Spa revenue in the U.S. declined 7.7 percent in 2020 as a result of falling demand due to the inability to successfully socially distance because of the nature of the industry, according to research from IBISWorld.
That means hotel owners who are preparing for the travel recovery might be wondering what’s next for their spa space. To put it frankly, prepandemic operations won’t pad the bottom line in today’s vastly different world. If hotel owners were primarily driving spa revenue from hotel guests before COVID-19 struck, they need to acknowledge that demand won’t be coming back quickly. It’s time to adapt.
Leasing out the hotel spa is a great option as the industry navigates the postpandemic landscape. Here are five benefits to leasing out the hotel spa to a third party.
1. It Shifts the Risk
When hotel owners lease out their spa, they can enjoy less risk and more reward. The operations—and the working capital—are all in someone else’s hands.
A hotel spa can consume a couple hundred thousand dollars to keep payroll moving. Owners need to ask whether that is the best use of their cash—something all the more important today than a year ago. Additionally, implementing new cleanliness guidelines from the Centers for Disease Control and Prevention and the Occupational Safety and Health Administration mean more expense for the spa. In a leased model, owners don’t have to put in the cash to get everything ramped up and ready to meet these new guidelines and changing guest expectations.
2. It Offers Guaranteed Revenue
When owners lease their spa space, they enjoy a fixed rent check, a percentage of revenue or both, depending on how the lease is structured. That means owners receive a guaranteed check and get to participate in the upside as the spa revenues grow without having to do anything other than maintain the space.
It’s no secret that profits can vary when it comes to hotel offerings. However, for those owners who need to apply for a loan—which in the current climate has become another ballgame altogether—it is easy to show a lender a steady stream of revenue from the spa’s rent.
3. It Allows Owners to Focus
Two main variables are in play for the hotel spa operation: revenue and labor. In the current environment, both of those are very much uncertain. There’s a lot of cloudiness as to availability of labor, particularly skilled labor. In addition, there’s uncertainty surrounding the return of spa demand and the type of demand that will return. Will it be hotel guests? High-value leisure? Or the local market?
As travel ramps back up, it will be imperative for hoteliers to focus on driving revenue by filling up their rooms. At the end of the day, the spa is not going to deliver significant profits to a hotel’s bottom line as the industry works through the recovery phase. Getting the revenue and labor parts right could take away time and focus from the hotel operations team as they troubleshoot how to keep from losing money in the short and long term.
A spa lease offloads all of that worry to someone else who determines how to price services, find skilled labor and puts up their own cash for payroll.
4. It Opens up Opportunities for Ancillary Spend
Simply put, the lessee has a motivation to fill the hotel spa with business. After all, they still have to cut the rent check to hotel owners even if there are no spa customers. That means they will do all that it takes to get people through the spa doors.
A good spa partner can tap into the local database to garner more exposure for the hotel. Often when guests visit the spa, they stop at the hotel bar for a drink, pay for parking and more. That extra foot traffic can add to the property’s bottom line via ancillary spend without any effort on the hotel team’s part.
5. It Provides a Seamless Guest Experience
The guest experience has become more critical than ever because consumers have shifted their behaviors thanks to the pandemic. Owners don’t have to fear that leasing their hotel spa would mean a break in the link. A lessee can adopt brand standards and culture so that guests never know the hotel does not operate the spa. A good spa partner will have a supportive management team, with leaders that attend the hotel’s daily, weekly and monthly staff meetings, resulting in a seamless guest experience.
Finding a Good Spa Partner
As the hotel industry navigates the next normal during the recovery phase, hotel owners have a lot on their plates. Not only do they need to rebuild an entire hotel operation, but they are doing it with a much smaller team. Many owners may find that they don’t even have a spa team right now.
In today’s new and unknown landscape, a good spa partner can take the risk from the hotel owner while still supporting the owner’s bottom line. And, after more than a year of uncertainty, it can offer much-needed breathing room.
David Stoup is the chairman of Trilogy Spa Holdings.