Spas Leave Money on the Table
By Judy Singer,
Hotel & Motel Management
April 15, 2002
In the mid-1980s,
it started to become popular to add spas to resorts. Most spas
were located in upscale, independent resorts and were considered
to be great marketing vehicles to attract new business.
During the 1990s,
the growth of resort-based spas began to proliferate. Now the
mantra is a resort is not a resort unless it has a spa. As spas
increase in numbers, so do the challenges.
Spas can be expensive to build and to operate. It's common for
a turnkey, four-star spa to start at $350 per square foot, excluding
land. Most luxury spas are as much as $500 per square foot.
spas are not independent business units. They receive some subsidy
from the hotel and very few, if any, pay rent. Our firm has
determined the following benchmarks (as a percentage of gross
- Payroll and Benefits:
55 percent to 65 percent;
- Other Operating
Costs: 13 percent to 20 percent;
- Net Operating
Profit when all expenses, excluding rent, are charged to the
spa: 15 percent to 25 percent; and
- Net Operating
Profit when the spa is charged only for its payroll and products:
30 percent to 40 percent.
There is no uniform
system of accounting used by spas, so be careful when looking
at numbers from spas. We prefer using a "zero-based"
budget when developing a pro forma for our clients.
Although the spa
business is booming and spa operators are generally satisfied
with their success, our company believes most spas are "lazy
assets" and are leaving significant profits on the table.
We believe, in some cases, the owner's expectations of a spa's
profitability are so low that they consider anything over break-even
as doing well.
If you are thinking
about adding a spa to your property, our company recommends
following a five-step approach so the spa can be a tangible,
as well as intangible, asset to your property. Your spa should
- Properly conceived;
- Themed for a sense
- Programmed with
the proper mix of revenue and non-revenue space plus support
- Designed to provide
an exceptional guest experience while being operationally
- Marketed proactively.
It can be difficult
to find qualified spa staff. When planning the spa, think about
the number of staff you will need and where and how you are
going to find, train and keep them.
Creating the right
compensation, incentives and benefits package will make a significant
difference in attracting and retaining staff while making sure
the spa is an economically viable business. Finding and retaining
a good, affordable and loyal spa director can be a challenge.
For some of our clients, we recommend they hire from within
and then we develop a training program.
Spas need to be proactive
and focus on spa yield management if they want higher occupancy.
Most spa treatment rooms are utilized 30 percent to 60 percent
of the time.
Spa treatment menus
are becoming more exotic and extensive. A spa doesn't have to
offer the international encyclopedia of spa treatments. It can
be confusing to guests and add considerable time and cost to
Facility fees for
hotel guests sometimes present a barrier to entry so sometimes
the fee is waived in full or in part. However, this revenue
is important because it covers much fixed operational overhead.
A spa should be run
as a business. It's part of the hotel operation and should be
accountable. Before venturing into the spa business, it's important
to understand the risks, opportunities and economic realities.
a member of the International Society of Hospitality Consultants
(ishc.com), is President of the spa consulting company, Health
Fitness Dynamics, Inc. in Pompano Beach, Florida (hfdspa.com).
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Fitness Dynamics, Inc.
1305 N.E. 23rd Avenue, Suite 2, Pompano Beach, Florida,
954-942-0049 - Fax: 954-941-0854