Ms. Olsen

Spas, Health & Fitness

What IsYour Spa's 'Healthy' Bottom Line?

By Casey Olsen, Owner, Spa Sources

In today's spa realm, the vast majority of resort and day spas with ample treatment rooms are typically looking at a 20 - 30% bottom line. This has become the mantra for this department's profit. Many moons ago when I began in this industry as the Spa Director of the 65,000 square foot spa at La Costa in northern San Diego County, my focus was, of course on guest service, but also my departments' financial success. Fortunately, I had a great Chief Financial Officer that worked closely with me on streamlining my operation. I had graduated from college with a degree in Business, so, unlike many of today's Spa managers, I had a real interest in the "numbers."

Upon my arrival to that property, the spa department was looking at a $2 + million annual income with a 35% net (no, that is not a typo, $2 million!) and within a year I brought that number to $4,200,000 per annum with a 47% departmental net profit. Granted, this was an enormous spa facility with tons and tons of treatment rooms, but there is no reason why the formula used here cannot be translated to all spas, regardless of their size.

Well, I take that back. If you have a facility that has 10 rooms and the overall facility offers little in the way of amenities, then achieving a 45% profit may be more of a challenge. But if you are operating a facility with 20 + treatment rooms, then it is more than possible to reach that kind of spread.

Normally, when I am asked by a General Manager or an Owner to come to an existing property to work with their Spa Director my first stop is the Reception Desk of the spa. Often, a Spa GM will not alert the department to my arrival and I check in as a typical spa guest, so that I can see how the spa is "really operating".

My first focus is service. No matter the experience of the Spa Manager, if they have not consistently trained and guided their staff to cater, cater and cater some more to their visitor, we can stop right here. Without personal pampering from the spa staff, your full potential is already not being reached. After all, why go to a spa if not to be pampered? In a previous article I outlined steps to return to service in your spa. When a guest leaves your spa, they will proclaim their experience as being either an enjoyable one or not. And, believe it or not, no matter if you have a 5 star spa facility or a 3 star, if the guest is treated like a king or a queen, they may comment briefly on the facility itself, but they will go on to rave about how special they were made to feel by the staff.

OK, back to the Reception Desk staff. My read here is all about friendly and gentle up-selling. Once your guest has requested the treatment that they desire, your Reception staff should nicely state,"Great, Mrs. Smith, I have you set for your massage, but I also might suggest that you try one of our terrific scrubs that blends perfectly with your massage treatment and will make your skin feel incredibly soft. Can I schedule this in with your massage?"

If you were to look at your mid week business and reflect on your occupancy, meaning treatment room occupancy, you will get an idea of how your spa business can improve. We've all designed those lovely mid-week packages, that are a great deal, but it seems that few often work enough to fill those treatment rooms during the week, unless there are guests already planning to come to your property. Having created such packages for years and tracked their success, they do little to motivate the guest that had no intention of taking a vacation at the time your package is targeted, however, they can be the reason why they chose your spa over another. So, although you may not think that they are worth the marketing efforts, do no dispense with them. They are offered by your competitors and a potential guest will take note and compare.

Now, let's say that your spa is doing very well in the occupancy department but that profit ratio is still a bit low. First step is to take a look at your costs. Often, Spa Managers get used to operating their facility with the same old strategy. They continue dealing with the same vendors for years and do not make the effort to compare costs of other vendors that may offer the same or similar items.

It is imperative that your manager regularly price shop for everything that is needed to operate the spa. Also, if they find that the pricing is comparatively similar, then it is time to hit up your present vendors for some real deals. You have been a great customer and they value your business, so they will make every effort to keep your business and will often either reduce their pricing or offer freebees.

Once you have examined your fixed costs, it's time to look at your staffing levels. Many spas make their biggest mistake right here. Spa managers that do not keep a daily watch on their staffing, should be questioned as to why. What ever happened to sending staff home a bit early on slow days? When I hire my spa staff, I never guarantee the number of hours that they will be needed. Obviously, I give them a schedule of when they will be expected to be at work, but follow up by informing them that there will be days when they are not needed at all or be sent home early. Just by doing this, you can save a tremendous amount on payroll costs.

I have entered spas and seen staff all congregated around each other socializing with nothing to do. The Spa manager's primary job, after the guest, is to streamline and prevent this from occurring. Yes, it does sometimes present a challenge in keeping good staff members, but there should always be back up staff that can be brought in if needed.

A large area of expense is the therapists and estheticians payroll. If your spa is paying them an hourly salary, you have committed the ultimate sin. It's not recommend that you use independent contractors, in fact, just the opposite, but paying them a percentage only, is the only way for you to see those profit ratios increase.

If you can achieve some of the above strategies, you will begin to realize that your spa can provide to your property a stronger and "Healthier Bottom Line."

Casey Olsen is the principal owner of Spa Sources, a comprehensive health spa consulting firm. With 23 years of Spa Design and Review, Management, Staffing, Marketing, Budgets and Forecasts, Complete Spa Operation Set-up, Liability Guidance, Accounting, Equipment and Product Identification, Spa Sources provides comprehensive assistance in the creation of new, and the renewal of existing spa facilities. As one of the industry's foremost health spa consultants, Ms. Olsen provides invaluable guidance to developers planning their luxury resorts that include a health spa facility. Ms. Olsen can be contacted at 760 341-3311 or spasources@earthlink.net Extended Bio...

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