Ms. Fenard

Spas, Health & Fitness

Spa Market Research and Feasibility: Compiling the data required to support the investment

By Elaine Fenard, Partner & Chief Operating Officer, Europe and U.S., Spatality

Making the decision to build a spa involves a substantial capital investment in a business that has unique nuances and is very different from the hotel business. Today, spa is a requirement in most five star properties and is considered an advantage in most four and even three star properties. As spa has become a must-have facility, it has also become much more important to make sure the spa facility...

In most cases, a market research study has already been conducted for the hotel. While this study may have outlined that the property needs a spa to be competitive, it is unlikely the report contained the data needed to make constructive decisions regarding the size and scope of the spa project, and the return on the investment.

There are five primary objectives in completing a successful Spa Market Research & Feasibility Study.

1) Project Objectives and Parameters

The party constructing the study will need to understand the objectives and project parameters of ownership/management prior to the data collection ensuring that everyone is on the same page. Additionally, it should be determined how the property fits into the portfolio and the intent for future growth of the spa division.

The data gathered to support this objective will...

Example: The market resource report for a property in the southeast United States showed the property would support a 12,000-square-foot spa. The owner had the budget and his heart set on building only 10,000-square-foot spa.. Realizing from the report that not only could the property support the investment, but a competitor was already building in the same range, the 12,000-square-footspa was constructed.

2) Market Opportunity Analysis

An analysis of the market place will show all opportunities for revenue and provide a snap shot of the competitive environment. It will assist in defining the spa positioning to provide the competitive edge needed in today's rapidly growing spa industry.

The data collected for Market Opportunity Analysis will need to...

3) Determine the Potential Customer Base(s)

The hotel guest obviously comes to mind as the primary base for spa usage and revenue. To ensure the spa reaches or exceeds projected occupancy demands, it is advantageous to know and understand where additional customer bases exist. In general, this will materialize in the form of day spa guests or members. Maximizing the use of the facility and planning for off-peak periods can make a significant difference to the ROI.

This data gathering and compilation will need to include...

This data is essential to determine demand and revenue potential and to realistically calculate the ROI.

Example: Membership was not initially a consideration for a desert property with spa and residences; the report outlined that competitive spas in the area were promoting fitness and spa membership for the sale of residences. The membership component was introduced to the desert property.

4) Determine Demand and Revenue Potential

When there is a significant investment, it is wise to analyze demand indicators to accurately project a project's potential. These indicators come from a variety of sources and can be based on different formulas. For example, identifying a property as urban or as a resort can yield valuable information. Areas to consider include...

Spa metrics should always be used to determine performance indicators including revenue per square foot, revenue per treatment room (RevPAT), revenue per guest, and payroll percentage of revenue.

5) Calculate ROI

The final objective is calculating the return on the investment. The marketing and feasibility will give you the information needed to...

Example: A recent market research report conducted on the west coast USA proved constructing a spa would not be a good investment due to the size of the property, the proposed location and construction costs.

Ultimately, when investing capital in a project that has the ability to increase the value of the asset, taking the initial steps to define the market research ensures that the size, scope and concept always pay dividends.

Elaine Fenard is an integral partner in Spa Strategy, one of the world's leading spa consulting and design firms. Joining in the Spa Strategy quest to create innovative and profitable spas, Elaine brought to the team more than 25 years experience in spa development and operations with one of the world's largest hotel companies and the leading international spa operations company. As an industry pioneer and recognized expert, Elaine is a frequent speaker at many conferences, and is a regular guest speaker at Cornell University. Ms. Fenard can be contacted at 303-573-8100 or Elaine@spastategy.com Extended Bio...

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