Ms. Segerberg

Spas, Health & Fitness

Spa Statistices: A Guide to Successful Spa Business Strategy

By Jane Segerberg, Founder & President, Segerberg Spa Consulting, LLC

What Gathered Proven Statistics (GPS) do you use to strategize the spa’s financial success? Like our reliance on our GPS devices for travel direction, proven spa statistics can be used to direct the spa’s business strategy.

Hoteliers know the importance of using reliable statistics to compare performance against industry averages and the property’s competitive set, stay ahead of the latest trends and monitor the industry overall. Like the hotel industry’s research, the Spa’s “GPS” can guide identification for areas of improvement, relevancy to the market and profitability strategies. Employing a combination of quantitative findings based on surveys and qualitative experience and opinion based surveys taken consistently over a period of time will result in a snapshot of the trends driving spa businesses. An important note of caution – as a maturing industry, the spa industry is just beginning to bank qualified reliable statistics and research that can be used to guide sound forward-looking spa business plans.

Spa Growth Changes

Spas have entered a more mature growth phase. Once enjoying a high rate of growth, some spas were built on emotional rather than practical principles resulting in spas that were sizeable and spectacular but not practical and profitable. In addition, the proliferation and fragmentation of spa segments has led to increased competition which has been amplified by the recent economic downturn. Experiencing a 15% drop in revenues, spas have found that they aren’t immune to changes in supply and demand related to market evolutions and economic fluctuations.

With the drive and focus on achieving ROI and black ink management, hotel and spa managers are turning to reliable spa research for guidance.

Spa’s Value to the Property

As many hoteliers have realized, the value of the spa to the property is broader than the success of the spa’s business itself. The inclusion of a spa amenity on the property is universally assumed to add to the overall property ROI with:

• Higher ADR
• Higher market visibility
• Higher RevPAR
• Higher double occupancy
• Longer length of stay

In addition, a niche of luxury hotels is finding that spa guests have a higher spend when compared to non-spa guests. Bringing in the higher spend obviously results in higher revenues overall. Spas have proven that they are well worth the development and planning within the overall property plan.

Reliable Statistics

It is not surprising that during the maturation of the Spa Industry, surveys and benchmarking have come later in the timeline. Just as with hotel benchmarking, not all research is equally reliable.

Investigate and qualify the research’s sources, methodology and knowledge of the industry. Is the research sample statistically representative of the spa type? Is the research a quantitative or qualitative primary study with reliability that the sample represents the spa segment in question? The nuances of spas are completely different given their segment – resort/hotel, day, destination -- and then further drilling down into luxury, urban, resort, etc. Or, is the research a secondary quantitative or qualitative study that summarizes existing data and research by others? Secondary studies can also highlight data points and opportunities particularly when reviewed over a series of years to identify trends.

Since all research is fraught with areas of lower accuracy, better information can be gleaned by noting the peaks, troughs, ranges and variances from consistent studies over a period of years.

A Metric in Hotel Language

Up until now most of the reporting language in the spa side of the hospitality industry has been Greek to the hotel side. RevPATH (Revenue per Available Treatment Hour) integrates the average treatment revenue per treatment sold (not the average price of treatments) with the spa’s treatment room occupancy just as Rev PAR integrates the average guest expenditure with occupancy.

For example, if a spa has a 55% occupancy and an average treatment expenditure of $100, the RevPATH would be $55:

• If the spa has 10 treatment rooms and is open from 9AM-7PM for spa treatments and has 1 hour treatments, considering the 15 minute turnover time results in each room available for 8 service hours/day.
• The spa’s 8 service hours per day X 10 treatment rooms X $55 RevPATH would be an average daily revenue of $4,400.
• If the spa is open 365 days/year the annual revenue ($4,400 X 365) would be $1,606,000

Since it is very possible for spas to have the same RevPATH and yet achieve it very differently, it is important to consider the spa’s positioning. For example, Spa A, B and C all have a RevPATH of $60. Spa A has an occupancy of 60% and an average service expenditure of $100. Spa B has an occupancy of 40% and an average service expenditure of $150. Spa C has an occupancy of 80% and an average service expenditure of $75. All three spas obviously have different markets and goals for the type of facility and experience desired. When comparing the spa’s RevPATH to published research it becomes clear that the research must be targeted for the spa segment and in addition must have a reliable sample.

Just as for hotel operations and RevPAR, charting the spa’s RevPATH provides a measure of flow and can be implemented to track seasonal periods, specific days of the week and periods of time during the day.

While percent of retail revenue, utilization of therapists, revenue per square foot, revenue per treatment, or revenue per hotel guest are important in charting and comparing the spa’s trends; consider giving strong consideration to RevPATH one of the more accurate measures of the spa’s operation.

Spa Business Strategy

Given all of the changes in the Spa Industry and in the economic climate, spa management must focus on strategies to maintain sales for the future while giving consideration to the unpredictable and erratic behavior of the customer. Spas must believe that the value-minded customer is here to stay.

Spa profitability does not occur by coincidence and spa management should monitor the expense of producing treatments and simplify menus while at the same time adding value for the spa guest. Research and trending of the industry along with monitoring the spa’s own trends provide the basis for making informed changes and decisions. Rather than just filling in the gaps, review the total spa image and positioning to develop a master plan then consider these strategies to fill identified troughs and slow periods:

• Service, Service Service – make all decisions with guest satisfaction in mind. Keep guests satisfaction high to retain existing spa customers and gain third party endorsement for acquiring new spa customers. Cut backs in spas in general have resulted in a drastic loss of service. Spas are an experience purchase and when the service experience declines, the value of the spa experience declines dramatically.
• Review operations to minimize hidden costs and streamline operations without reducing service levels. Changes in operations require service re-training so service levels do not dip.
• When simplifying menus, consider that the two universally top performing services in spas, massages and facials, perform well for a reason. Massage attracts the broadest range of age and gender demographics because of the common need to reduce stress and improve well-being. Facials are fairly resistant to economic fluctuation because the face is considered to be the image and most visible part of the body. Spending for facials will continue during an economic downturn, possibly not as frequently.
• Modify marketing to meet the consumer demand for value. Exotic services hyped by the media may attract attention but guests will still most often buy the basics. Emphasize stress-reduction as necessary and valuable to health and well-being. In addition, consider marketing to locals to sustain the spa’s occupancy during its low and shoulder periods. Hotel/resort guests enjoy discourse and interaction with locals. Locals who spend their dollars and time at the hotel/resort spa mix well with the property’s guests.
• Now is the time to create strong vendor win-win relationships. The spa’s vendors should be more than enthusiastic about adding value to the spa’s services with product gifting and special backbar and retail pricing.

In Conclusion

Reliable spa statistics assist in identifying areas for improvement and making reliable spa business plans. The spa that uses these metrics will remain competitive while maximizing profitability by designing and delivering programs to make timely modifications as guest preference and usage patterns change. Spa management must seek out and use a reliable Spa “GPS” to monitor the industry, compare performance, stay ahead of trends and study the behavior of spa customers. Stay tuned as spa research continues to improve in reliability and relevance.

Jane Segerberg is founder and president of Segerberg Spa Consulting, LLC., a multi-faceted spa consulting and management company with an industry reputation for creating spas that work –they are compelling for the property’s market, attain recognition, engage guests in memorable experiences and achieve bottom line success. Over Jane’s thirty-year history in the wellness, hospitality and spa industry, she has become recognized for providing outstanding service and keen attention to detail. For company information please view http://www.segerbergspa.com. Ms. Segerberg can be contacted at 912-222-1518 or janesegerberg@yahoo.com Extended Bio...

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