Last year, hotel spas in the United States notched 72.8 percent occupancy and grew average daily rate 3.5 percent to $287.45, according to the 2019 edition of CBRE’s “Trends in the Hotel Spa Industry” report. And while hotel spas grew total revenue 4.8 percent, labor costs were in hot pursuit, increasing in step at 4.7 percent.
So, how does a hotel spa ensure that it’s a profit center and not a cost center? A lot of that depends on forces at work before the spa even opens its doors, according to Leslie Fairbanks, owner and managing director of Aspen Spa Management, an international spa consulting company. “A lot depends on how the spa is conceptualized and designed,” she said. “Regarding the concept, does it fit the market you’re trying to serve? Is it designed in a way that maximizes profit?” What works for a spa in Europe might not translate to a U.S. market. For example, guests across the pond may be more open to cryotherapy or hydrotherapy, while Americans would be more comfortable sticking to traditional spa treatments such as massages, manicures, pedicures and the like.
“Large build-outs that include huge locker rooms or over-the-top hydrotherapy, multiple pools and so on—a lot of times those won’t generate much revenue and will cost a lot to build and outfit as well as have staff in there,” Fairbanks said. “It’s really how you financially plan for the space. It starts from the beginning, thinking about how you’re going to manage it.”
And while some in the industry might think a hotel spa is just an add-on and not a room-demand driver, David Stoup, chairman of boutique spa management company Trilogy Spa Holdings, said that can be the case—if it’s how operations were built at the onset. Sure, that could be the right strategy for the space, but owners can’t be certain unless the eventual operator of the spa is consulted during the planning stages, he said.
“You have to ask what the strategic objective of the spa is,” Stoup said. “Is it as an amenity? Is it aimed at the hotel guest or the local guest? Depending on who it’s aimed at, what do those people expect as a price point? That will affect how many rooms and amenities are offered in the spa. The price point is determined by the guest you’re trying to attract and what they’re going to want to pay as well as what the competition is charging.”
That forethought is critical, Fairbanks agreed. “When developing a spa, there always needs to be some sort of financial analysis. This sometimes happens as an afterthought,” she added. “Owners will bring in an architect and the space looks gorgeous, but they haven’t thought about how to make money. They may say, ‘Oh, we’ll hire a management company and they can make it profitable.’ But it all needs to harmonize.”
Operating for Success
The doors are open and the spa is ready for guests, but how do operators keep the party going? Beyond the management of payroll structure and costs (commission-based employees versus flat-rate fees versus independent contractors), retail is paramount. While Stoup’s spas aim for 20 percent of revenue from retail, he said the industry standard should be at least 10 percent.
“It’s the low-hanging fruit because you can increase your incremental income with having the right retail,” said Henry Oliver III, spa director at the Hard Rock Hotel Daytona Beach (Fla.). “If you don’t have that, you’re missing out on easy money and revenue.”
He said a little communication and creativity also go a long way. At his spa, about 60 percent of business comes from in-house hotel guests, about 19 to 21 percent are locals, and the rest are associates or guests from other hotels that don’t have a spa. With that data in his back pocket, he gets to work attracting business.
He partners with the front-desk team to ensure guests are informed about the spa’s services and are alerted to the in-room spa menu upon check-in. An insert with a special offer also is placed in each keycard folder, and information about the spa is played on guestroom TVs via the hotel channel. On heavy check-in days such as Fridays, the spa team will head to the lobby during peak hours and offer complimentary five-minute massages to tout services and let guests know where they can find the spa within the hotel (a challenge on its own because the spa is located on the lower level). As for a little creative communication, Oliver said to turn resort fees into an educational moment.
“A lot of times, guests have questions and ask what the value is. Explain to the guest what it does cover, and it also includes the use of the spa amenities,” he said. “They can come down to the spa, use the steam shower and relaxation lounge, and enjoy fresh fruit. That adds value to the resort fee.”
Meanwhile, locals are just as important for a hotel spa’s success, Oliver noted. “Locals carry us through the low occupancy season,” he said. Here, loyalty building and marketing are crucial. To gain a following, Oliver offers 20 percent off treatments seven days a week for locals, something that he said sets his spa apart from the competition, which generally gives this discount Monday through Thursday. Local guests who visit also receive complimentary valet parking and access to the hotel pool on the day of treatment, depending on occupancy. If the hotel is fully booked, he said it’s important not to displace guests, so locals are invited back to use the pool another day.
Additionally, Oliver and his team throw spa events targeted to locals. Recently, the team hosted a “spa-rty” that featured free products, swag bags, chair massages and tours of the spa. Discounts were offered for retail products as well as future appointments booked at the party. Finally, spa memberships are another way to drive revenue.
“A membership program where locals pay a monthly fee and start building up points to apply toward retail gives value to locals,” Oliver said.