At the New York Spa Conference this past May, a panel of spa industry experts from PFK Consulting, Starwood Hotels, and Red Door Spa Holdings educated listeners on the current outlook for the US hospitality and spa industry.
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/.