Hotel & Motel Management - March 3, 2008 - (Page 20) 20 Trends & Stats H&MM March 3, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Luxury hotels with spas have greater pricing power IN THE details Spas make a difference Luxury segment researched Rate premium increases Occupancy not as impacted Luxury hotels with spa—ADR—Compared to open date $300 $275 $250 $225 $200 By Jan Freitag H&MM Columnist A ging baby boomers looking for relaxation and Generation X-ers taking more frequent, short getaways have made spas a favorite amenity of developers and travelers alike. Smith Travel Research tracked 260 luxury hotels, 190 of which operate spas. When comparing the occupancy and the occupancy percent change of hotels with and without spas over the last 10 years, there seems to be little difference. Through November 2007, luxury hotels with spas achieved 71.2-percent occupancy, whereas luxury hotels without spas reported 70.8 percent. The picture changes drastically when looking at the average daily rate performance. Luxury hotels with spas showed a stunning rate premium that seems to be growing over time. At the beginning of 1997, we showed an ADR that was around $40 higher; most recently this premium was around $73. The drawback of the previous discussion is that hotels with spas are treated as if the spa was in operation starting in 1997. In other words, classifying a luxury hotel “with spa” assumes that the spa was open all the time, which certainly is not the case for all of the hotels in our sample universe. The following charts show the performance of a sub-group of 13 luxury hotels that opened spas between 2003 and 2005. For the purpose of this dis- cussion, we aligned the performance of all these hotels so that the opening month of the spa was treated as month “0.” We then observed the performance of this group of hotels 36 months before and 24 months after the opening of a spa. In addition, we examined the rate and occupancy premium that hotels with spas can achieve. Occupancy seems to increase after a spa is opened, and the sample hotels were able to achieve a higher stabilized occupancy than before. In comparison to their respective competitive sets, the hotels with spas showed an occupancy premium of up to one occupancy point before the spa, but of more than two percentage points 18 months after opening. The drop in occupancy premium in the 12 months after the spa was introduced is puzzling, but may be explained through the increase in rate premium we discuss next. ADRs for hotels introducing a spa also show a premium after the spa’s opening. Specifically, in the 12 to 36 months before the spa opened, hotels reported ADRs in a very narrow range, varying about $5. After the spa opened, rates climbed continuously, up to more than $30 higher than before the spa. Comparing this to the performance of the competitors shows that the subject hotels had always maintained a rate premium, but this had been decreasing over time. The introduction of the spa then infused new energy into the pricing strategy and allowed the hotels to charge ADRs that, after 12 months, were about $50 higher than the competitors’ rates. Overall, our numbers suggest that for luxury hotels, a spa seems to increase pricing power. While the spa seems to do little for occupancy, the achieved rate premium is one reason why luxury hotel spas currently are undergoing such a strong renaissance. hmm@questex.com Jan Freitag is vice president of Smith Travel Research (www.smithtravelresearch.com). 36 months prior 24 months prior 12 months prior Spa opened 12 months later 24 months later Luxury hotels with spa—ADR—Premium over competitive set— 12 month moving average compared to open date $55 $50 $45 $40 36 months prior 24 months prior 12 months prior Spa opened 12 months later 24 months later Luxury hotels with spa—Occupancy point premium over competitive set— 12 month moving average compared to open date 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% 36 months prior 24 months prior 12 months prior Spa opened 12 months later 24 months later Luxury hotels with and without spa—ADR— 12 month moving average - 1997 to Nov. 2007 325 11/07: $310 Luxury hotels with and w/out spa—Occupancy percent— 12 month moving average - 1997 to November 2007 79 74 69 11/07: $237 94 59 54 275 W/out spa With spa 11/07: $73 11/07 71.2% 225 01/01: $54 01/05: $64 175 01/97: $40 W/out spa With spa 11/07 70.8% 125 1997 1999 2001 2003 2005 2007 1997 1999 2001 2003 2005 2007 © 2007 Smith Travel Research http://HotelMotel.com http://www.HotelMotel.com/digital_edition http://www.smithtravelresearch.com
Table of Contents Feed for the Digital Edition of Hotel & Motel Management - March 3, 2008 Hotel & Motel Management - March 3, 2008 Contents Embassy Suites Refreshes Look, Service F&B Concept Set to Take Off Conference Promises Perspective Letter to the Editor Legally Speaking Guest Column HSMAI Consultant's Corner On Finance Travel Trends Energy Star Update Trends & Stats Transactions Property Management Systems Carpet: Mixed Media Planting Greener Greens Transportation Vacation-Ownership Update Ad/Editorial Index Marketplace Classifieds Checking Out Hotel & Motel Management - March 3, 2008 Hotel & Motel Management - March 3, 2008 - Hotel & Motel Management - March 3, 2008 (Page 1) Hotel & Motel Management - March 3, 2008 - Hotel & Motel Management - March 3, 2008 (Page 2) Hotel & Motel Management - March 3, 2008 - Contents (Page 3) Hotel & Motel Management - March 3, 2008 - Conference Promises (Page 4) Hotel & Motel Management - March 3, 2008 - Conference Promises (Page 5) Hotel & Motel Management - March 3, 2008 - Letter to the Editor (Page 6) Hotel & Motel Management - March 3, 2008 - Letter to the Editor (Page 7) Hotel & Motel Management - March 3, 2008 - Guest Column (Page 8) Hotel & Motel Management - March 3, 2008 - Guest Column (Page 9) Hotel & Motel Management - March 3, 2008 - HSMAI (Page 10) Hotel & Motel Management - March 3, 2008 - HSMAI (Page 11) Hotel & Motel Management - March 3, 2008 - Consultant's Corner (Page 12) Hotel & Motel Management - March 3, 2008 - Consultant's Corner (Page 13) Hotel & Motel Management - March 3, 2008 - On Finance (Page 14) Hotel & Motel Management - March 3, 2008 - On Finance (Page 15) Hotel & Motel Management - March 3, 2008 - Travel Trends (Page 16) Hotel & Motel Management - March 3, 2008 - Travel Trends (Page 17) Hotel & Motel Management - March 3, 2008 - Energy Star Update (Page 18) Hotel & Motel Management - March 3, 2008 - Energy Star Update (Page 19) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 20) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 21) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 22) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 23) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 24) Hotel & Motel Management - March 3, 2008 - Transactions (Page 25) Hotel & Motel Management - March 3, 2008 - Transactions (Page 26) Hotel & Motel Management - March 3, 2008 - Transactions (Page 27) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 28) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 29) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 30) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 31) Hotel & Motel Management - March 3, 2008 - Carpet: Mixed Media (Page 32) Hotel & Motel Management - March 3, 2008 - Carpet: Mixed Media (Page 33) Hotel & Motel Management - March 3, 2008 - Planting Greener Greens (Page 34) Hotel & Motel Management - March 3, 2008 - Planting Greener Greens (Page 35) Hotel & Motel Management - March 3, 2008 - Transportation (Page 36) Hotel & Motel Management - March 3, 2008 - Transportation (Page 37) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 38) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 39) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 40) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 41) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 42) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 43) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 44) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 45) Hotel & Motel Management - March 3, 2008 - Ad/Editorial Index (Page 46) Hotel & Motel Management - March 3, 2008 - Ad/Editorial Index (Page 47) Hotel & Motel Management - March 3, 2008 - Marketplace (Page 48) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 49) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 50) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 51) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 52) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 53) Hotel & Motel Management - March 3, 2008 - Checking Out (Page 54) Hotel & Motel Management - March 3, 2008 - Checking Out (Page 55) Hotel & Motel Management - March 3, 2008 - Checking Out (Page 56)
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