Spa Profitability

[1] Simplify your Menu Structure
A well designed and structured spa services menu can provide the essential flexibility to book services, schedule resources and run promotions that maximizes your Spa’s bottom line.  For each treatment, understanding the associated range of your labor costs and true profit margin is critical in this planning exercise.  Strategizing to maximize the booking of high-end, high-margin specialty services creates more opportunities for therapists to further improve revenue capture via upgrades and retail sales.

[2] Apply Revenue/Yield Management Techniques
The ability to leverage a well structure spa services menu (low, med and high margin services) is best exemplified by revenue management techniques.  In simplest terms, using dynamic availability, reducing the list of services of available (highest margin) during peak times has a tremendous impact on profitability.  Even with the same number of services booked (by the same treatment providers) the resulting boost in bottom-line performance can exceed 25%.  It also tends to push more bookings in to non-peak times that would otherwise go unsold.

[3] Compensate Employees to Deliver on your Values
In most spa locations the labor cost of delivering a service can exceed 50%. Developing a compensation strategy that rewards the behaviors that produce the best results is essential. It must be a “win-win” relationship to be sustainable, retain your best employees and provide levers for your spa to push and pull during periods of variable demand. Creating a plan that includes fixed and variable compensation elements as well as team-based bonuses creates a teamwork dynamic that ensures everyone is aligned in purpose and execution.

[4] Maximize the Use of Space
When a spa is first designed or expanded it can be difficult to determine the exact service mix that will prevail. Some decisions are made about service areas (i.e. dedicated specialty, hydro or vichy rooms) that go significantly underutilized (<10% per day) while others are always fully booked. Monitoring utilization and modeling the revenue potential of repurposing the space can produce a quick ROI for any retrofit. Be prepared to bite the bullet and invest quickly to maximize your spa’s revenue potential. Poor design decisions can go unresolved for years at a massive detriment to the performance of your business.

[5] Make Upgrades Easy
Almost universally, the most popular service is massage. Create upgrades to your most popular services and make it easy for the guest to upgrade “in-treatment”. An example is having hot stones in every massage treatment room. Provide staff with much higher compensation incentives on service upgrades as the incremental revenue is almost all margin. The therapists also become more engaged in the guest’s total experience and are more apt to recommend a product regimen to compliment the service.

[6] Maintain a Consistent Retail to Service Ratio
Maximizing this important ratio can dramatically improve your bottom-line. In most spas, retail makes up 10-15% of a spa’s total revenue but can represent 20-25% of the profit. Therefore, an increase in retail sales has a greater impact on your profit than an equivalent increase in service revenue. There is also a direct correlation from selling higher-end services to incremental retail revenue resulting in a higher retail per service revenue ratio—incent your reservations agents to book these!

[7] Develop Strategic Promotions
Maintain a close relationship with your local and loyal spa customers. Create a “last-minute” club using Email, Text-Messaging, Facebook and/or Twitter to inform your “fans” of sudden opportunities arising from cancellations and unforeseen availability at a “special” discount. It could help fill spots that would otherwise go unsold and create other revenue opportunities in retail and/or additional services. It also creates additional loyalty and retention within your local spa community.

[8] Monitor your Spa’s Key Performance Indicators via a Dashboard
Closely monitoring your spa’s key performance indicators (KPIs) and making timely business decisions can impact your business performance proactively versus retrospectively at the end of the week or month. For example, knowing that your spa has dropped below your daily threshold for staff utilization can allow you to make good decisions intra-day (i.e. shortening shifts) that result in immediate bottom-line improvements. As in the previous tip, monitoring Retail KPIs (Retail/Service, Retail/Guest, Retail/Ticket and Retail per Treatment Hour) and continuously adjusting your strategy can produce exceptional retail results.

[9] Manage Inventory Closely to Reduce Costs
Managing your inventory closely is imperative in reducing costs and improving revenue. Even if you manage your top 50 and bottom 50 products very closely, the improvement can be substantial. Too many spas run out of their most popular products too often resulting in lost sales opportunities and reduced guest satisfaction. Some carry too much product, resulting in increased spoilage, theft and money tied up in unsold inventory. Managing inventory on professional products is also key; some systems can forecast shortages based on what services are booked in the future and can automatically deduct from inventory as services as completed.

[10] Add Value Before Dropping Prices
Create reasons for your customers to remain loyal and book frequently without giving away revenue. In other words, delight them with added knowledge or specials that enhance their experience above and beyond their treatments. Choose low or no cost (to you) items to maintain margin. Examples would be 20 minutes of nap time on the table after a treatment (during low demand times only), complimentary product give away (liquidating overstock or working with your product vendor’s promotions), do-it-yourself services to upgrade treatment and class value without added labor. When structured properly, value added experiences may also further incent retail sales resulting in more loyal customers, more revenue and more profit. Plus, when business does improve you won’t have to put your customers through the dreaded price increase just to get back to normal.

Years ago, a merchant’s crime threats were limited to an armed delinquent or a shoplifter. Today you can add the cyber thief to that list. This thief is looking for a more profitable payoff, your customer’s/guest’s payment card information. He or she is much more savvy and capable of doing more harm to your business than just emptying your hotel’s front desk float or spa’s cash register. This breed of thief can cost you thousands of dollars, your reputation, and the ability to accept payment cards.

Since January 2005 more than 245 million databases containing sensitive and personal information have been involved in security breaches in the US alone (PrivacyRights.org). In 2007, the number of attacks on payment card processing doubled from 2006, a trend that we don’t see diminishing. According to Visa Inc., 80% of all identified compromises occurred at Level 4Merchants’ – businesses that process less than 1 million payment card transactions each year. And if you thought the hotel, resort, spa or hospitality industries were at all exempt from that, think again. Upwards of 55% of credit card fraud comes from the hospitality industry (The PCI Compliance Process for Hotels, American Hotel & Lodging Association).

The Payment Industry’s Response

In 2006, the major credit card companies joined together to form The Payment Card Industry Data Security Standard (PCI DSS or PCI). PCI was established to eliminate the risk and mistreatment of cardholder data, enhance payment account data security, and to ultimately protect the cardholder. In 2007, the PCI compliance grace period ended and became mandatory.

The Implications of PCI Non-Compliance

All business operations accepting credit and debit cards must adopt processes to protect sensitive customer payment information and have no choice but to comply with PCI. Non-compliance puts the operation at great risk, leaving the business and its customers/guests vulnerable. Operations face fines of up to $500,000, increased card processing fees (or worse), the loss of the ability to accept payment cards, bad publicity, and brand devaluation. The consequences are serious, from monetary to business-ceasing. 

Hospitality Industry’s Responsibility

Unfortunately, spa, leisure, hotel and resort operations are lagging behind other industries. The clock is ticking and the hospitality industry needs to embrace the requirements set forth to comply with PCI. At the core of this situation is the abundance of legacy software systems still being used in spas, hotels and resorts.  Although the responsibility to comply with PCI isn’t all about technology, software undoubtedly plays a large role. Most of the archaic systems used don’t have the ability to properly encrypt and secure sensitive card holder information or to properly relay encrypted information to your selected credit card processor.  And because of software architecture limitations in these systems, they cannot ever be updated to meet PCI standards. Your software could be hindering you from compliance and putting your operation, customers, and guests at great risk.

What Spas, Hotels, Resorts and Leisure Operations Need to Do

PCI compliance is the responsibility of the merchant, the hotel, the spa, not the software vendors – the onus is on you – you need to make it your business to find out whether your software system(s) meet or are at least undergoing the process necessary to meet PA DSS (Payment Application Data Security Standard – the certification for software developers [if you are using a custom application, then you are also responsible for making the application meet the PCI DSS requirements]). All applications must be PA-DSS compliant by July 1, 2010 (Visa Inc.) A listing of certified applications can be found on visa’s website. However, there are some simple things you can do to quickly evaluate whether your software is meeting even the most fundamental PA DSS (formerly called PABP) criteria.

• Are users automatically logged off after a maximum 10 – 15 minutes (max) of inactivity?
• Is all card holder data in folios, receipts and reports masked with maximum 4 – 6 digits appearing?
• Is card holder data masked or encrypted within the database?
• Is track data or card verification codes encrypted within the database?

PCI compliance is a serious business matter that should be approached at the top of your organization. Business processes and guidelines concerning the delicate handling of sensitive customer data and information should be put into place and should be incorporated into your corporate culture. Your software vendors should be engaged to help you understand how and where sensitive data is stored, processed, transmitted and eliminated.

If your current solution is not compliant, you should begin investigating alternative solutions as soon as possible. Make sure that your new solution(s) provider is well versed in the world of PCI and how it will impact your business. They obviously need to be compliant or should be well down the path to being compliant; otherwise, don’t even consider them as a potential software partner.

For more information on where to begin your PCI compliance, visit the PCI website https://www.pcisecuritystandards.org/security_standards/pci_dss.shtml or, call your credit card processor, which is always a great place to start.

PCI compliance may seem overwhelming at first, with all those acronyms and technical jargon. However, once you engage the right partners and familiarize yourself with the tools and processes, you will be better for it and the benefits will outweigh the work and resources invested. Protect your customer’s/guest’s sensitive data and in turn protect your operation. You can no longer afford to sit idle. PCI compliance is your responsibility!

Frank  

This document is provided for information purposes only and the contents hereof are subject to change without notice.  This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions or merchantability or fitness for a particular purpose.  We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document.  This document may be freely copied and distributed provided that it is not modified in any way and is distributed only in its entirety.

Fauzi Zamir, COO, ResortSuite

Historical Gap in Hotel Needs and Reporting

It wasn’t too long ago that financial staff could take their time assembling, analyzing and packaging financial data for executives. It took a little while to massage the numbers, and that wasn’t a problem because the competition was at times moving at the same pace. Times have changed.  Decision makers now expect information immediately. Business decisions, in large measure, should be based on accurate, timely and comprehensive information rather than just intuition. This isn’t exactly an earth shattering or novel observation, but faithfully practicing it is not always possible.  Why?  There could be several reasons:

• The information required was never captured, so there is no historical information to use as a base for making decisions.
• The information is not complete or cannot be relied upon.
• The information cannot be pulled together in a timely manner as it is resides in numerous systems.

Information Management with Available Technology

Obtaining information directly accessible by management from systems is better than management asking for information from various departments.  The capability to receive this information with easy to use technology is now available.  Using this approach with the right reporting tools, one spends less time gathering and synthesizing information and more on what to do with the information.

Technology vendors must always be cognizant of the need for accurate, reliable and timely information.  If systems have the capability to span all operations of the property, (which sadly might not always be the case!) we will have captured all the relevant information in one database; therefore accuracy, reliability and timeliness become non-issues.  The only thing left is to display the appropriate information and you are on your way to making a decision based on facts.

Technology vendors in the hospitality industry have always been able to provide a multitude of reports to ensure that information is collected and acted upon but sometimes it can be challenging to find the right report. 

Advances in Hospitality Reporting

At ResortSuite we are planning to take reporting to another level with two initiatives that we are currently working on:

• A digital dashboard with Key Performance Indicators (selected by each user) represented in visually appealing graphics.  This will empower front line staff and management to make key decisions based upon real-time data. Reacting to changing circumstances as displayed crisply by a dashboard will ensure that properties drive optimal revenues and better control their costs.
   
• A Report Finder application wherein a user can specify the fields/information that they are looking for and the application will present all the options of reports that contain the requested information.  The user can then select the report that best suits their needs.

We believe that the dashboard will help our customers and future clients in general and owners and management in particular, have access to critical information at the click of a button to make the right decisions for their business.

Fauzi Zamir – COO, ResortSuite
www.resortsuite.com

The Hotel Hershey, Hershey, PA

I am happy to “officially” announce that Hershey Entertainment and Resorts (HER) has selected ResortSuite to manage the The Hotel Hershey, The Spa At The Hotel Hershey, Hershey Lodge, Hershey Highmeadow Campground, Old Mill Stream Campground, Hershey Golf Collection and all associated activities and membership operations.

Instead of blogging about the merits of our software, I thought that sharing the details of the selection process HER undertook in choosing ResortSuite would be an interesting story.  I also thought it would provide invaluable insight on how a large and successful hospitality operation tackles a consequential business decision such as a next-generation system overhaul.

Hershey Entertainment and Resorts operates a resort complex in Hershey, Pa., comprised of a hotel, lodge, two campgrounds, four golf courses, a spa, private club membership, various retail and dining venues, and an amusement park.

The property had a variety of separate systems to manage their business; including, a mainframe hotel reservation system and other standalone systems for spa, golf, membership and other operations. The challenge they had was managing guest information and reservations across all of the systems and using that information to their advantage to provide greater guest service and more focused marketing.

Ultimately, the intent of the evaluation process was to determine how they could significantly reduce the number of management systems required to run their operations, and where interfaces were necessary, ensure that the systems communicated as much information as possible in a modern architecture.

During our initial meeting with HER, we gave them a presentation of ResortSuite’s overall capabilities and technology, and based on those meetings, ResortSuite was asked to participate in their evaluation process.

The following is a summary of the selection process:

Request for Information

HER released a 16 page Request for Information (RFI) that explained their selection process and asked us to provide background on our company and describe how our solution managed different types of reservations (hotel, spa, golf, etc.), online reservations, guest profiles, and integration with third party products such as Passkey, GDS providers, etc.  The RFI was given our team as well as all of the major vendors in the hospitality space.

Request for Proposal

The RFI responses were used to reduce the number of vendors down to a handful, who were then given a Request for Proposal (RFP) to complete. This document contained over 3700 specific questions covering all aspects of HER’s operation. The questions were used to verify specific capabilities for reservations, operations, reporting, and technical capabilities in order to measure vendors against each other on a relative scale. 

Based on the responses received from both pure point-of-sale vendors and vendors providing reservation focused solutions, HER made the decision to separate the point of sale evaluation for the amusement park and retail operations from the selection of a vendor to manage reservation related operations. However, HER would require whatever vendors were selected to provide a robust interface to share guest profile and transaction information.

Onsite Demonstrations

After an evaluation of the RFP responses, the list of possible vendors was reduced to two. The next step in the evaluation process involved a week-long series of meetings and presentations in each operational area. The vendors were asked to prepare a demonstration of their products that would cover specific scenarios outlined by HER. Managers in each operational area were brought into the meetings which were held in an interactive format.

Mark Ozawa from Accuvia helped HER align their requirements with an effective scoring system and provided expert external oversite during this phase.

Enhancement Capabilities

The demonstrations uncovered gaps in the vendor’s solutions, HER’s requirements, and one of the fundamental issues for HER – the ability for their selected vendor to respond to requests in a timely manner. HER asked each of the two vendors to demonstrate their ability to enhance their existing solution by selecting a number of requirements from the demonstration sessions, and giving the vendor two weeks to develop and validate those capabilities with HER. The purpose of this request was to measure how some of the enhancements required from each vendor would significantly impact their system.  Hershey was essentially testing us to see how quickly and safely those features could be implemented without impacting other users of the solution. This not only verified the speed of the development environment, but also the quality of the underlying product design to accommodate enhancements in an efficient manner.

Hands-on Sessions

After the enhancements were made based on HER’s requirements, a week of onsite sessions was scheduled to allow primary users in each area to work with the system to review the new features and also test scenarios in the system. The goal was to assess how the enhancements fit into the product’s overall workflow and ask specific questions on system functionality. ResortSuite provided an implementation specialist for the sessions who provided a mix of training, demonstration, and hands-on use.

Final Selection

ResortSuite was selected based on the entire process outlined above. The keys to our success were overall depth of the product, ability to enhance the solution within the existing architecture, and the rich interface capability provided by our web service architecture.

The Hershey rollout is progressing well with the PMS (Campgrounds), GOLF and CLUB modules live and the SPA coming online this month.  The PMS (Hotel and Lodge) go live is scheduled for early November.

The HER selection has been an incredible validation to our product vision and development over the past 10 years.  Our entire team rallied around the selection process to ensure each question and use case was presented as effectively as possible.  I was told that our strong technology platform (Oracle) and product depth and breadth made us a very strong finalist, but it was our ability to prove our responsiveness to enhancement requests that truly separated us from the pack.

Frank Pitsikalis, ResortSuite Founder & CEO

Welcome and thank you for visiting. My name is Frank Pitsikalis. I am the Founder & CEO of ResortSuite.

Writing a blog has been something I have wanted to do for a quite some time. I have been eager to share my views, experiences, and predictions with those in my professional network that are interested in tuning in and engaging in the conversation. I desire to strengthen the ties that I have established with many of you and build new ones with those of you with whom I have not had the chance to.

Through the ResortSuite blog, I look forward to sharing with you some of the behind the scenes at ResortSuite and what you can look forward to. More importantly, however, I am excited about discussing industry technology trends, business challenges, operational strategies, and otherwise, and to sharing relevant, thought-provoking experiences in a way that hasn’t been presented before. In addition, I will call upon guest bloggers to offer their expert advice on various relevant topics.

I encourage you to join the conversation by posting your comments or by emailing me directly at franksblog@resortsuite.com. If there is a specific topic of interest that you would like to hear about, please let me know. I would love to hear from you. Thank you.  Talk soon.

 Frank Pitsikalis