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Spa and Vacation Ownership

By Patty Monteson, ISHC and Judy Singer, ISHC
Vacation Industry Review, March/April 2001

Spas have been getting a lot of attention lately as the "new, must have" resort amenity. They appeal today to an increasingly broad market of people looking for holistic and alternative methods to reduce stress.

The strong U.S. economy throughout the 1990s, aging baby boomers, the increase of younger spa-goers, and the attention spas have received in the media are some of the reasons for this increasing awareness and usage of spas by the traveling public. All of our indicators show us that a health spa at a resort has become important, expected, and necessary to a growing number of today's travelers.

This article focuses on spas at some of the resorts affiliated with Interval International, and provides information to developers and owners' associations considering inclusion of a spa in a new property or addition of a spa to an existing property.

First, a word of caution: Please don't say you have a spa if all you have is an exercise room, a massage room, and a locker/facility area that may or may not include sauna, steam, or whirlpool. Today's spa guest is savvy and has a fairly good idea of what to expect from a property that says it has a spa. If you use the term solely as a marketing tool, you may fool a spa guest once, but never again. Also, most spa-users learn about spas by word of mouth - good or bad. If you say that you have a spa, it should include basic components such as:

  • A reception area.
  • Separate men's and women's locker rooms with lockers, showers, toilets, and perhaps a staffed issuance desk and a lounge.
  • Separate men's and women's facility areas or a co-ed facility area, including at least some of these items: steam, sauna, whirlpool, cool dip pool, and lounge.
  • Dry treatment rooms, for massage and facials.
  • Wet treatment rooms with specialty showers, for body wraps and scrubs.
  • Staffed fitness studio with strength and cardiovascular equipment.
  • An optional exercise studio for classes.
  • Retail store/area.
  • Salon for hair, nails, and perhaps make-up.

Create An Experience A spa should offer enough to create an experience for its guests. The lighting, ambiance, and aromas all should help to create a place where guests can relax and be taken care of. Integration with the outdoors, where possible, is a desirable attribute.

To create enough "comfort" zones (lounges, uncrowded locker rooms, and facility areas) as well as profit zones (treatment rooms and retail) plus fitness and support areas, the spa will probably occupy at least 10,000 square feet (929 square meters).

Spas are costly to develop and operate. We have found that the turnkey cost for building a spa ranges between $350 and $500 per square foot.

When we say the spa should provide an experience, don't infer that you must have a plethora of spa services. We don't believe that "more is better." Offering an encyclopedia of spa services is confusing to most guests and adds to the stress they are trying to reduce in the spa. For example, many guests don't know the difference between various types of massage. When we create menus for our clients, we like to list a customized massage (with the spa's name or some other signature definition). The guest learns that the therapist will use various modalities and types of massages based on the guest's desires and needs as derived from a written or oral assessment. This way the massage is customized and personalized for each guest.

The same holds true for body treatments. Try not to be trendy. We believe many spas have gone too far with "catchy" spa treatments used more for marketing than benefit to the guest. Remember that extensive treatment menus also mean a large inventory of products and more training.

Most Popular Services Our company's most recent economic study of 30 resort-based spas found that the two most popular spa services were massage and facials. In the last few years, we have observed an increase in demand for facials at resort-based spas, perhaps because Baby Boomers are attempting to manage the effects of aging and realize the benefits of good skin care.

In our market studies of spa users, we found that most of them like to take à la carte services rather than a spa package, and this preference is evident in spa economics. The category that contributed the highest percentage to spa gross revenues was à la carte services (55 percent). Spa packages were second-highest at 13 percent. The remaining categories (facility fees, retail, salon services, memberships, and food & beverage) each accounted for 10 percent or less. Since much of what happens in a spa involves a one-on-one experience, spas are labor-intensive. We encourage our clients to market and pre-sell their spas aggressively to help control payroll costs. Reasonable benchmarks of expenses as a percentage of gross revenues are:

  • Payroll: 35 to 45 percent.
  • Payroll with benefits: 50 to 60 percent
  • Operating expenses: 15 to 20 percent.

As for net operating income (NOI), we believe realistic expectations are:

  • NOI with all expenses, excluding rent: 15 to 25 percent.
  • NOI with the spa responsible for only payroll and products: 30 to 40 percent.

Remember, spas have no Uniform System of Accounting, so be careful when looking at spa numbers. We prefer using a "zero-based" budget when developing a pro forma for our clients.

Spas And Interval International The popularity of resort-based spas has led to an increase in the number of spas at Interval International member resorts, and to inclusion of a spa benefit in Interval Preferred through a spa tour operator, Spa Finder®, which provides access to 250 full-service spa resorts worldwide and gift certificates for nearly 400 day spas throughout the U.S. and Canada. Bill Dowling, executive vice president, says Spa Finder gets a substantial number of calls from Interval Preferred members, which indicates the popularity of spa-going among timeshare owners.

"The spa is very important to our club-membership program," says Diana Mestre, spa director at Paradise Village Beach Resort & Spa in Nuevo Vallarta, Mexico. Although this beachfront resort has many amenities, many members have told Mestre that the spa helped them decide to purchase at Paradise Village.

Paradise Village offers $25 and $55 coupons for spa services; and free spa admission days and exercise classes for members and guests (including many Interval International exchange guests) who participate in the resort's Spa Adventure Program.

We are proud to have been the spa consulting company to this seven-year-old, 15,000- square-foot (1,394-square-meter) spa. It has 16 treatment rooms, including two outdoor massage areas, plus comfortable men's and women's locker rooms and wet-area facilities, each with steam, sauna, and a whirlpool. The spa also includes a beauty salon, fitness and exercise studios, and a juice bar.

Club members at Paradise Village receive free access to the spa (the facility fee is $10 per day or $45 per week) plus a 15 percent discount on spa services and 10 percent on retail purchases.

Many of the spa's employees, including the director, have been there since it opened. Members and guests appreciate this continuity, Mestre says. Utilization by men has increased over the years, with the current breakdown about 60 percent women to 40 percent men for spa services, and 50-50 for facilities and fitness use. The spa's signature treatments are the Mayan Wrap, a soothing milk and honey treatment; and the Sea Fango Massage.

Spa-Products Line Another "veteran" spa is at Los Abrigados Resort & Spa, an ILX Resorts, Inc., property in Sedona, Arizona. The 6,000-square-foot (557-square-meter) spa opened in 1986. It includes five treatment rooms plus a two-room salon for hair and nail care. Several years ago, it created a proprietary line of Sedona Spa botanical products for face, hair, and body. These items are available in the spa's retail shop, the resort's gift shop, and at a retail outlet in town. Furthermore, all ILX resorts feature Sedona Spa products as personal-care bathroom amenities.

"The spa is a focal point of our resort and helpful to sales," says Edd Zielinski, executive vice president of operations. Owners and Interval International exchange guests receive complimentary admission to the spa during the week of their stay (valued at $60 per week). Owners also receive a 20 percent discount off spa services and retail-product purchases, while exchange guests receive 15 percent. The spa includes a fitness center with state-of-the art equipment and offers more than 30 exercise classes per week. This health-club component is popular with local residents, many of whom have become members.

A popular treatment in summer is the Creekside Massage, 60 or 90 minutes in an outdoor gazebo beside Oak Creek. Another signature treatment, the Desert Dream, is a 30-minute body polish followed by a 60-minute body masque and wrap.

New Orleans Spa The Equivest Avenue Plaza Hotel & Pro Spa in New Orleans, Louisiana, has an 18,000-square-foot (1,672-square-meter) spa and fitness center. The spa has three wet treatment rooms for body treatments and four dry rooms for massage and facials. Most owners and guests use the spa on an à la carte basis, and massage is the most popular service. A popular package, Southern Comfort, includes a 30-minute massage, a body scrub or herbal steam wrap, a 30-minute facial, a manicure, and a pedicure. The package takes three and a half to four hours and costs $145. "The beauty of our spa is the fact that guests can spend the day being taken care of," says Patrick Meuche, spa director. "We have a spacious locker room and a comfortable lounge area with a sauna and whirlpool, and connected to the spa is a full-service salon that is run by an outside operator." In today's market, he says, a hotel must have a fitness facility. Avenue Plaza's has equipment of the highest quality and a personal entertainment center at each piece of cardiovascular equipment.

Utilization for this spa is evenly divided between men and women. Many couples use the spa together, and often a husband will call to arrange a special surprise of spa services for his wife during their stay.

Owners receive a VIP card that entitles them throughout their stay to free spa access ($9 per day) and a 25 percent discount on basic spa services. This preferred rate does not apply to packages, since these rates already are reduced. Exchange guests also need not pay a facility fee.

A Continuing Trend At Paradise Village, Los Abrigados, and Avenue Plaza, the spa is perceived as an important component of the property and has figured in many owners' purchase decisions. We believe this trend will continue.

In the future, growing numbers of people of all ages will be preoccupied with their quality of life and will strive for health over wealth. Health spas, both resort-based and day spas, will be part of their commitment to live more healthful lives.

Moreover, older Americans increasingly enjoy health and vitality far into their elderly years, and most of these people are accustomed to traveling. They will continue to be "experience seekers" at resorts, and we believe spas will offer growing numbers of them a relaxing experience and healing balance. Top

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Health Fitness Dynamics, Inc.
1305 N.E. 23rd Avenue, Suite 2, Pompano Beach, Florida, U.S.A. 33062
Phone: 954-942-0049 - Fax: 954-941-0854