this outburst of social commerce?

The first solution is obvious: utilize these resources. As noted in the chart, Twitter usage is growing. Twitter’s primary function is not limited to its home site—users can access twitter and create tweets through many other outlets. This gives businesses a unique opportunity to speak to consumers in real time and extend their reach. Take this scenario for example: after a hard day at work, a spa consumer tweets “I need a massage!” In response, a spa in her area—well-informed and proactive about social media—follows-up by tweeting a deal to any guest that comes in for a service within the next hour. The strategy is simple and effective. Companies who build value into their products attract price-sensitive consumers.

Second, companies must make a decision on whether to provide deals or not by considering existing clients and structuring promotions in a beneficial way. The web offers more than 100 deal sites—location and industry specific—that are impervious to the various types of consumers, like Groupon and Living Social. According to Coyle’s Spa Report, 71% of research respondents cited “finding deals” as their primary reason for using websites containing spa information. With such a high percentage, a risk-analysis on deal-offerings is necessary. If offered, businesses must increase the focus on client loyalty in a way that does not punish consumers for using deal sites. Most importantly, it is essential not to offend current clients by offering deals only to prospective ones. Doing so punishes and unnecessarily upsets loyal guests.

What does this all mean for spa owners? First, consumers have the power to set price points based on real time comparisons, which could loosen their loyalty. To retain them, why not offer a promotion that deters them from betrayal and keeps their focus on your brand? Clients recognize excellent service and will remain loyal when treated with care. Second, consumers feel less pressured to purchase products early. To compliment this behavior, offer last-minute deals on dynamic websites, similar to the Twitter scenario discussed earlier. Finally, guest loyalty is an exclusivity item not to be measured in a one-to-one dollar value. Stimulate guest loyalty by showing current clients that their purchases allow them to earn something bigger, such as a deal or a promotion. With yield management in mind, structure those deals in a way that encourages additional spending, and always have an executable strategy to bring guests back.

How can spa owners react to the overall picture? By understanding the importance of social media. Take advantage of YouTube and update your company’s profile on LinkedIn to connect with new people everyday. Rather than simply communicate with current clients, integrate with all consumers. Manage your online reputation. As seen in the table below—taken from Coyle’s Spa Report—47% of respondents said they were likely or very likely to communicate experiences via an online review, and 40% would post on a social networking site. You must monitor these websites at all times to know what is being said.

To read more about the spa industry from Coyle Hospitality Group or to view Coyle’s full Global Spa Report, please visit www.coylehospitality.com/2011-global-spa-report/

A lost consumer frantically searches the web, yearning for a last minute appointment at a nearby spa to repair the rain-damaged tresses she used to call a hair-do, and—GASP—the big event is in two hours. Enter the spa website, perfectly situated to include all the necessities one spa guest such as herself would need to choose the most suitable spa. This damsel in distress becomes a happy customer in a matter of moments, and the next challenge for the chosen spa won’t arrive until she enters the doors. End scene. You might be wondering what exactly a ‘perfect’ spa website might look like. Is it organized and detailed with appropriate information and captivating images? What kind of information, exactly? Does it offer exciting product promotions and deals? Does it give you the option to book an appointment right there on the screen? How do YOU get that web-surfing consumer to choose your services?

Coyle’s 2011 Global Spa Report addressed the issues surrounding online shopping and booking, including website orientation. When asked about the most important elements on a spa website, 98% of respondents said it was important or very important to list the offerings and treatments available, and 97% find it important or very important to list the associated prices. 74% (a 4% increase from 2010) of respondents said it was important or very important to have the cancellation policy listed on the website. Additionally, the ability to view general spa information went up 4%–now at 78%–this year.

When we asked about booking appointments, we found that 51% of consumers think it is important or very important for businesses to provide consumers with online booking capabilities. Yet, when asked which treatments they have booked online, the number of respondents who had booked a treatment online decreased slightly in most areas from last year to this. This indicates that offering online booking has not increased in importance at the rate one would have anticipated based on the demand for the service. When asked why they would not book a certain treatment online, compelling responses included:

• The inability to ask detailed questions about personal treatments—especially waxing, hair coloring, or medical treatments
• The failure to get a feel for the facilities—even with photos or a video, many guests prefer the actual sensations involved in taking a walking tour of a spa
• The lack of information about service providers and the subsequent inability to choose a specific therapist based on a recommendation

If you want to try online booking, a good start would be to do so with existing customers who already have faith in your business. It is also important to keep yield-management in mind. Incentivizing off-peak times for online bookers can help during slow periods while saving staff time on the phones trying to ‘sell’ these appointments.

To download and view the full report, please visit Coyle’s website at www.coylehospitality.com/2011-global-spa-report/. To find out about how Coyle can assist you with mystery shopping services and improving the spa experience, please visit http://www.coylehospitality.com/mystery-shopping-services/spa-consulting/.

Last year, Coyle Hospitality Group conducted exclusive market research within the spa industry to uncover the motivations behind spa consumer behavior. This year, as spa owners and consumers proactively evolved to combat the prolonged recession, Coyle reengineered its research strategies to reach a broader range of respondents and include more objective, relevant questions: Why do people go to spas? What spa deals are capturing their attention? What is the impact of deal websites like Groupon? And, most importantly, how do spas retain clients and get them to inform their social networks? The result is the 2011 Global Spa Report—a compilation of spa trends and spa consumer priorities that industry professionals should know about as they enter the second half of the year.

Coyle uncovered some big changes between 2010 and 2011, the most alarming being the increased dependence of spa consumers on technology and the internet to source deals and information. A major example of this is seen in the explosion of social commerce through deal websites, such as Groupon and Living Social. Groupon enjoyed a tremendous increase as a site to seek spa information, jumping from 22% in 2010 to 52% this year. Living Social, a site that was not even included in 2010, is now the fourth most-popular website for seeking spa information, tied with Facebook and beating out sites like Yelp, Citysearch, and SpaWeek. When asked about website usage, we saw a 9% increase in the usage of websites primarily for deal-seeking, compared to only a 2% increase in the usage of websites primarily to learn about a spa altogether.

Clearly, these trends call for a risk-analysis on deal-offerings versus retention, and fast. Other interesting findings include:

• 47% of spa consumers listed “improving appearance” as one reason they visit a spa
• 69% of those surveyed visited a spa based on word-of-mouth
• 66% of respondents have utilized online-deal sites to book a service
• 86% of respondents would feel comfortable receiving a follow-up correspondence post-visit

To download and view the full report, please visit Coyle’s website at www.coylehospitality.com/2011-global-spa-report/.

To find out about how Coyle can assist you with mystery shopping services and improving the spa experience, please visit http://www.coylehospitality.com/mystery-shopping-services/spa-consulting/.

Despite the present economic decline, there may be a positive outlook for hospitality industry professionals if they can properly handle the downturn and tighten operations to increase occupancy, according to Andrea Foster, VP and National Director of Spa Consulting for PFK.

Since spending patterns are cyclical, and we are on the downturn, average daily rate (ADR) and profit margin recovery are in the near future. Studies have shown that despite the economy and the increase in oil prices, consumers continue to spend for health, beauty, and personal reasons—a trend that did not exist when gas prices similarly shot up in 2005. In fact, Coyle Hospitality Group’s 2011 Global Spa Report, conducted in March of this year, indicates that 47% of spa consumers continue to list “improving appearance” as one of the reasons they visit a spa.

The question for right now is this: how do spas succeed in selling luxury goods when the economy doesn’t allow for it? Foster believes it comes down to the guests’ perception of value. As long as the guest experience remains untouched and the service is deemed valuable—i.e., its price is reasonable in terms of its quality—spa consumers have no qualms about spending their hard-earned recession dollars on a little lavishness. The most successful spas focus on human capital and innovation. Rather than up their prices, these spas add value through marketing and menu engineering. Coyle’s 2011 Global Spa Report shows an example of such marketing engineering. Take a look at the two advertisements below, which show the same photograph but different deals:

When asked, 45% of respondents to Coyle’s spa survey thought advertisement #2 was very appealing, while only 9% of respondents thought that advertisement #1 was very appealing. Consumers want choice, simplicity, and a good deal. Spas who embody these values are able to rationalize the product being sold without seemingly cutting back on the quality. Overall, it is about maintaining the perception of luxury in a dim market.

Take it from a company that runs a lean operation, like the Mirbeau Inn and Spa near the Finger Lakes in New York. Mirbeau invests in people; they utilize employees to drive return business. They also incentivize employees to perform well—e.g., rewarding them for booking a certain number of services. Like Coyle Hospitality Group, Mirbeau also recognizes the value of social media. One snowy day, when they had only 10 reservations on the books, Mirbeau posted a deal on Twitter and increased their number of reservations to 45.

As you can see above, 71% of consumers use websites to search for deals. As noted in Coyle’s 2011 Global Spa Report, 66% of spa consumers also use online-deal sites to book a service. Clearly, Mirbeau noted and capitalized on this trend. Mirbeau identifies their highest margins and then educates their employees to sell them. Their final touch? Implementing a strong retail section of the spa, where spa guests can shop while they wait.

There are various solutions that exist for spas looking to increase occupancy. Here are some unique options that are incredibly successful:

• Push bridal offerings—the bridal business exists year-round despite the poor economy.
• Partner with hotels—they will help you find the right clientele.
• Create a holistic spa and wellness program for teens that encourages them to come in with their parents. Include exercise in this program to add value.
• Design benefits for the aging population to keep them interested in the industry.
• Combine the spiritual and the holistic with a retail concept. Many spa consumers have lost interest in the spiritual entertainment aspect of spas, but implementing this tactic gives consumers the relaxation value combined with the excitement of trying out new products.
• Increase the social atmosphere of the spa—when a spa becomes a social environment, consumers will return to spend time with one another.

To read more about the spa industry from Coyle Hospitality Group or to view Coyle’s full Global Spa Report, please visit www.coylehospitality.com/2011-global-spa-report/.

It may be nearly impossible. As much as these hospitality businesses might want to rail against social media channels, particularly ones that focus on reviews – Yelp, TripAdvisor, Zagat and the like – they’re certainly not going away anytime soon. And hospitality companies know this. In fact, they fully intend to track their reviews.  For instance, a 2011 TripAdvisor survey revealed that 99% of hotels planned to respond to customer reviews online, but, according to this report, one GM believes only about 7% actually do respond.  It’s not hard to understand why – between monitoring, measuring, resolving and responding, it’s a time-consuming process to say the least.  Add in the act of encouraging reviews from happy customers (we have seen some pretty posh hotels come right out and ask satisfied guests to write a TripAdvisor review), and it’s a full-time job, one which many small businesses are not yet prepared to fully fund in the form of additional staff.

Coyle’s restaurant secret shoppers have seen that the well-trafficked review sites can certainly attract or repel customers. Our secret shoppers are on-site at hotels, restaurants and spas evaluating the guest experience every day.  Their mystery shopping evaluations help operators refine, improve and elevate the guest experience. Can this all be undone by one employee in a bad mood who sets off a ranting review online? With the latest customer satisfaction index at a two-year low, it makes the idea that there’s a megaphone for everyone that much more frightening.

Oh, and just when you thought you’d mastered Facebook, here’s one report that says Facebook booking conversions are growing. Some hoteliers are implanting stand-alone booking and shopping engines on Facebook and independent properties are differentiating themselves with booking functionality. Conversions from Facebook, apparently, are higher than from TripAdvisor, so there’s no overlooking the importance of your Facebook presences.

And yet, there’s evidence that users of these review sites – at least in the travel segment – are more likely to book.  According to a recent survey by the market research firm PhocusWright, travelers who visit planning and review sites, metasearch or other types of nontransactional websites have a higher conversion rate, and they book at higher rates through supplier sites directly. This demonstrates the importance of review sites for conversions.  But how much weight should operators place on different sites and on particular reviewers themselves?

Most outside firms who help track your social media reputation do so automatically, boasting complex algorithms and more. But it may take human analysis on an ongoing basis and a familiarity with the operation, for this analysis to be truly accurate. What’s your online rep score? You’re probably not going to get it from a computer program alone.  For restaurants, hotels or spas to really gauge where they stand in the online review realm, they need constant tracking in context, whether by an in-house staffer or an outside contractor that dedicates human analysts with indepth knowledge of the market segment.

To find out more about how Coyle Hospitality Group can assist you with mystery shopping services and social media reputation management, contact us.

1. Don’t waste the call. Great news! You’ve got a new spa client on the phone and it’s time to book their visit. Are your reservationists following the scripts you’ve set? Are they asking how clients heard about the spa, if they’ve visited previously, what their preferences are and what their expectations might be? Are they explaining the treatments and offering a few different options if they apply? Are they telling these clients about applicable specials or add-ons to the treatment? Our spa mystery shoppers make hundreds of calls to spas, and, unfortunately, this golden moment to create a better guest experience and more revenue for the spa is often squandered. 

2.  Provide ease of booking. Coyle’s spa research has shown that many spa clients want to book treatments online. Online booking could be an integral part of the experience a guest has with your spa.  Are you losing business by not offering potential clients (or loyal ones) a way to click and book at any time of day or night?  Online booking may not be for every spa, but when it is, it can lead to additional revenue and a better guest experience for busy clients. If it’s not for your spa, make the booking process as customer-friendly and convenient as possible. Consider providing a separate email address for booking, asking questions or sending comments. This can give you valuable feedback and the opportunity to share more information and sell more treatments.

3. Reward loyal customers in meaningful ways, to them. Many spas have loyalty programs in place and find them valuable ways to reward regular clients and garner those valuable, word-of-mouth referrals. Take a new look at your programs. Consider giving incentives for follow-up or complimentary treatments.  Make sure you gather important information from clients (birthdays, anniversaries, celebrations) so that you can properly offer them the treatments they would most appreciate, and at the appropriate times.

4. Don’t overlook the check out. Coyle’s mystery shoppers report that they’ve seen clients leave spas who are clearly on edge or not pleased with a treatment, yet the spa receptionist and front desk employees happily sent them on their way. If guests are allowed to leave your spa unhappy, they’ll likely never return or refer anyone else to your spa. Develop an approach to address these customers and explore their concerns away from the front desk. Your “service recovery” approach may yet save this client, or at least stop them from badmouthing your spa.

5.  Audit your guest experience. Sometimes the only way to really know if your spa is implementing the standards that you’ve carefully set is to test them anonymously on a regular basis. Consider using a mystery shopping provider or create a spa audit of your own and use friends and family to implement it. Professional mystery shopping services can help set standards to evaluate, objectively report on how these standards are being carried out, and help your spa focus on specific areas of weakness in the guest experience.

For more information on spa mystery shopping and quality assurance services, contact Coyle Hospitality. 

Perrone Goldstein noted that the spa consumer has changed along with the economy over the past several years. Understanding who that consumer is should play into how you manage your spa, how it’s promoted and how you communicate with customers. Following are some highlights from her IECSC seminar:

• The top reason spa clients visit spas continues to be for relaxation and stress management; if spa clients leave looking less than relaxed, this needs to be addressed by staff. In fact, the top reason cited by those who report a negative spa experience is that they felt pain from their treatment.
• Word-of-mouth is still the strongest way to get referrals – meaning the guest experience is paramount. Almost three-quarters (74%) of guests share a good spa experience by word-of-mouth; 29% will email friends. And 38% of those surveyed said they booked at a certain spa because of a word-of-mouth recommendation. Not surprisingly, a vast majority of those who give positive word-of-mouth are retained by the spa.
• The number-one reason potential spa clients go online and/or visit a spa website is to find deals. Other top reasons for taking to the Interent include to view spa menus, read user feedback and learn what spas are all about.
• 40% of potential spa clients go online to find a new spa to visit, making the need for a spa website that’s optimized for search engines extremely valuable to any spa business.
• 53% reported that the reason they booked a treatment with a spa is because they received a direct mail piece; 44% booked after receiving an email with a discount. These tried-and-true methods work better than we might think.
• Consumers are looking for prices, treatment descriptions and hours of service when they go to a spa’s website; 91% of consumers surveyed said they would book a massage online. Spa operators must consider what the consumer is looking for from their websites and whether adding these features makes sense for their business.
• Most spas don’t have the sales call mastered, according to Coyle Hospitality’s spa mystery shoppers. Once you have a client on the line, are you making the most of this opportunity? If you don’t maximize the call by offering options, qualifying the client or mentioning appropriate alternate treatments, you’re most likely losing revenue.

Watch this space for more spa research in the coming weeks. To download Coyle’s Global Spa Research Report, click here.

In yesterday’s seminar, “Trend Watch 2011: Worldwide Spa Trends”, spa consultant Bryan Durocher of hospitality consulting company Durocher Enterprises, shared tips to make the most of marketplace trends. “The spa business has proven to be recession-proof for those who run their businesses correctly,” said Durocher, who added that the spa industry accounts for $13 billion of annual revenue in the U.S. Following are some highlights from Durocher’s seminar.

• 1 in 4 women has never been to a spa, creating a huge potential market of women to convert to spa-going. Operators must educate these potential spa consumers, many of whom may be intimidated by spas or believe they’re only for the wealthy.
• There’s a significant market to be had among Generation Y (Millenial) males who feel no stigma in spa treatments and believe in indulging themselves. Services that look to be growing enormously among this younger male group include laser hair removal and waxing services.
• The Millenial market is made up of 76 million people – a huge potential market to target.
• Spa operators should focus on value-added promotions rather than discounting their services via daily deal sites or in other ways, says Durocher. It’s better to discount retail products than to discount services.
• If you use online marketing, give consumers good content – skin care tips, stress management approaches, etc. – rather than just deals.
• You should have a 24/7 retail store online, buffeted by a VIP loyalty reward program that provides incentives for your clients to purchase from your shop. If you give your clients reasons to be loyal to you, says Durocher, they’ll stay with you and buy from you.
• Consumers are shopping for “experiences.” Create unique guest experiences that foster memories so that they’ll share the experience by telling others – and return for more.
• Carry premium skincare products in your retail store. There are indications that many spa-goers are willing to pay top-dollar for high-end products to maintain the high-end treatments they’re investing in.
• The desire for shorter services is growing. Add a selection of 15-minute spa treatments (perhaps targeted to one area, like eyes or lips) to your menus. Keep this theme by offering and promoting  time-saving products, such as skincare regimes that only take five minutes per day.
• Look into “tryvertising” – giving potential clients the opportunity to try out your services at special events or through the use of limited time pop-up kiosks.
• Status spa treatments are important to many spa consumers. Look to offer exclusive treatments that go beyond luxury brands, offering unique experiences or VIP options. Make sure you guide guests through the entire experience, leaving nothing to chance.
• Make sure you create scripts and dialogues for your staff to follow. Then use spa secret shoppers and mystery shopping services to make sure your staff is using your scripts correctly. 
• Sampling is huge. Make sure clients can touch, try and feel everything you offer in your retail store.
• Make your menu of services tighter; if it’s not selling, take it off the menu. And make sure everything on your menu relates back to the retail products for sale in your spa.
• Consider investing in imaging devices; they provide an objective view that’s valuable in selling treatments.
• Four million teens have been to spas; look for this market to continue to grow and capitalize on that.
• Corporations have noted the huge return in productivity for every dollar spent on wellness. Spa operators should consider pursuing lucrative corporate business.

Coyle Hospitality’s vice president of sales and marketing, Stephanie Perrone Goldstein, will present a seminar on the spa consumer tomorrow at IECSC, from 10:45-12:00 noon.  For more information on Coyle Hospitality Group’s mystery shopping services, click here.