The island of Bali has been renowned as one of top spa destinations. Most (if not, all) luxury hotels on the island have a spa facility. According to Global Spa & Wellness Economy Monitor (n. d.), the spa industry has been enjoying an annual growth of 7.7% YoY.
Depending on the objectives of the business owner, the spa facility can either be cost centre or profit centre. There have been discussions that many spa facilities cannot meet their financial objectives for several reasons. Ideally, spa facility should function as an additional revenue generator for the hotel..
Does a luxury hotel need a spa facility?
There is no straight-forward answer to this question. But we can start evaluating the value proposition of a spa facility to the hotel.
Non-Monetary Values
Spa facilities can provide non-monetary values including:
- Spa facility is an expected element within luxury hotels (Koh, et al, 2010);
- Spa enhances the ability of increasing hotel occupancy and provide additional sales and marketing opportunity (Slattery, 2012);
- Spa services are to compliment and improve a hotel’s guest stay (Global Wellness Institute, 2014);
- Spa facility can help justify the pricing structure of luxury hotels (Zneidi, 2014); and
- Spa is the key element in promoting positive guest experience (Lo, et al, 2015).
Monetary Values
Spa facility at a hotel can contribute monetary values including:
- Spa facility is to help increase occupancy rates and drives ADR (Monteson & Singer, 1992);
- Spa increased the WTP (Willingness To Pay) of the guests for other hotel products including Wedding & MICE; and
- Spa can function as profit centre and generate ancillary revenue.
Key Takeaways
It is hard for luxury hotels to compete without a spa facility as it has been seen as an expected element. When managed well, spa facility can act as an additional marketing tool for luxury hotels and play significant role in being an extra revenue stream.