Hotels Gain ADR Steam with Spas

November 23, 2015
Bruce Serlen, HNN contributor

Hoteliers who operate properties with spas say they see a positive impact in average daily rate and guest experience.

REPORT FROM THE U.S.—While the question might be straightforward, the answer is hardly clear-cut: “Does having a spa allow a hotel or resort to charge a higher average daily rate?”

In preparing its “2015 Trends in the hotel spa industry” report, PKF Consulting USA compared two groups of full-service properties—one group with a spa, one group without—and found that indeed the spa-equipped hotels/resorts had higher ADRs. The report didn’t measure the amount of the increase, simply that properties with a spa carried a premium in rates.

But PKF’s managing director Andrea Foster, who directs the firm’s spa and wellness practice, cautions owners and developers not to assume causality.

“Our research doesn’t assume there’s cause and effect. There could be numerous other factors at play accounting for the increase, including location, target market, overall positioning in the market and so on,” she said.

At the same time, however, Foster believes that having a spa on site typically enhances a property’s appeal.

“There are more things to do, more ways for guests, both leisure and group, to spend their time. The value proposition is greater,” Foster said.

A number of New Castle Hotels & Resorts’ 20 properties offer spas, but not all spas are created equal, notes President and COO Gerry Chase.

“Some are major features of a property; ‘spa’ is included in the property name and is managed by the owner and operator of the property,” he said. “They’re integral to the property’s identity. By contrast, other spas would be more of an amenity, still valued, but ‘spa’ wouldn’t be part of the property name and, typically, would be operated by an outside vendor on a lease arrangement.”

The former type would be more likely to benefit from a bump in ADR, Chase said.

Similarly, on the group side, a well-designed and well-managed spa can have a positive effect on ADR, especially for incentive and other leisure-oriented groups, according to Ted Davis, chief sales and marketing officer for Benchmark Hospitality International.

“A spa on property brings a lot of ancillary value. For incentive and meeting planners, it’s a component that’s necessary in their programming,” Davis said.

Like New Castle, Benchmark has a number of properties in its managed portfolio that include a spa—with ‘spa’ both in the name and not. Davis also describes a perception factor attached to the presence of a spa. “There’s a certain panache to it, especially at the luxury tier,” he said. It’s true at destination resorts, but it also applies to the city hotel with an urban spa.

“We judge the (return on investment) through the revenue the spa generates via room bookings as well as special promotions such as spa packages,” he added.

For luxury, a must

From the on-site property perspective, Alex Attia, general manager of The Charles Hotel in Cambridge, Massachusetts, takes Davis’ point one step further.

“For the luxury market, a spa is an absolute necessity. It adds value and that translates into being able to charge a higher ADR,” he said. The spa in question at The Charles is Corbu Spa & Salon and is a leased operation.

Attia singles out the wedding market as an example. The hotel hosts a significant number of elaborate weddings during the year, many of which include a room block.

“Typically, the bride and other members of the wedding party book spa and salon appointments the day of the wedding. It’s become an integral part of the overall event,” Attia said. “In fact, we’re asked about it as part of the bidding process for the wedding as a whole.”

Hotel spas also benefit from the valuable revenue generated by customers from the local community, which has no direct effect on ADR because there are no guestrooms involved.

“Often, the operators of our leased spas have an existing following in the local community. That reputation precedes them when they open a facility in one of our hotels, and their customers seek them out,” Chase said. “Better yet, these tend to be repeat customers, rather than group of leisure guests at the hotel, who are more likely to only use the spa once during their stay.”

In the case of The Charles, the “locals” are as close as next door because the hotel is part of a mixed-use development that includes 75 condominiums adjoining the hotel in a project called the Residences at Charles Square.

“Local spa clients are also more apt to book appointments at times—say midweek mornings—than hotel guests, whether business transient, group or leisure guests, who are typically doing other things at those times,” Attia said.

Bringing members of the local community on property also has another added benefit, one more difficult to quantify, Foster said. It reminds the local spa customers the hotel is there, so that when they next need to book a hotel room for a business associate, friend or family member, the hotel hopefully is top of mind.