By: Andrea Foster & Jenna Finkelstein
Business is back for hotels across the United States with occupancy levels surpassing long-run averages and hotels raising room rates more aggressively. According to PKF Hospitality Research (PKF-HR)’s forecast, occupancy is estimated to be above the long-run average in 49 of the 55 U.S. markets they track, 14 of which are achieving their highest occupancy levels in the past 25 years. By 2015, the U.S. lodging industry will experience six consecutive years of increasing occupancy, the most since 1988. The hotel industry has finally climbed out of the recovery period following the Great Recession as people are traveling more than ever before, and at higher prices.
According to the 2014 edition of PKF’s Trends® in the Hotel Industry, in 2013, total hotel revenue increased 5.4 percent from 2012 (the most current year-end data available). Driving this increase was 5.9 percent growth in rooms revenue, while all other revenue sources averaged 4.4 percent growth. On a per occupied room basis, all other revenue increased by 2.7 percent. Hotels have struggled in recent years to encourage spending from hotel guests on services and amenities other than rooms. After increasing occupancy and rate, hotel managers are now seeing the return of guest spending in other areas of operation, a healthy sign of growth.
Spa is one hotel department in particular that is seeing great gains in both revenues and profits. Fueling the growth of hotel spas is a combination of a nationally improved economy, increases in hotel occupancies, and a shift in the perception of spa from an exclusive, luxury experience to a wellness-oriented experience valued by the average consumer to help facilitate a healthier, more vibrant life. As spa and wellness are becoming more prevalent in today’s society, hotels are ensuring they adopt these lasting trends and offer consumers an experience aligned with society’s increasing desire for a healthier lifestyle.
At its root, spa is about health and well-being, and there are indications that health and wellness trends are here to stay. As such, hotels are incorporating spa and wellness not only in spa department, but into other aspects of the hotel, such as rooms, meetings, and food and beverage. For example, some hotels are offering aromatherapy and sleep-aiding amenities in rooms, trendy juices and spa menus at their restaurants, and outfitting meeting rooms with healthy snacks and beverages and premium air quality control. In addition, hotels are creating new ways for guests to be active and social, such as initiating a bike-share program or leading group hikes/runs. Thus, spa and wellness is growing outside the spa, and in facilitating healthier lifestyles for their guests, hotels are seeing a positive impact of the integration of spa and wellness into their entire operation.
PKF Consulting USA (PKFC) and PKF-HR, both CBRE Companies , together are the only consulting firm with a proprietary annual database of approximately 7,000 individual hotel income statements, which includes detailed hotel spa revenue and expense data. Using this database, our Trends® in the Hotel Spa Industry report is the only publication of its kind reporting hotel spa performance and profitability, providing hotel spa operators and owners with sound benchmarking information. The performance overview to follow is excerpted from our extensive 2014 Trends® in the Hotel Spa Industry report.
Hotel spas benefited greatly from hotels capturing more demand and society’s trending healthier lifestyles. In 2013, the most current detailed data available, all hotel spas averaged a 4.6 percent increase in revenues, greater than the average increase experienced by all hotel revenue sources other than rooms. Specifically, both urban and resort hotel spas saw revenues increase, by 7.7 and 3.6 percent, respectively. On a per occupied room basis, urban hotel spas saw a greater increase in total spa department revenue, driven by a combination of an increase in customers, revenue per treatment, and revenue per customer.
Revenue per treatment increased 3.2 percent for urban hotels, while resort hotels experienced a decrease of 1.2 percent. Revenue per customer for urban hotels increased 1.3 percent, compared to a 1.3 percent decrease for resort hotels. For urban hotels, we attribute a portion of these increases to effective revenue management and selling techniques. To calculate hotel guest capture rates, the number of occupied hotel rooms is divided by the number of spa treatments from hotel guests. Combined, hotel spas averaged a 7.8 percent capture rate in 2013, comprised of resort spa capture rate of 11.0 percent and urban spa capture rate of 4.6 percent. This reflects a slight increase over 2012 for resort spas, while urban hotel spa capture was flat.
Hotels continue to reach out to locals to boost spa revenues. By sourcing local patrons, hotels can decrease the volatility of spa revenues relative to occupancy patterns, and bolster demand in off-peak periods. Daily facility use, fitness and personal training, health and wellness, and membership fees, typically associated with locals and non-hotel guests, grew by 4.5 percent combined. This is slightly greater than the increase in total treatment revenue, which grew 4.2 percent.
Retail revenue increased for both urban and resort hotel spas, by 10.4 and 3.3 percent, respectively. We are finally seeing a return to spending on retail and product merchandise in addition to spa treatments, which is a healthy sign for hotel spas.
Increase in hotel spa revenues is great news for hotel spa operators, and even greater news is the fact that much of these additional revenues passed through to the bottom line. Both urban and resort hotels managed to achieve a greater increase in revenues compared to their change in operating expenses, showing that hotel spas are becoming more efficient in their operations.
As it is a “high touch” experience, labor remains as the spa department’s highest expense. As revenues increase at hotel spas, it is no surprise that labor costs increased compared to the prior year, as well. Labor expenses at all hotel spas increased 2.6 percent overall from 2012 to 2013, however the percentage of total labor expenses to total spa department revenue decreased from 60.8 percent in 2012 to 59.6 percent in 2013. As demand increases for hotel spas, higher staffing levels are needed to create the same personal, high-quality experience. One notable change we saw in 2013 was a decrease in payroll related expenses for spas with less than $1M in revenue. It seems reasonable that this would be driven by a shift from full-time employees to part-time, on-call, and/or contract labor for which benefits are not offered. For spas with lower volume, this can be an effective cost-saving strategy.
Due to an increase in revenues and the controlling of expenses, hotel spas were able to see high percent increases in total spa departmental income. Combined, all hotel spas averaged a 13.9 percent growth in profits. Leading the way were urban hotel spas, which grew their bottom line by a greater percentage than resort hotels. Despite a lower overall growth in spa departmental profit, resort hotel spas saw higher profit margins than urban hotel spas, at 23.1 percent compared to 17.7 percent.
New England Hotel Spa Market
New England is home to many hotels and resorts that have spa operations, including destination spas, resort, and urban hotel spas. These spa operations are known for their innovative treatments, high quality services, and excellent guest service.
As society is increasingly making healthy changes to their lifestyles, hotel spas are seeing a benefit and an opportunity. Whether travel decisions are made on behalf of individuals or companies, many are being made with these healthier lifestyles in mind. Additionally, both de-stressing and spirituality have become top-of-mind for hotel and resort guests, and hotel and resort spas are responding in kind.
Mirbeau Inn & Spa at The Pinehills, located in Plymouth, Massachusetts, finds that a strong spa and fitness component is an important factor when companies select a hotel to host a corporate retreat, which they find puts them at an advantage. And Stoweflake Mountain Resort, located in Stowe, Vermont, sees that, in general, guests are looking to reduce their daily stress. As such, their Ayurvedic services are extremely popular, and they offer diet and lifestyle consultations, treatments, therapies, and workshops that are customized for guests. Additionally, destination spas such as Canyon Ranch, located in Lenox, Massachusetts, offer numerous spirituality programs focusing on the body, mind, and spirit for the purposes of grounding, finding purpose, and stress reduction.
As noted, many hotels are integrating wellness into other aspects of the hotel, beyond just the spa. At the Mandarin Oriental Hotel in Boston, Massachusetts’s only 5-star hotel spa, the Spa Director sits on the hotel’s executive committee to ensure the health and wellness of guests are addressed throughout their stay. Committee initiatives include placing yoga mats in each room and offering personal training and nutritional services. Stoweflake Mountain Resort incorporates yoga, meditation, and wellness workshops into meetings for business travelers. Food and beverage is a popular hotel department in which wellness can be incorporated. Hotels such as the Stowe Mountain Lodge are offering healthy menus to their guests as an option, along with its regular menu selections. Mirbeau Inn & Spa at The Pinehills also provides its guests with such options, including organic meals, healthy snacks, and smoothies.
Hotel spas are also using technology and social media as a way to reach and engage with consumers. For example, Mandarin Oriental hosts wellness chats on Twitter, and Stoweflake Mountain Resort welcomes spa writers and bloggers to their online platforms. Technology and social media are instrumental tools for hotel spas as they allow them to reach a broad consumer base to offer promotional offers, educational resources, and other spa-related content.
Hotel spas are finding that personalized, unique, and interactive experiences are what guests are seeking, and what will keep them coming back. Stowe Mountain Lodge looks to ”bring the outside in” by providing maps of hiking/running trails to guests upon check-in and offering outside yoga classes, both in the woods and at the base of the mountain. Also, two of Stoweflake’s most popular treatments are the Vermont Maple Sugar Body Polish and the Green Mountain Coffee Body Treatment, each of which uses unique local ingredients. Additionally, hotels are noticing that guests are taking greater advantage of interactive programming, such as Canyon Ranch’s creative arts programming where guests can learn basket weaving, jewelry making, knitting, and collage art.
Consumers are ever-more driven toward unique and active experiences that are “share-worthy”, and spas have a continued opportunity to deliver just this in a way that can generate posts, shares, and create online trending. Technology continues to transform the way the hotel industry conducts business, and thanks to social media, hotels and spas are able to engage with their customers more than ever before. Hotels are realizing the profound influence of technology and social media on guest purchase decisions, behavior, and awareness. A presence on social media is no longer a competitive advantage, but a competitive necessity; all hotels and spas must engage with their customers online to remain competitive. For hotels to rise above the competition and differentiate themselves, they need to provide consumers with unique and personalized experiences. Not only are hotels regularly engaging with their guests through social media, guests are also in constant communication with other potential customers. Therefore, it is important that hotel spas efficiently provide innovative and meaningful experiences that are Facebook- and Instagram-worthy, which will help increase the awareness of these offerings, organically.
A Healthy Present, A Healthy Future
2013 was a healthy year for hotel spas as they were able to increase revenues and control expenses, resulting in an increase of departmental profits, and we estimate similar improvements in 2014 as we gather year-end financial statements. As occupancies continue to reflect record demand levels, hotel spas have more opportunities to generate spa guest patronage, and the healthy living trends allow spa and wellness experiences to appeal to a broader guest base. It is reasonable to expect that spas providing innovative and unique services, that maintain approachability and the essence of wellness, while managing their expenses, will prove to be most successful in the future. For hotel spas to have sustainable success, they will need to maintain a balance between controlling costs, sourcing new customers, and offering high quality, unique experiences in both spa and broader wellness.
The full 2014 Trends® in the Hotel Spa Industry report can be purchased and immediately downloaded here.
Andrea Foster is Senior Vice President and National Director of Spa & Wellness Consulting, for PKF Consulting USA, a CBRE Company. She is also the publisher of PKF’s Trends® in the Hotel Spa Industry report. he now heads up the Boston office of PKFC.She can be reached at email@example.com, or (617)488-7290. Jenna Finkelstein is a Consultant with the firm. They are both located in the firm’s Boston office.
By John D. Murtha
Doctors say that people who exercise, eat right, reduce stress, and have a balanced outlook on life stay healthy and live longer. So, could it be said that teamwork, having the right resources, maintaining a stable operation and fostering a productive culture will make a hotel healthier and more successful over time? Yes. A focus on keeping things “healthy” offers useful perspectives for hotel managers looking to enhance the culture and results of their operation.
Setting the Tone
The hotel I manage is home to a lot of history and more than 30 associates that belong to our 30+ Club signifying 30 or more years of service to the property. Their tenure is an important element of the atmosphere, culture, and success of the hotel. Part of my job is to make sure this special staff attribute is nurtured, applauded and contributes to the overall “tone” of the operation.
What’s a “tone”? It’s a style, a manner of being, or as Merriam-Webster says: “The state of a living body or of any of its organs or parts in which the functions are healthy and performed with due vigor.” Establishing a tone that infuses the operation with health and vigor is a critical step in cultivating success over time.
The GM is the one to take the lead on this, enrolling his or her management team in the tone-setting process. It starts with having shared goals and tactics for achieving outcomes. Then, it means fostering an atmosphere where people feel comfortable, recognized as individuals by everyone in the hotel (especially the GM) and acknowledged for their contributions.
A simple thing like noting an associate’s birthday goes a long way. As often as I can, I do so in person with the associate at their workplace, along with sending a card to their home. I also make a point of congratulating sales managers when they hit their monthly goal, or gently urge them on when they miss it. At those times, I find it works better to be a cheerleader and leave the coaching to their director.
Setting the tone includes being fair and consistent in all dealings with associates and guests, being easily accessible to everyone and telling the truth, even when it’s not easy to do so. But, it also means injecting some humor into the operation. The hotel business—and, it is a business—can be stressful at times, so keeping things light when the pressure’s on allows people to relax and perform better.
A Balanced Diet
Doctors also recommend a balanced diet as a way to stay healthy. The same advice works to keep hotels healthy. What constitutes a healthy diet for a hotel? In my view, it comes down to a balanced “feeding” of the primary constituent groups served by the property, including the owner, the guests, and the staff.
In order for a hotel to prosper over time, it must generate a reasonable return for the ownership entity that risked its capital in the first place. You need to pay bills on time, keep the property in great physical condition and acquire, develop, and retain a professional staff. This all requires sustained profitability.
The guest also needs to gain something from the hotel’s operation. Travelers expect personalized service, cleanliness in everything, modern systems, and good memories of their experience. You may very well be leaving some money on the table to generate high levels of guest satisfaction, but that comes with the territory when you’re looking for a balanced diet.
Your staff must be well served in the process, too. Fair rates of pay, good benefits, opportunities for training and advancement, personalized acknowledgement of their contributions to the operation, and consistent application of rules and regulations are essential elements of generating high degrees of employee satisfaction and low turnover. Again, some profit may be foregone to make sure that the staff is happy and taking good care of your guests. But it’s worth it.
Dual Health Benefits of MBWA
A few decades back, we learned that unstructured management by wandering (or walking) around (MBWA) was distinguished as a valid way to improve the morale and productivity of an organization. I think that MBWA is intuitive to most hoteliers because we know the best way to understand what’s happening in our hotels comes from being “on the floor” and responding to what we directly observe, rather than from reports, documents and other sources after the fact.
Japanese businesses use the notion go to gemba (“the real place”) to highlight the concept of having managers spend their time where the work is done. This approach asserts that direct experience best informs problem solving and process improvement.
MBWA is a great way to catch your associates performing well so you can acknowledge their contributions immediately or provide feedback for improvement, when needed. It also works to increase the amount of time you spend with guests, in the lobby and elsewhere throughout your property. One should use time spent at “the real place” productively and not simply to get out of the office.
The second benefit of MBWA is the health benefit to you, personally, from being on the floor. Some fitness experts claim that staying healthy requires a steady diet of 10,000 steps per day, which for a person of average height is about 4 ½ miles of walking. You may not be able to walk that much each day on-property, but practicing some level of daily, unstructured MBWA can reduce stress, keep you healthy and strengthen your operation.
Another benefit of MBWA is that it’s probably the best way to experience how your associates are performing. You can then praise or coach them in “real” time. But there’s an important distinction in how to approach this task. It’s the difference between checking “on,” and checking “in,” with your staff.
Tip: Evaluate everyone involved in assembling and finalized your forecasts, then add to this list. You may find that a “more is merrier” approach will improve accuracy.
I suggest that checking “on” is based on an unstated belief that the person being monitored might have done something wrong—even unintentionally—that needs to be corrected. One checks on people to make sure they adhered to established standards and procedures, to verify that specific instructions have been precisely followed or requests have been fulfilled in an acceptable manner. Managers accustomed to checking “on” their colleagues use the phrase “inspect what you expect.”
On the other hand, checking “in” with an associate assumes no wrong-doing, but rather that you care about them and their work. Good morning! How’s it going today? Is everything okay? Can I give you a hand? Is anything missing? Did you get that report you needed? How’s our guest that needed some TLC yesterday? These are the questions posed by a manager checking “in” with, and not “on,” their associates.
The answers you receive and observations you make still alert you to problems that need to be addressed, but your comments based on the checking-in style will more likely be perceived by associates as support for their efforts, not criticism. I think this is a healthier management approach that works to ensure both guests and staff have a memorable experience of your hotel.
Many hotels have an all-associate meeting, once a month or a quarter, sometimes known as a “Koffee Klatch”. At one of our recent meetings, most members of the
executive committee presented their team’s accomplishments for the previous year.
One member of the committee neglected to do so.
This particular division head knew immediately he’d made a mistake. His team had done quite a lot to improve the operation during the year and they deserved to be recognized in front of their peers. After the meeting, his team politely asked “Hey, what about us?” Be assured that the division head made up for the error at the next meeting.
I’ve normally found it easy to show gratitude to my staff for doing great work but wanted to know if there was evidence that doing so improves their well-being and results. I did some quick online research to see if any studies have shown a connection between showing gratitude and improved employee engagement. It turns out that lots of work has been done on this subject; here are some findings that I found interesting:
- Praising someone’s good work causes dopamine to be released in his or her brain. Dopamine is a chemical that is credited with generating feelings of pride and pleasure.
- Showing gratitude also increases feelings of goodwill in the person delivering the praise.
- People who don’t receive praise for their efforts report having the notion “What am I doing this for?” This implies that it’s not all about the money.
- Recognizing entire teams of associates for the value they add to the overall operation bolsters the enthusiasm of each member of the team and improves their standing within the organization. This is why we celebrate Housekeeping Week.
- Faint praise doesn’t work and neither do scheduled recognition ceremonies, at least not for very long.
- Appreciation and praise needs to happen on a regular basis under typical business conditions for it to be effective.
- Praise also needs to be very specific. A simple “great job” won’t suffice. Tell them exactly what they did that had you say “great job” in the first place.
- Rodd Wagner and Jim Harter, authors of 12: The Elements of Great Managing, said “Great managers are extremely effective in figuring out the best form of praise for each person. Some managers worry that they can give employees too much recognition. But the research shows that it’s extremely difficult to do that, as long as the recognition is right for the person.”
Operating a busy hotel can be stressful at times so it’s in everyone’s best interest to avoid stress whenever possible. Here are some common business activities that most hoteliers wouldn’t typically describe as stress reducers but that I find work that way for my team and me:
Accurate Forecasts: If everyone in your operation knows what is really going to happen, then plans and resources will be aligned correctly. This is especially true when scheduling staff. Accurate forecasts lead to department schedules that appropriately match staffing with business levels, thus avoiding the last minute scrambling that occurs when solid information was absent during the scheduling process.Purchasing activities also benefit greatly from accurate forecasts. Haven’t you ever had to jump in your car to fetch something for the chef that he or she needs right now but didn’t buy sooner because the forecast was “off?”
Appropriate Meetings: Most of us who prefer to be on the floor don’t like to be in meetings, so start relating to them differently—as opportunities to reduce stress. The more that you and your associates know about what’s going to happen, the better that everyone can prepare to deal effectively with those upcoming realities. Your guests will benefit as well, from the friendly service that is naturally offered by relaxed, “in the know” staff members.
Handling Issues Immediately: Issues and the stress they create aren’t going to disappear until you and your staff deal with them head-on, so you might as well handle things quickly and completely. It’s the next best thing to having done it right in the first place, the best stress reducer of them all.
This material was originally published on my blog, “The Healthy Hotel”, at HOTELSMag.com. I hope that you’ll check out future postings and take the opportunity to share with other managers what you’ve done to improve the culture and results of your hotel.