Spa Financials: Amenity, Add-on feature, Cash Cow, Profit Center?

By Melinda Minton Executive Director, SPAA | May 19, 2010

Math...yuck...who likes to do financial equations? However, you only have to plug a few numbers into some formulas to figure out what is going on with your business. Is it viable? What do you need to add, subtract or change to make your hotel spa flourish? Read these basic guidelines to get a better feel for your potential plan of attack. Formulas like the following will allow your spa management team to assess the health of your spa as well as make financial plans for your spa's future.

Break Even Point

Your Break-Even Point is the level of monthly sales required to achieve a profit of zero. Understanding your break-even point is critical to planning and operating a successful business. It is calculated as follows:

Break-Even Point = Operating Expenses / Gross Margin %

For example, if your Operating Expenses are $20,000 per month and your Gross Margin % is 45%, then your Break-Even Point would be $20,000 per month / 45% = $44,444 per month.

This graph illustrates the concept of break-even and the importance of increasing Gross Margin. Each line shows monthly profit for various levels of sales, and the break-even point is where the line crosses through a profit of $0. Each line shows a different scenario:

Coming up in February 2018...

Social Media: Engagement is Key

There are currently 2.3 billion active users of social media networks and savvy hotel operators have incorporated social media into their marketing mix. There are a few Goliath channels on which one must have a presence (Facebook & Twitter) but there are also several newer upstart channels (Instagram, Snapchat &WeChat, for example) that merit consideration. With its 1.86 billion users, Facebook is a dominant platform where operators can drive brand awareness, facilitate bookings, offer incentives and collect sought-after reviews. Twitter's 284 million users generate 500 million tweets per day, and operators can use its platform for lead generation, building loyalty, and guest interaction. Instagram was originally a small photo-sharing site but it has blown up into a massive photo and video channel. The site can be used to post photos of the hotel property, as well as creating Instagram Stories - personal videos that disappear from the channel after 24 hours. In this regard, Instagram and Snapchat are now in direct competition. WeChat is a Chinese company whose aim is to be the App for Everything - instant messaging, social media, shopping and payment services - all in a single platform. In addition to these channels, blogging continues to be a popular method to establish leadership, enhance reputations, and engage with customers in a direct and personal way. The key to effective use of all social media is to find out where your customers are and then, to the fullest extent possible, engage with them on a personal level. This engagement is what creates a personal connection and sustains brand loyalty. The February Hotel Business Review will explore these issues and examine how some hotels are successfully integrating social media into their operations.