Identifying Essential Benchmarks for Hotel Spa Profitability

By Leslie Glover Owner & CEO, Aspen Spa Management | November 11, 2012

If you were to take a six year old child to a nice restaurant and ask him what he wants for dinner he will undoubtedly request something that he knows and likes. Perhaps he will request macaroni and cheese, a hot dog or hamburger, but nothing on the menu because it is unfamiliar. When you ask hoteliers to come up with spa benchmarks they will come up with what they are familiar and comfortable with as they understand that these things are necessary to monitor the efficacy of the operation. But like the child in the analogy, for the most part they do not know how a spa operates, nor do they truly understand what their clientele are seeking in terms of wellness services. Therefore in general, they will apply benchmarks that are used in hotel operations, unfortunately many of which will not provide management the information required to implement changes nor provide the essential information needed to have a good read of what the problems might be.

So, what is the necessary data to use in order to improve or simply gauge the performance of the spa? First and foremost it is necessary to know the percentage of in house clients (hotel guests) that use the spa facilities. This percentage provides the "capture rate". These percentages vary based on the type of hotel and can be quite different from one another. Successful resort hotels have a higher capture rate than business hotels; some resort hotels have upwards of seventy percent of guests using the spa and wellness facilities, while urban hotels on average will obtain closer to a twenty percent capture rate. Obtaining this information is vital. Lower than average capture rates will reveal underperformance and may indicate a number of weaknesses that will need to be looked into further. There are a number of reasons why a spa may not be reaching an optimal capture rate, such as poor in-house marketing, inadequate signage, or even more simply that the type of spa or services offered does not satisfy the expectations of the clientele or meet their needs.

It is important to understand the hotel clients' primary reason(s) to be there does not always include the need for spa treatments; therefore spa services must be attractive enough so that the clientele will want to patronize the spa. Understanding this and educating the clientele about the unique features and benefits of the spa is part of what needs to be done. There are a number of methods to accomplish this, such as providing information or an infomercial about the spa on the hotel TV network and strengthening the spa message throughout the other services in the hotel by creating packages which coordinate with one another.

Additional information or data which is helpful for benchmarking is to understand how well the spa facilities are being programmed. What is the breakdown of utilization in time and day usage? This information will allow the use of yield management to maximize profitability. It will provide the necessary information to generate guest visits at otherwise weak time slots.

The percentage of retail sales compared to treatment sales is extremely important as it might indicate the lack of sales techniques on the part of the staff. Yes retail sales are important to the bottom line because the profit margin on retail in most cases is larger than treatment revenue, specifically in North America and Europe where labor costs are high. Consistently monitoring retail sales and adjusting the amount and type of inventory based on sales is also a vital element to optimize the performance of a spa and its bottom line.

The percentage of occupancy and/or revenue per available room (Rev/Par) broken down per number of treatment rooms has little value for benchmarking the performance of a spa. RevPar numbers may help to identify and monitor seasonal changes; however that is about the extent of their value. Spa treatment rooms may contain multiple work stations and they are not booked once a day as are hotel rooms. In most cases a low figure in that department might be caused by a poor conceptual design of the spa and not necessarily inadequate management. Rather than adopting the hotel industries benchmarking tools, spas should use RevPaws or revenue per available work station broken down by the number of work stations to gauge treatment performance.

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The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.