Essential Key Performance Indicators in the Spa Industry

 

In this series of posts dedicated to revenue management in the spa industry, we have talked about the importance of tracking occupancy figures, RevPath and establishing logical rate fences. We have also argued in favour of an integrated approach capable of providing spas with the ability to market and manage every available moment of the spa as a distinctive product, something that would really allow the spa industry to tap into the full potential of our yield management systems.

All these actions, however, will be empty if the spa is unable to find its own place in the market. Because of the significant role of finding such a place, this week we would like to talk about measuring our KPIs against those in the market. We believe this is something crucial if we really want to improve our revenue management strategies.

 

Why Benchmarking Is Important

Even though the answer to this dilemma may be obvious in many industries, that is not the case in our field. In fact, there are still many spas and wellness centres out there that do not have a clear idea about the role that benchmarking plays in their revenue management systems.

While it is important to know how we are performing according to our budgeted figures and KPIs, it is equally important, especially in moments of global economic changes, to know how we are performing according to our competitive set. If we do not know that information, we won’t be able to get a real picture of our business.

For instance, exceeding budget does not mean much if we are doing less than our competitive set. Conversely, we might well be below budget, however, compared to our competitive set, we might be outperforming them in terms of RevPATH. Hence, not only is it important to closely monitor our KPIs but it is equally important to see how we are doing compared to our competition.

 

Essential KPIs to Monitor

In order to get a good idea of its competitive set, each spa needs to monitor the following four KPIs: MPI, ARI, RGI and GOP PATH. If spa industry brings into their revenue management programme the KPIs that the hotel industry uses, for example, the Market Penetration Index (MPI) and the Average Rate Index (ARI), we would get valuable insights as to how our spa occupancy and average treatment rate figures are performing compared to the competition. Such an understanding will help spas to identify which strategy they need to use for each customer segment.

At first sight, the most useful strategy would be the Revenue Generated Index (RGI) or rather RevPath Index, which basically helps you to understand your revenue share of the market. By using RGI on behalf of your revenue management system, you can answer several questions including the following: When does your spa achieve the lowest score? Weekdays, weekends, events, during your low demand periods? Do you have the right market segmentation for your spa services? Is your price positioning by segment correct? By implementing this KPI, you can see if you are comparing yourself to the right competitors.

Finally, revenue management can gain lots from the newly introduce GOP PATH (Gross Operation Profit Per Available Treatment Hour). In fact, this KPI would allow us to see the profitability of our spa operations per available treatment hour. While RevPATH talks about our revenue generating capacity taking into account average expenditure and occupancy figures, GOP PATH will allow us to look at the profitability of available treatment hours and how effectively we are managing our available time in terms of profitability.

 

Transparency

In order to take full advantage of these KPIs, the spa industry needs to be more transparent about them. Because of this, we urge spas to share their KPIs and figures. Without this transparency it would be impossible to create a more competitive and prosperous market for all involved. We strongly believe the future of yield management in our industry depends on our own ability to implement an approach that is both integrated and transparent. We will see if we can meet that challenge.

By Sonal

Sonal Uberoi creates and delivers smarter spas around the world. Spas and hotel groups hire Sonal to help them design, set up and manage their wellness businesses. Her finance background and worldwide operations experience in the spa, wellness and hospitality sectors make Sonal the go-to expert for business optimisation solutions. Connect with Sonal on LinkedIn www.linkedin.com/in/sonaluberoi.

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