Commercial Spa Strategies is a business at the forefront of the rapidly expanding spa industry. The expert consultancy boasts both operational and board level experience, with its specific offering to support the commercial success of new and existing hotel-spa businesses.
By really leveraging the opportunity to improve hotel occupancy, drive treatment room yield and optimise secondary spend, hotel spas can ensure healthy contribution lines as well as delivering new experiences which enhance the overall residential experience.
Company directors, recognised spa expert Liz Holmes and established Resort MD Nick Holmes, have a proven track record and multi award winning successes, across a number of high end resorts, spas, golf clubs and 5* properties. One of which – Ramside Hall & Spa.
Building a Commercially focussed Spa Business
John Adamson, owner of Ramside Estates is an entrepreneur with a reputation for creating commercially successful businesses. Ramside Hall http://www.ramsidespa.co.uk was already an established and well regarded 80 bedroom, 4* hotel and golf resort outside Durham and busy with weddings, golf breaks (36 holes) and corporate business. As part of a £16m investment programme John felt it was important to introduce a high-quality spa with an additional 47 bedrooms – taking the total to 127, to broaden the appeal of the hotel in order to reach new higher spend leisure stays, create a local membership base and to bring in lucrative spa day business. The results after three years have been excellent, with annual room revenue increased by over £2m and spa revenue for this year, set to reach £4.6m potentially making it the most profitable spas in the north of England if not the UK.
In 2015, having recently finished a 6-year stint as opening MD of Rockliffe Hall Nick Holmes of Commercial Spa Strategies was retained by John to advise with the new spa design and to help develop the new spa’s business strategy. Post opening, Liz also worked with the team, during 2016 in order to help fully establish the structure and audit key products.
In the business plan, created and developed with John, Nick set out a clear path to ensure that all revenue streams would be optimised. With a brief to ensure the new £9m spa maximised all potential revenue streams and therefore profitability, it would be important to ensure that the facility could accommodate the various markets during periods of peak demand. Specifically, hotel resident use, membership and non-residential spa days.
Equally important was engaging the right commercial leader for a project. Decision making bias can so easily reduce the opportunity if the person leading the project is focussed singly (or even more comfortable with) hotel impact, membership demand or treatment quality. All three need to be considered as business opportunities and given equal emphasis. For example, someone of a strictly hotel background might legitimately see the spa as effective way to drive room business whilst missing the opportunity from memberships and spa days, whilst a Head Therapist might be inexperienced within a membership environment.
Jill Russell, formerly Liz’s Revenue Manager at Rockliffe Hall and latterly, in spa reservations at Seaham Hall, was recruited as Spa Director leading the project through opening and its first year. Jill utilised her experience and the support of Commercial Spa Strategies to ensure commerciality was at the heart of the plan. “Working with Nick and Liz (Commercial Spa Strategies) really gave me the confidence to go for it at Ramside and we achieved levels of commercial success which I have rarely seen happen so quickly in a new launch,” says Jill.
John had a great deal of confidence in Jill’s approach and says, “Jill did an amazing job for us. She really understands the business and has great ideas with the leadership needed to put them in place. Most of Jill’s great marketing ideas are still being used now three years later”.
Setting out the stall
Many UK spas find themselves full of hotel residents who may not be spending anything in the spa but have access included as part of their stay. While this is great if the strategy is all about hotel rooms, without any controls in place this can limit the opportunity by displacing more lucrative treatment and spa package sales. It was therefore important that the team fully understood and bought into the idea that we wouldn’t be reluctant to drive all aspects of demand and the need to manage capacity whilst maintain service standards.
With the right team structure, creative marketing, a strong sales culture and carefully designed access control systems in place, it is possible to strike the right commercial balance. Gantner and Premier Core were chosen as partners so we could provide all members, guests and spa day guests with the right band which ensured they could flow through the spa and usage could be tracked to manage this.
Key design points
The spa facility is extensive so allows for a relatively high number of users. The 25-metre pool and 15 metre Hydropool are in a good space with access to an outdoor spa garden and pool. Hotel guests can enjoy a swim, steam and sauna as part of their stay, but access through to the hydrotherapy pool, additional thermal rooms and outdoor area is managed for upgraded hotel stays, members or spa days only. Equally potential ‘pinch points’ at times peak demand need be considered. Typically, this will be about changing room capacity, scheduling, locker and lounger availability.
As Nick says, “we often see spa design and creative development as the main focus ahead of the business case, but developing both together can optimise revenue and therefore deliver to expected ROI. In the case of Ramside we were now looking at hotel capacity of 250 adults; a membership base of 1,000 and peak spa days of 100. So, you have to plan for the day when everyone turns up. John always understood this and was prepared to invest in the systems and team required to manage the demand.”
Ramside already had a well-established reputation as a hotel, event and dining venue, as proving a quality product at an affordable price and it was important that this provided a brand opportunity in terms of attracting demand from the start. Market research within the region suggested that the market had an appetite for high quality spas and service led membership as demonstrated by the likes of Rockliffe Hall and Seaham Hall. Therefore, signature spa day packages supported by a comprehensive gift voucher programme in partnership with SK Chase gift voucher provider, could command upwards of £140 per day and memberships in excess of £100 per month.
Jill prioritised the spa brand development, covering the logo, types of packaged events, PR and marketing activity, putting a plan which set the tone of the new facility, informed and started to mobilise the interest. She also understood the need to achieve this across all products and potential markets.
Spa days were created around different start times at varying times of the day so that revenue could be optimised and flow managed. It was always important to have accessible price points as well as higher end packages to support this strategy. With a restaurant to fill, as well as treatment rooms, packages without treatments included were also offered and this made for a good entry level price point for those new to spa. The addition of the private infinity room, with its own lounge and balcony pool also created a good opportunity for giving groups their own private space as part of their day.
Maximising all Potential Revenue Streams
Opening up higher spend leisure break market was key along with repositioning the hotel as the complete ‘destination resort’. Since opening hotel occupancy has growing from 78% on 80 rooms to 92% on 127 rooms – a near doubling the annual number of room nights sold. Furthermore, net average room rate has rising from £76 to £94, improving previous room revenue by over £2m net per annum.
With a potentially 250 residents on site during peak occupancy it was inevitable that demand would at times require some element of control in order to protect the exclusive spa day and membership experience. Hotel guests are guaranteed access to pool and gym during the stay but not automatically the hydro pool and spa garden area, which is provide as an upgrade option – either as part of a higher spend package or an upsell opportunity.
Hotel residents generally make little direct contribution to spa revenue so at peak times it was important to restrict resident within the arrival and departure time in order to manage capacity, particularly at weekends during room change over as over use will affect and displace spa day revenue and risk frustrating members. Requests for an early check in or late check out spa use were used as an upsell opportunity for an add on package and occasionally residents access has to be managed with the use of booked ‘slots’. Also, the hotel is considering removing the availability of alcohol on pool side during peak times to avoid guests commandeering loungers all day and towels are removed from loungers by a well drilled spa butler team, if not used for 20 minutes.
The new facility opened with over 400 members paying on average £100 net per month. This was achieved through a combination of: converting initial enquiries into nominal £50 refundable pledges in order to ensure commitment; outreach activity such as attending local music events, charity lunches, football matches; general hands on sales at other major events; creating an on-site sales office ahead of opening; flyers at the hotel Christmas party nights; general in-house marketing; recommend a friend; a strong PR campaign drip feeding the story and building the excitement; a strong class programme was important (currently 50/week).
Members tend to settle into a use pattern that understands and naturally avoids peak times and similarly members guests pass availability needs to be considered, for example during bank holidays and during periods of busy weekend occupancy in the hotel.
In 3 years since opening membership has risen steadily to 975 with excellent retention and now generates circa £1m per annum in subscription revenue.
Nick says “the membership opportunity is often shied away from as members can become high maintenance and quite proprietorial potentially encroaching on the resident and spa day experience. It is possible to make this work but the person in charge needs to be extremely strong in terms on managing behaviour. Sometimes owners naively let membership committees form. Have focus groups by all means but member representative groups usually end in tears”
With 12 treatment rooms, 4 heat experiences, inside and outside hydro therapy pools an extensive relaxation spaces, the opportunity for a strong spa day business was always part of the development strategy. The building design was carefully thought through to be able to manage the spa day experience from arrival to departure, carefully planning the ‘customer journey’.
The position of reception in terms of meet & greet, lounge space for questionnaire and orientation process, carefully prepared lockers, timing of treatment and food delivery, relaxation timings all equally important in terms of ensuring optimising space and availability.
One of the things that helps managing flow is creating bookable spaces and areas which can be managed without necessarily tying up therapists such as private infinity pool, mud rasul, separate manicure room, private lounge space for groups. In some cases, these can be used as upsell opportunities if not already included within the package.
Once the core business has begun to be established, yield management will become a crucial focus. Managing the availability of lower cost packages and potentially restricting to off peak times such as ‘The cheeky midweeker’ one Ramsides more successful packages and twilight spa stays. Since opening investment in the spa reservations resource has always been a priority.
Three Years on
We caught up with owner John Adamson and Joanne Green, formerly Deputy Spa Manager at Centerparc’s Penrith and Ramside’s Spa Manager for last 14 months in order to understand any lessons learned over the last 3 years and how the business has performed.
Joanne says, “It was interesting for me to compare the Centreparcs approach of the controlled management of on-site spa access compared to a typical hotel resident expectation of open access. There we had a well drilled machine in terms of managing the guest journey and spa access. So for example all spa users have to be booked in advance before use so from a management point of view its ideal. The challenge and opportunity at Ramside Spa has been balancing users in terms of maintaining superior service whilst optimising the revenue streams. Managing occupancy, capping twilights at weekends and maintaining a flexible approach, so never about turning away business but recommending a different time”.
John is pleased with the progress made and feels there is more growth to come. He is already considering developing more bedrooms and building luxury lodges within the grounds of the hotel. “Room sales has more or less doubled since adding the new development and pleased with the way we’ve growth both occupancy and room rate. I expect net spa revenue to reach £4.6million this year with a membership base of 975, although I think we can get this over 1000. Net weekly revenue is currently averaging £85,000 and has peaked at £119,000 one week. Apart from the membership growth and impressive spa day demand established, the big success has been the spa food and beverage offer which we developed as a pan Asian themed all day restaurant and lounge. This has become a destination in itself and now turning over around £35,000 per week in food and drink sales”.