Mr. Anderson

Spas, Health & Fitness

Hotel and Resort Spa Feasibility - Why We Need it?

By Peter Anderson, President, Anderson & Associates

Spas are sleek, sexy and expensive amenities that may add to your development costs between $200 - $700 per square foot, depending on plumbing, heating, water, drainage, weight, electrical and ventilation requirements. Additional layers of expense can be created when architects/owners/designers envision high-end custom amenities and spectacular levels of finishes. In many cases these costs can be justified based on their ability to generate revenue, enhance current operations and make owners and operators feel as they are exercising their perceived competitive responsibility to "keep-up-with-the-Jones." However from a cost/benefit analysis, each expense or investment must be weighed against its revenue potential. A market study and feasibility analysis gives the operator the ability to:

Significant capital investment used without market intelligence to back it up is money very poorly spent. The following paragraphs outline some of the anomalies related to spa feasibility and underscore it importance.

Rapid Expansion of Supply and Demand - A Fast Dance

Unlike the lodging environment where the basic product is relatively standard, spa environments are far from standard, and depending on the market, spas can cater to both the local population as well as the hotel and resort guest. Currently the spa market is in rapid expansion mode, with supply being created to keep up with ever evolving demand. Demand interestingly, is increasing in both scope (gender, age group and other demographics) and depth (wellness versus luxury amenity). However, it is impossible for every new spa to over-penetrate the market, so if capital is going to be deployed to develop or enhance a hotel or resort, the allocation should be used to surpass the competition. In this world, demand supports supply development, and innovative supply whets demand's appetite for "the next better mousetrap". It is not only a fast dance, but also a marathon. In the spa world, today's cutting edge modality may be tomorrow's norm.

Keeping it Simple

While pushing the envelope in terms of treatments and service delivery is important, this should not be done at the expense of providing fluff in place of substance. Ironically, some of the best spas keep their menu very simple, which makes service selection easy for the spa client and in many ways service delivery easier for the spa. A spa menu with a few well-thought-out items can be a tacit statement of confidence and quality by the operator. A focused menu approach is best supported with ability to customize treatments based on clients' preferences.

Providing frivolous interpretations of a basic service can dilute a spa's ability to position itself as the "go-to" establishment for a particular service. In the end, a complex spa menu may confuse and annoy your guest. A spa's physical configuration should be as flexible as possible. This will translate into maximizing the yield of the spa, and thus maximizing its profitability.. All of these variables are best addressed in the feasibility study.

Additional Disciplines Required for Market Information

Original lodging feasibility draws from a defined list of market needs, and takes into account the prima facie of sleeping rooms, Feasibility then follows to supporting research about facilities for meeting, eating, and recreation. Spa feasibility, especially in the resort environment, utilizes all these parameters but also draws demand information from psychographic profiles, health care models, wellness assessments, disease prevention trends, and in many cases, attitudes related to spirituality and safety in determining the appropriate menu of services and optimal utilization levels. This information in its most basic form translates into the size of the spa, the level of finishes and the anticipated price points for treatments and retail. Because a target market can drive the spa product and vice versa, this process is often iterative, and includes numerous levels of sensitivity analysis to determine the optimal target market(s) and corresponding spa product(s).

Spa Demand is Qualitative and Quantitative

A spa's ability to create revenue and enhance profitability is best evaluated prior to any development taking place. A spa feasibility report will start with a comprehensive understanding of local, regional and national spa trends, followed by an evaluation of current and proposed projects. Your spa needs to be tailored to your market's needs. Unlike lodging, which is clearly defined in levels of service, amenities and finishes, the spa industry is not as clearly defined. Day, destination and amenity spas can all compete at some level for the same market segments. For this reason, spa demand must be evaluated on a qualitative level and a quantitative level to assess that there is the right amount, and also the kind of demand needed to support your spa. Economic, demographic and psychographic measures are used to assess demand. and this analysis will assist in helping define market expectations. Doing one's homework with the appropriate level of feasibility analysis will save money and allow an owner to create realistic expectations.

When a branded hotel is attached to the spa product, the spa must compliment and support the brand where it is being incorporated. Service levels and training, FF&E, finishes, and an integrated PMS system are all back-of-the-house considerations that make the inclusion of a spa seamless. Standardization and brand compatibility are essential -- however, signature treatments and signature retail are also a must in creating customer interest and loyalty. While signature features of a spa support overall spa branding, it is important to leave enough flexibility to incorporate a sense of place, and address other market anomalies and opportunities.

The physical plant should also be developed in a way to be able to respond to ever changing market demands. It is appropriate to consider spa feasibility or spa programming evaluations in the following circumstances:

In cases where there is a strong possibility that the property may lose market share due to additions to supply or extensive renovations of the competition

Market analysis cannot change others development plans, but it can arm you with accurate and objective information helping you make your best financial decisions. A feasibility study will also help assess your ability for success. Ultimately, your spa's ability to anticipate market needs, address them better and more profitably than your competition, and to integrate itself into your operation seamlessly are all things that are assessed in the market and feasibility analysis. Absent this work and you are flying blind.

Peter Anderson is a principal of Anderson and Associates, which focuses on the issues of spa development and wellness programming for hotels and resorts. Mr. Anderson consults for the inclusion of spa programs and wellness therapies. Mr. Anderson's firm conducts market and financial analysis by tracking and evaluating spa and wellness trends which include emerging healing modalities in the allopathic and alternative medical disciplines. Mr. Anderson holds a Masters from Cornell and a Bachelors of Arts in Psychological Basis of Behavior from the University of Pennsylvania. Mr. Anderson can be contacted at 310 -392-9368 or peter@anderspa.com Extended Bio...

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