Because it embraces capacity use and
average expenditures, revenue (or contribution)
per available treatment-hour is a much
better indicator of the revenue generating
performance of a spa than are the commonly
used measures that we just mentioned.
RevPATH indicates the rate at which
revenue is generated and captures the tradeoff
between average expenditure and facility
use. If occupancy percentages increase even
as the average expenditure decreases, for
instance, a spa can still achieve the same
RevPATH. Conversely, if a spa can increase
the average expenditure, it can maintain a
similar RevPATH with a slightly lower
facility use. The balance between average
rates and facility use depends in part on the
type of spa. High-end spas, for instance,
may wish keep rates high to ensure low
facility occupancy and thus maintain a quiet
ambience and relaxed guest experience, as
well as use price to signal the spa’s luxury
positioning.