Financial Management
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Insights to spa revenue management for industry professionals
Kristine Huffman for Pulse: Many of us aren’t familiar with the duties of a revenue manager. Tell us a little about that job.
ADAM HAYASHI: When I started in the hospitality industry in the ‘90s, I had no idea what revenue management was. It was still in its infancy, and the airlines were really picking it up. In 2001, I got my first job as a revenue manager at a hotel property. Even back at that point, it was rare to have a property-specific revenue manager focused on the yield and the optimization at each hotel. Fast forward: Now, most brands are prioritizing it. With revenue management strategy, we measure demand through data and trend analysis, and take opportunities to yield our pricing to attract the right guests at the right time, at the right price, through the right channel.
In terms of the discipline itself and how it differs from other departments, it is part of the commercial structure, focused on building the top line revenue and aligned with sales, marketing, digital and e-commerce. And that differs from the function of someone who is a finance director or controller who’s more focused on managing expenses and the accounting side of things.
Pulse: Often day spas and boutique hotels don’t have somebody focused exclusively on revenue management and the primary focus becomes expense management. What would you say to an owner of a smaller boutique property or a day spa to help support the idea that this is a necessary role? How would they get it started?
Keeping Up with the Financial Scorecard
A financial report, in simple terms, is your success scorecard. “Financial reports provide information on the health of the business. They are your measure of success,” says Rose Fernandez. vice president of sales for North America at Jurlique, based in Santa Monica, California.
Minimum Gap Restriction: A smart strategy to reduce unsold gaps in the spa schedule and maximize revenue potential
As a spa director or revenue manager, you know how important it is to fill your spa schedule with as many appointments as possible. But you also know not all appointments are equal. Some leave unsold holes in the schedule that are hard to fill, especially if the gaps are short or irregular. These gaps can reduce your revenue potential and waste your therapists’ time. How can you avoid these gaps and optimize your spa revenue?
Pulse Points: The Compensation Situation
Money, like politics and religion, is one of those things that isn’t supposed to be discussed at the dinner table. That said, we’re about to dive into the dollars and cents of the spa industry, so if you happen to be reading Pulse at a dinner table, now might be a good time to relocate.
The 2019 ISPA U.S. Spa Industry Study Compensation Supplement may not provide ideal mealtime conversation fodder, but it does offer a clear breakdown of how spa employees are compensated, what they earn and what the staffing picture looks like across the industry. A closer look at the numbers reveals some notable recent trends.
Service Fees, Gratuities and Pricing Structures
In an ongoing trend, more spas—especially luxury resorts—are adding automatic service charges to guests’ statements. The additional proceeds largely benefit spa employees, augmenting the general compensation structure that traditionally has included commissions and an hourly rate. Since coming out of the pandemic, some spas are even seeing an increase in the service charge amount.
An ISPA Town Hall session this winter featured a great discussion about the diverse structures of service fees and gratuities that other members are implementing—focusing on what’s working or not working well. Panelists Pat[1]rick McDirmit (Trilogy Spa Holdings), Suzanne Holbrook (Marriott International) and Taylor Fields (PCH Hotels & Resorts) joined ISPA Chair Patrick Huey to share their insights and expertise.
Strategic Savings: Navigating the Tax Benefits of Section 179 for Spa Owners
In the ever-evolving spa and wellness industry, savvy owners are keen to optimize their financial strategies. Among various options, Section 179 of the tax code stands out. This underused provision offers significant tax advantages, serving as a key to financial growth for spa businesses.
UNDERSTANDING SECTION 179:
A Financial Lifeline for Spa Owners Section 179 is a vital part of the IRS tax code for spa owners. It allows businesses to deduct the full cost of eligible equipment purchased within the tax year. This encompasses a wide range of assets, from luxurious massage tables to advanced skincare technology.
The Four Basic Financial Statements
The balance sheet is one of four basic financial statements for any business. Understanding these reports is essential for spa business leaders to make informed decisions. These statements provide critical insights into the financial health of an operation, guiding strategic planning and day-to-day management.
Town Hall Examines “Hidden Fees Statute”
A new California law with ramifications for the spa industry went into effect July 1. Known as SB478 (California Senate Bill 478) and nicknamed the “Hidden Fees Statute,” this law prohibits businesses from advertising a price lower than the actual price consumers will ultimately pay for a good or service. SB478 aims to increase transparency for consumers by eliminating mandatory charges and fees, such as service fees and surcharges.
U.S. Luxury Hotel Industry Sees Rates Soar to New Heights
With the pandemic fading in the rear-view mirror, luxury hotel operators in the U.S. are now refocusing on revenues and profitability. Room demand for luxury hotels has recovered well, and the industry is now selling almost 30 million room nights annually, more than ever before.
Effects of the Covid-19 disruption, however, are evident. Expected demand numbers based on pre-pandemic growth rates still have not been achieved.
Even while demand was disrupted between 2020 and 2022, room supply has continued to grow. Developers and investors are eager to participate in the healthy industry fundamentals that drive profitability. Forty-six million room nights are available annually, which will likely continue to increase as more investors place a bet on the segment.
Uniform System of Financial Reporting for Spas
A uniform system of financial reporting establishes standardized formats and account classifications to guide individuals in the preparation and presentation of financial statements.