Hotel & Motel Management - September 15, 2008 - (Page 20)

20 Cornell Insights IN THE details Optimizing revenue in spas RevPATH deﬁned Structure rates, demand Understanding patterns H&MM September 15, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Using revenue-management systems in spas lthough revenue-management systems are commonly used to price and sell hotel rooms, revenue-management strategies are less commonly found in spas— even those operated as part of a hotel. A new report from the Cornell Center for Hospitality Research explains how the same principles that support revenue A By Glenn Withiam H&MM Columnist management for a hotel’s rooms division also can work in a spa— whether that spa is connected to a hotel or is a standalone facility. The report, “Spa Revenue Management,” by Sheryl E. Kimes and Sonee Singh, is available at no charge from the center at chr. cornell.edu. Kimes is a professor at the Cornell School of Hotel Admin- istration, and Singh is regional director of spas–the Americas, for Mandarin Oriental Hotel Group. In their report, Kimes and Singh explain that the key to achieving the best possible revenue position for a spa is to include time and revenue in one single measurement. They term this measure “revenue per avail- able treatment hour,” or “RevPATH.” This is a measure similar to revenue per available room, or RevPAR, and the basic concept of RevPATH is similar to that of setting room rates. By selling each time period of the spa day at an appropriate price, you can sell treatments to each customer at the right price— where “right” means the price that gives both your spa and the customer the most utility from the transaction. During slack times, a spa’s revenue manager can offer promotional pricing or other encouragement to entice customers to book a treatment. On the other hand, during busy times, the spa can structure its rates to shift demand to less-busy times, while perhaps offering extra beneﬁts to those who have paid premium prices. Also during busy times, the spa managers can address the problem of noshows, perhaps by requiring payment guarantees or by calling guests to remind them of their appointments. Kimes points out that revenue management is not merely a discounting program, but instead involves a strategy of setting differential rates for varying levels of business. Singh suggests that spas will not want to experiment with overbooking during busy times. Instead, one tactic that some spas employ during busy periods is to call guests and offer them an incentive to switch times. Most critically, a spa manager must measure and understand the reasons for demand patterns. Then the spa can implement its strategies to accommodate heavy demand and also to encourage more business when demand is light. Indeed, most spas use some of the tactics found in a full revenue-management program, but the report suggests that spa managers assemble those tactics into a strategy that will optimize the revenue per treatment hour. hmm@questex.com Glenn Withiam directs publications at The Center for Hospitality Research at the Cornell University School of Hotel Administration. He can be reached at grw4@cornell.edu. CIRCLE NO. 158 http://HotelMotel.com http://www.HotelMotel.com/digital_edition http://chr.cornell.edu http://chr.cornell.edu http://www.travelclickworks.com http://www.travelclickworks.com

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Hotel & Motel Management - September 15, 2008 Contents Microtel, Hawthorn Settle in at Wyndham Is it Black or Red for Green Hotels? New City on the Strip When in Doubt, Purchase some Seashells Legal FAQ Consultant's Corner Sales Clinic On Finance Travel Trends Franchise Law Guest Column Events Cornell Insights HotelWorld Update Trends & Stats Top Hotel Companies Survey Awards Lending Requires Knowledge, Preparation Casegoods Minibars Historian to Keynote Leadership Forum at IH/M&RS Fitness Equipment The Lodging Conference Preview Accent Lighting Awards Vacuums Supplier News Transactions People Ad/Editorial Index Marketplace Classifieds Checking Out

Hotel & Motel Management - September 15, 2008

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