Webinar: Turning Spas into Hotel Profit Centers with Trilogy Spa Holdings’ John Grunbeck #12

Founded in 2011 by beauty and spa pioneer David Stoup, Trilogy Spa Holdings’ portfolio of hotel brands includes Fairmont, Hilton, Marriott, Ritz-Carlton, Westin, Waldorf-Astoria and Four Seasons, in markets as diverse as New York City, Arizona, Texas, California and Puerto Rico.

Trilogy’s track record debunks the myth that resort spas can’t make a profit. Pre-pandemic Trilogy revenues were up by an average of 20% year-over-year at the spas they manage and post-pandemic all of Trilogy’s spas are profitable.

The company’s profit-making know-how even extends to an often-overlooked segment of the typical hotel spa department- fitness. With innovative group events and classes, fitness centers in Trilogy spas become profit centers. And throu8gh mindfulness training, laughing yoga, nutrition education etc. the company boasts the ability to help hoteliers host a “different type of meeting”- a critical growth area in the not-so-distant future.

In this 45-minute hospitality industry webinar, Trilogy Spa Holdings’ John Grunbeck will discuss:

• The nuances of hotel and spa management and marketing
• How to mentor teams of spa professionals
• The benefits of allowing property spa directors to focus on the guest experience, not the day-to-day management of the spa
• How to build on a platform where there is an expectation that more than 50% of revenues will come from locals
• And his go-to strategies for producing a reasonable return on invested capital.

If you’d like to watch the webinar instead, click here.

John entered the hospitality world to explore his passion for travel and hotel management. Fast forward 11 years and he is still passionate about delivering the highest level of customer service to his clients while strengthening relationships amongst his current and prospective hospitality, healthcare and beauty partners. John is directly responsible for initiating key sales strategies to ensure the sustained development and growth of Trilogy Spa Holdings.

The nuances of hotel and spa management and marketing

Dave starts off the conversation by asking John “what are some of the nuances of Hotel and Spa management that you come across that the average person or even the average general manager of a property or owner of a property doesn’t really consider?”

John answers, “so I think that one of the most important parts when thinking about spas is that it is about as intimate of a form of hospitality as you can get. There is no greater form of trust, than what we ask a consumer to have a massage with us. And despite that incredibly high hurdle that we deal with day in day out, these tend not to be areas where if you’re a performance management candidate, you’re going to see the gap right. Our chairman would say he’s been in this business for a very long time, for 40 plus years but he has never met a general manager who came to that seat by way of being a spa director. This is not an area where people go to become hotel management, they view it as an amenity to the overall asset, which we view to be missing out on the profit side of things. There is a tremendous risk on the guest service side because if the check-in experience in a hotel is poor, there are opportunities to recover that but you could actually hurt somebody quite seriously if you do a massage. That may stick with them not just during their experience with you, but when they go home. And so, this idea that these things shouldn’t be invested in and shouldn’t be nurtured is, in our view, it’s crazy. If you’re not going to do it right you should not build them because they have a lot of risks. It’s not so simple as, say, a fitness centre, where you just put the equipment in and the customer figures it out. This is a very human experience, and you need a lot of specialized training to understand how to execute it properly.”

Dave went on to explain a recent poor experience that he had visiting a hotel spa. The experience was not great and the prices were almost the same as a nightly rate to stay at the hotel. Dave wanted to know how John markets to hotel guests and attracts them to visit and book at the spa. 

John replied, “so, in our view, the spa prices for the services are in many ways extortion, you know, it is a crazy number. We at the Waldorf would charge $205 for a 50-minute massage, and that was the entry-level price, plus then gratuity, plus taxes. You’re not leaving for less than $250 for one hour. That is a number that, you know, you can get a lot of different things for that price. So we’re looking at it from, how do you bring in hotel guests to get them to come in, your competition isn’t just another spa that they can drive to, it’s anything that they could do with $250 or 50 minutes. This is a high bar to clear, so the experience has to really deliver and that starts really from the first point of contact with the guests.” 

John continues, “now we believe heavily in multiple touchpoints with the customer before the transaction even takes place. So, in pre-arrival messaging, setting the expectation and setting the stage for the customer who desires the spa service, then that becomes a really important part of justifying the price. You don’t want the sticker shock of when they open up the menu, you want them to build it up to an experience that is worth that price. Then comes the equally challenging operational part of delivering on that experience. It’s more than just a great massage because you can get a great massage for a reasonable price. Now, in most of North America, it is to do all of the little touch points around it that makes the customer feel special. Is it the champagne? Is it the amenities that are available to the customer while they’re at the facility? But, it’s also going to have to come down to the bread and butter of the hospitality industry and customer-facing service.”

How to mentor teams of spa professionals

According to John, the people who are attracted to the spa industry are a unique breed of people. John explains that they have two kinds of mindsets, one is that they have a really strong desire to serve and take care of a guest and then the other piece of it is the desire to heal people. John explains, “we provide opportunities for our teams to move out of, say, day to day operations and into more corporate roles, if they so choose, or to oversee operational roles that are overseeing multiple assets. And so, to have more of a strategic viewpoint, but still be able to do those two fundamental things: take care of customers and your team members, and to provide services that heal people and improve people’s lives. That is a benefit of being able to be a spa focused company, you don’t have to leave our industry. If you want to go into a marketing role you can do marketing, we can help you nurture that skill and still be in spas. Like with myself, I didn’t have to leave the spa business or the PM that I like who I work with.”

The benefits of allowing property spa directors to focus on the guest experience, not the day-to-day management of the spa

John explains, “when we were coming into assets and spa directors were overwhelmed with all of the back office parts of the job that are necessary to keep the lights on and people paid and all that, but those don’t drive revenue in any material way. What drives revenue is that these individuals are highly talented, experience-driven, and passionate hospitality professionals. Letting them do those things with customers and with their employee-partners and be out on the floor either addressing needs, identifying opportunities, you know those little moments to wow a customer, they can’t do that while they’re sitting at the backfilling out an Excel spreadsheet. That isn’t their right skill set and it doesn’t bring them a lot of fulfilment. Some people really love filling out Excel spreadsheets, they typically don’t become spa directors. That is where we step in and take as much as we can of that backup office burden and centralize it. Take it off their plate and they’ll still be involved but it doesn’t have to be 10 to 20 hours a week of this tedious paperwork that really isn’t improving the day-in-day-out experience of our customers and our employees. What we’ve seen is that it helps to drive retention of our guests and our employee-partners, and it helps to identify areas of opportunity because you have eyes on the opportunity, you have that skilled management out there.”

How to build on a platform where there is an expectation that more than 50% of revenues will come from locals

“So we come to this from the same angle that the airline industry does, and the hotel industry does which is – we’re selling an expiring product,” John explains. He continues to say, “now, ours is kind of two-fold, we sell time and we sell a person’s expertise. So the way we have to approach things is a little bit different because we can’t discount, you know to dollar zero since our therapists are being compensated off of what we’re charging, and they would get upset if we did that and we wouldn’t have many therapists for very long if we did that. But we can view the demand cycle in two different segments. So our local guests have a different lifetime value to us than the hotel guests do so we can price accordingly. In addition, they have different times of day and days a week that they tend to come in and they have greater flexibility with when they come in. So they’re more responsive to our marketing than the hotel guests are when it’s a spur of the moment type message. We have a different approach where we separate our hotel guests from our marketing and focus on local guests and target them with specific messages that are dependent on the services that they got and dependent on how frequent their return rate is. That allows for us to build this tiered system that generates a profitable spa with different guests coming from different segments, fulfilling different revenue books.”

Go-to strategies for producing a reasonable return on invested capital

John’s top strategies to producing a reasonable return on invested capital are to:

• Limit how much capital you invest out front by taking the time to work with companies like Trilogy or other spa consultants who can help with the operational angle
• Understand what is the addressable market, not just from the hotel side but from the local side. 
• Build a spa that can easily cover its fixed costs.
• Build a spa that is capable of handling the addressable market but that is not wildly overbuilt and only designed for max peak capacity. Remember, nothing sells like exclusivity.

John and Dave’s conversation goes even deeper into how John’s properties succeeded during the pandemic, how they drove bookings through OTA’s and Google, how his pricing model changes for locals vs hotel guests, and more in the webinar, feel free to listen to it HERE. 

As a reminder, Micrometrics believes that businesses should create more meaningful connections with the people they serve by enhancing face-to-face interactions and creating connections with guests at scale. Our hospitality clients leverage powerful messaging automation to improve customer experience and operational efficiency at their properties. You can learn more about us at https://www.micrometrics.com/hospitality/