SUMMIT REVIEW TO SPA OR NOT TO SPA?
Jan Freitag points out why spa operators should be aware of misreading data including the latest Smith Travel Research results that he presented at this year’s Global Spa Summit
JAN FREITAG » VICE-PRESIDENT OF GLOBAL DEVELOPMENT » SMITH TRAVEL RESEARCH M
ark Twain famously remarked about three sorts of lies: “Lies, damned lies – and statistics”. T is may be an odd way to
start a discussion about data, but I feel that information presented here – and which I showed at the Global Spa Summit – has lent itself to many diff erent, confl icting interpreta- tions that spa operators should be aware of. T e focus of this survey is: does the mere
existence or absence of a spa in a luxury hotel infl uence the performance of the hotel? To gather information, we called and sur- veyed 340 luxury hotels in the US – all from chains such as Four Seasons, St Regis and Ritz-Carlton – and asked whether they oper- ated a spa or not. From existing and ongoing work with
these hotels, we were also able to calculate the average daily rate (ADR), occupancy and revenue per available room (RevPAR). We then aggregated the data based on the two subsets: US luxury hotels with spas and US luxury hotels without spas. Graphs 1 and 2 show the occupancy and
the ADR for the two sets. Data is presented back to the beginning of 2005, so it includes the peak performance months of 2007 and the latest global downturn between fall of 2008 and fall of 2009.
T e data On the surface, the interpretation of the data is straightforward. Luxury hotels that do not operate a spa seem to run consist- ently higher occupancies that those that run spas (Graph 1). For the beginning of the observation period, that difference was only slight, but the global economic downturn magnifi ed the diff erence. On the ADR side, however, the picture is very diff erent. Luxury hotels with spas have
– and had – a premium over those without spas (Graph 2). On an annualised basis, that ADR diff erential is between us$55 (€43, £36) and us$61 (€48, £40) and even as luxury hotel ADRs increased in 2006 and 2007,
80
Luxury Hotels WITHOUT Spas Have Occupancy Advantage
70
60 No Spa
50 Jan 05
Jan 06 Jan 07 Has Spa Jan 08 Jan 09 Jan 10
*Occupancy, US Luxury Hotels, 12 MMA, 1/05 - 3/10 80
Luxury Hotels WITH Spas Have Clear ADR Advantage
70 60 No Spa
50 Jan 05
Jan 06 Jan 07 Has Spa Jan 08 Jan 09 *ADR, US Luxury Hotels, 12 MMA, 1/05 - 3/10 Jan 10
set only points towards a relationship, but not a causal relationship. In other words, is the ADR higher because the hotel has a spa? Or, has the hotel been forced to add a spa because of its higher prices? We cannot defi nitively say what begets what and our data makes no claim to establish that a spa leads to higher ADRs. In fact, we did not control for any other
the diff erence in ADR held steady. Today, as luxury ADRs are declining because of the global slowdown in luxury hotel room demand, the diff erential declined by around 10 per cent from 2005, but is still well above us$50 (€39, £33).
T e interpretation Every time we present this data, spa develop- ers and hotel owners are abuzz and inevitably ask: “So, if I build a spa I can expect a higher ADR?” T e answer is – it depends. Our data
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factor, so maybe diff erent questions need to be asked. What about the age of the hotel or its location? Just from cursory review, it seems that a majority of the luxury hotels without spas are in urban locations and those with spas are located in resort areas. Or maybe an explanation can be found in some other amenity. In any case, this data has made its way
into many a feasibility presentation as irrefutable fact that spas help performance. A closer reading of the evidence may suggest otherwise, simply because no true cause- and-eff ect relationship can be established. If nothing else, the data will hopefully lead to further discussion to assist hotel owners, spa developers and operators alike.
SPA BUSINESS 3 2010 ©Cybertrek 2010
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