Editor's Note:
This article is excerpted from Judy Singer's seminar,"
How to Make Your Resort Spa Profitable" presented May 20,
2002 at the Spa & Resort Expo in New York City, NY.
HOW
TO MAKE YOUR RESORT SPA PROFITABLE
By Judy Singer,
ISHC
Spa & Resort Expo
in New York City, NY
May 20, 2002
My name is Judy Singer
and I, along with my business partner, Patty Monteson, am the
owner of Health Fitness Dynamics, Inc. (HFD). HFD is a nineteen
year old spa consulting company, based in Pompano Beach, Florida,
specializing in planning, marketing and managing health spas
for fine hotels, resorts, mixed-use developments and day spas.
Since 1983, HFD has completed over $600 million of completed
spa development. In addition to our turn-key spa consulting
services, we also conduct a lot of economic and consumer research
as well as write articles on all facets of how to create and
operate marketable and profitable spa facilities and programs.
If you are interested in reading any of this information, look
at our web-site www.hfdspa.com
During this session
, I want to give you an overview of the eleven factors that
need to be considered if you want your resort spa to be a viable
business. For those of you who have a day spa with no lodging
component, I anticipate that there will be valuable and pertinent
information in this presentation since many resort spas offer
a day spa experience to the local community.
MARKET
The market should
drive your decision on whether or not to have a spa and what
kind of spa you should have. Everything you do needs to be market-driven,
you need to understand and serve the people who you expect to
visit your spa.
Know Your Market:
You need to know your market and develop a concept, facility,
program and service standard that they will want and appreciate.
If you do not know your clientele, there is no way to give them
what they expect and deserve.
Depending on where your resort spa is located, the following
are the potential markets:
- Local Market:
this could be day guests or members from the community
- Resort Market:
this could be the leisure guests, conference guests, companions
of conference guests, niche markets and affinity groups
Know Your Competition:
Once you know your guest profile and what they want, make sure
you can deliver it and that none of the competitive resorts
offer what you do. You need to be different and better. You
can not be a "copy cat"...you need to have your own
unique selling points and personality.
CONCEPT
The concept is your
vision and the foundation of everything you do in order to capture
and please your market. There are five main focal points in
developing your concept:
Be Unique: You can not be a "me too." There is a careful
balance between being unique and being so unique that you limit
your market. Points of uniqueness could be the services, products,
facilities, guest clothing, price point, etc.. Your uniqueness
should create curiosity and demand so that you get people in
the door. What you do to get them to return is another key element
to your success.
Be Consistent: Know
your concept and be true to it. Share it with your guests and
staff. Everything you do should reflect the concept.
Make It PR Worthy:
Magazines should want to feature and/or write about you. Let
the media tell your story. This is a more credible and marketable
strategy than placing ads.
Be a Leader: Stay
one step ahead by offering new products and treatments. Don't
get lost in the crowd by being good. Excel in every way.
FACILITY
Whenever we read
about a spa, the selling points almost always focus on the size,
number of treatment rooms and cost. There are, however, several
other important features that are the media may not mention
but that are critical to an operationally efficient, comfortable,
marketable and profitable facility.
Consistent with the
Concept: The facility and design must reflect the concept. If
you have a tropical spa, the design elements, lighting, foliage,
etc. should connote this feeling.
Efficient Flow: The
flow should help you control payroll as well as be stress free
for guests.
Balance between Profit
Zones, Comfort Zones and Back-of-House: How you allocate your
space can affect your success. The spa needs to make money with
treatments and retail. There needs to be enough social and private
comfort areas where people can stay and relax. In order to run
a business, you need to have the functional areas like offices,
workstations, etc.
Create Experience: One area that warrants special attention
is the wet facility area. This is one of the most expensive
areas in the spa. We need to re-examine what is put in this
area and whether it should be an experience worth paying for
or a loss-leader. We think there will be more emphasis on the
former.
Design with Flexibility:
The facility should allow for growth and development. Think
of your expansion plan during the initial planning stages so
that you do not compromise the efficient flow. It's hard to
predict the future, but think long-term, e.g., will you operate
everything in-house, will you lease out some space to complementary
resource people, etc.
TREATMENTS
People typically
go to a spa because they want to take a treatment, although
the treatment is the medium to help them relax, get rid of stress,
feel pampered, etc. There are some key factors to consider:
Consistent with Concept: Treatments and products must be in
line with the concept
Competitive Pricing:
Look at what everyone else is charging, the length of the treatments,
the overall experience, etc. then determine what you should
charge. Do not under sell yourself, but do not price yourself
out of the market.
Charge More but Offer
More: If you can create convenience, people will pay for it,
e.g., charge $5 - $10 more for your deluxe manicure but give
people the polish.
Don't Discount...Do
Value-Added: Offer value by doing add-ons or with give-aways,
e.g., after a body polish, give people the loofa mitt; after
a pedicure, give them the emery board; etc. Don't discount or
de-value what you offer....strive to enhance the value.
Gift Certificates: Un-used gift certificates mean that you may
have lost a marketing opportunity. You need people to come in
if you want them to come back. Encourage people to use these.
Up-Sell and Link-Sell
to Create an Experience: People should have an experience and
not just a treatment. For instance, up-sell by suggesting the
four handed massage rather than the two handed massage and link-sell
by suggesting a hair style after a facial. Think what you can
do to create a memory and a "wow." Create excitement
and you will have ambassadors who will do your word of mouth
marketing.
Personalize: Each
service should be customized and modified to meet the guest's
needs and desires. People want it "their way" not
your way or they will take the highway to the next spa in order
to get their own Special Personalized Adventure (SPA).
PRODUCTS
Products are important
because they are directly related to the concept, treatment
experience, retail opportunities, branding and profitability.
Here are some points of consideration:
Branded Product Lines:
Branded products can be a wonderful option because of the packaging,
name recognition, liability insurance, etc. Be careful, however,
with how many lines you have. Carrying too many lines can dilute
your bargaining power for pricing, training, collateral material,
free samples, etc.. If there are minimums, you could also face
a spoilage problem.
Private Label: There
is a wide gamut of options from having a generic product and
package with your name on it to creating a product formula,
fragrance and packaging. Having your name on a bottle is a great
way to establish and enhance your image if you create a good
product line, but there are lots of risks if you don't. The
mark-up value can be enticing, but the price of entry can be
substantial. If there is not a strong "home spa" sales
program, this may not be a cost-effective option.
Retail In-House:
Retail is the only "annuity" a spa has. If people
like the spa experience, they will want to take it home with
them in terms of spa products, accessories and themed gift baskets.
If you expect to sell products, you need the right line, space,
incentive program, "sales" people, etc.
Mail Order: Database
retailing is important in terms of establishing a relationship
with your guests. Your product company should be your partner
in the "after spa" sales efforts. This can be through
marketing, fulfillment house services, etc.
Re-Order: Know lead time of ordering products so you don't tie
up money by heavily stocking your shelves.
CONTROL PAYROLL
Payroll is the most
costly expense you have so it is critical to have the right
compensation program. There are many ways to pay your service
providers to show that they are valued and that they are part
of your success. As you put together a compensation program,
consider the following:
Hybrid Compensation: There are lots of options but some type
of hybrid program can give people security as well as incentive.
For instance, offer an hourly salary plus a productivity incentive
or give people a weekly salary with an incentive. These could
be draws against their actual earnings.
Commissioned Staff:
You may want to have people on a fee-for-service program. This
would be a treatment fee rather than a percentage.
Team Incentives:
When everyone works together to achieve departmental and team
goals, there can be greater earnings for the individuals as
well as for the spa owners.
Benefits: Think about
a benefits menu so that your staff can select what is important
to them, e.g., health and dental insurance; discounts on treatments
and retail; meals; uniforms; training; conferences; day care
services; etc.
PEOPLE
The spa business
is a people business, e.g., everything you do revolves around
your staff and your guests.
Invest in Your Team:
Hire well, continue to train them, help them to grow personally
and professionally and reward them in terms of recognition and
incentives. Make your success their success and celebrate the
success of the individual and the team. Create an environment
that reduces turn-over and builds loyalty.
Invest in Your Guests:
Personalize each guest's experience, use people's names, remember
birthdays and special occasions, etc. Never forget to say thank
you and welcome them back. As with the staff, it is important
to establish a relationship and to make their feel that they
belong and that you cherish their loyalty.
Invest in Your Community:
You and your staff should participate in community events that
are consistent with your concept. Do volunteer work, make charitable
donations, reach out and invite people in. Be a good neighbor.
OPERATING EXPENSES
It is important to
control operating expenses. The types of operating line items
and the financial assumptions depend on if the spa is an IBU
(independent business unit) or a department within the resort.
The following are some of the more expensive operating expenses:
Credit Card Commissions:
It's important to negotiate rates but maybe spas should be offering
preferred rates or give some type of "gift" when guests
pay with cash.
Laundry: When a guest
spends a full day in the spa, it is not uncommon to use 25 items
per person per day. The laundry expenses will vary based on
whether it is done in-house or out-sourced. You should do a
laundry analysis, e.g., sometimes if out-sourced, the laundry
company will buy all your robes, slippers, terry, etc. but will
charge a bit more to launder each item.
Marketing: Most spas
will be part of piggy-back marketing plan with the resort. However,
there may be direct marketing costs the spa will incur for local
marketing, membership sales, etc.
Professional Supplies:
You may want an inventory plan so that you do not waste products.
Think about pre-measuring products, setting up a requisition
program, keeping track of pars and re-order times, etc.
Utilities: It makes
sense for a spa to have an environmental consciousness program
because this is consistent with the "health" message
plus there are economic benefits.
MARKETING
Internal Marketing:
A guest should never be at your resort and not know that you
have a spa. There are numerous ways to promote awareness starting
with hotel reservations booking your hotel room as well as your
massage. Awareness strategies can include, but not be limited,
to direct mail, e-mail blitz, newsletters, referral programs,
frequent user and loyalty programs, in-room collateral, a spa
button on your phone, etc.
External Marketing:
If people like your program, make them your "ambassadors."
Offer them some type of incentive program to let their friends
and customers know about the spa. Ambassadors could include
wedding planners, gift stores, liquor stores, real estate agents,
travel agents, etc.
SPIN-OFF VENTURES
If you have been
able to establish a strong brand and a solid business plan that
can be implemented impeccably and consistently, maybe it's time
to see how you can create additional revenue streams.
"House Call"
Services: Be the provider of spa services to other hotels, private
residences, condominiums, etc. Set up an "out-reach"
program which can help you be a good neighbor while bringing
in additional revenues for you and your staff.
Spa Parties: When
people want to celebrate special occasions, create the spa party
either at the spa or at a person's home. This can include spa
services, gift baskets, spa food and beverage, etc.
License Your Name
or Set Up a Franchise: This is a major step but if you have
something that is reproduceable, you might want to consider
this option.
CONCLUSION
The spa business
is not an easy business to operate and there is minimal room
in which to make an error. It is not as profitable as people
may think but there are rewards that go beyond the monetary.
Your success formula should include the following:
Well Thought Out
Plan: Create a solid and realistic business plan; plan a facility
that has a good flow and feel; hire and reward well-motivated
and service-oriented staff; continue to do on-going marketing;
stay focused.
Impeccable Execution:
Pay attention to detail; provide small and consistent surprises;
be pro-active; make sure the facility adheres to the most stringent
cleanliness standards; etc.
Stay Ahead of the
Competition: Visit the competition and make sure you're better
than them; never be satisfied...if you stand still, you'll fall
behind; keep learning what else you can do and how to do things
better. Strive for perfection and never be content.
Look at Trends: Stay
on-trend by being aware of what is happening in spas, hospitals,
recreation, health clubs, family vacations, leisure time pursuits,
etc. Understand the past and present, but think in the future.
Spas are not a passing
trend. They are an expected and necessary component of a resort.
They must also be planned and operated as a viable business.
Stay focused and deliver the promise.
______________________________________________________________________________
Judy Singer is
the co-owner of Pompano Beach, Florida-based Health Fitness
Dynamics, Inc. (www.hfdspa.com), an internationally recognized
spa consulting company that specializes in the planning, marketing
and management of spas for fine hotels and resorts, day spas
and mixed-use developments. HFD has been the consulting firm
to over $600 million of completed spa projects since 1983. A
partial list of clients includes: Four Seasons Hulalai, Miraval,
Cranwell, Pinehurst, The Homestead, The Greenbrier, Bacara,
Silverado, Delano, La Posada de Santa Fe and Hotel Crescent
Court.
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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
E-MAIL: hfd@hfdspa.com
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