Mr. Henkin

Spas, Health & Fitness

Spa Operations: The 10 Most Effective Ways in Creating a Positive Bottom Line

By Gary Henkin, President & Founder, WTS International

Operating revenue can be generated from numerous sources. This includes income from spa services (massage, facials, body treatments, nail services and salon/beauty). In addition, significant income can be derived from spa product sales as well as daily usage fees and/or "spa membership" sales. As critical as it is to set the stage for a smooth launch for a newly developed spa, it is even more crucial to develop a systematic approach to ensure that operational goals, both from a customer service and financial perspective are met. In a recent industry study, it was reported that hotel spa revenues averaged just over $130 per square foot, or about $115,000 per revenue station (treatment rooms and salon stations). Massage is still the king of all spa treatments; combined with facials and body wraps. Services/treatments still represent over 70% of all departmental spa revenue. The good news is that the study indicates that spa department profits continue to rise with resort hotel profit margins higher than those of urban properties by almost a two to one margin.

There are numerous concerns and potential pitfalls when operating a spa. Typical mistakes abound, but so do opportunities. Several are outlined below.

Staff Selection and Training

Finding and retaining qualified staff is a significant and ongoing challenge. This includes not only the Spa Director position but service providers (therapists, estheticians, nail technicians, etc.). Offering consistent educational programs, training and support combined with benefits such as a staff break room to relax and on-site meals is vital to attracting and retaining a quality staff. All too often, hotels overlook the importance of allowing for a continuing education program and spaces within the spa to allow for staff (and not just guest) relaxation. Thus, one of the biggest problems in hotel spas today is the constant turnover of personnel. Another typical mistake is to hire the Spa Director based primarily on the person's experience or resume without due consideration given to the individual's "core qualities" (leadership and communication skills, business, acumen, enthusiasm, work ethic, etc.). A thorough training process including business skills should be in place as many Spa Directors and service providers are focused more on delivering the experience and less in the delivery of revenue generation, promotion, expense management and the operation of the spa as a business unit. When you hire new staff, consider carefully these core qualities and not just the candidate's resume and past experience. This is the most important decision you will make, and the right staff selection and continuous training will give your spa the best chance for operational and financial success.

Efficient Scheduling of Staff is Crucial

All too often, this area is paid short shrift in spa management. Yet, the inefficient scheduling of staff can quickly lead to the demise of any spa from a financial perspective. The Spa Director needs to be cognizant of the importance of this issue so that the spa is capable of working with groups on a short timeframe and has a nimble approach to quickly respond to consumer demand. This should be a topic of discussion in weekly staff meetings called by the Spa Director.

Better and More Efficient Use of Treatment Rooms

Hiring therapists who are multi-skilled and treatment rooms that can serve in a multi-use fashion are significant pluses. Too many times, owners/developers design treatment rooms for one use only and hire staff who do not have multidimensional skill sets. This is an operational mistake which can have negative financial implications. Massage treatment rooms can serve to provide skin care services while couples room can also become applicable for singles. Having flexibility to convert other spaces in the hotel for use as treatment areas is highly advantageous as is the potential to add spa services to guest rooms.

Emphasize Product Sales, Cross Marketing and Staff Training in This Area

Another profit avenue not emphasized enough in spa operations is that of retail merchandising, display and marketing. Retail sales represent a healthy percentage of overall spa revenue; yet, this area is often a stepchild when designing or operating a spa. One should consider offering spa products as part of the hotel's retail outlet as well as part of the property's web site. Consumers should want to extend their spa purchases from home. This opportunity is lost on many hotel owners and operators with the assumption that once a purchase is made by the guest, that is the end of the line in terms of sales potential. A system for continuous purchase opportunity needs to be established by the spa and monitored by the staff. A guest should be viewed as a continuum for product and service purchases even from their home. Don't make the assumption that their initial purchase need be their only purchase. Additionally, if you expect to have retail product sales impact your spa's bottom line, your Spa Director must continuously offer training and support to the staff in this area. The word "sales" is often not viewed favorably by therapists and estheticians unless the spa makes it easy for them to broach this subject, with the guest; this is best done through education and creating a value proposition for the product line. Finally, make sure that there is a separate link to the spa's web site so that hotel guests and day spa users can easily book a treatment or make a product purchase.

Getting the Word Out is Critical

Perhaps the single greatest error from an operational/financial perspective is to avoid the expectation that a well developed marketing and promotion plan is required. Many spa owners and hotel management firms make the mistake of not thinking through how best to entice hotel guests and local traffic as well, to the spa. They assume instead that "the horse will always drink the water" or that "if I build it, they will come." Nothing is further from the truth, and consistent effort must be made to integrate the spa into every facet of the hotel's marketing and sales approach. This is particularly true at urban sites where the guest isn't necessarily there to relax as they may be at a resort or destination property. A close working relationship with the hotel or resort sales department needs to be established and the Spa Director should attend weekly sales meetings with the hotel staff. In order to maximize the capture rate from in-house hotel guests, consider exposing the spa to conference and meeting groups well in advance of check-ins; signage is important (in elevator cabs, at reception, etc.); the in-room TV channel should advertise the spa continuously; food and beverage, concierge and other spaces within the hotel should promote this area as well. In addition, each spa should evaluate the potential to add income from the surrounding locale. In order to do this effectively there should be a sales/marketing budget in place which includes direct mail, public relations potential, occasional open house functions and advertising. An effort also needs to be made to create positive community relations which can be accomplished through charitable events or affiliations from time to time. In summary, in order to maximize revenue and the chance for a positive bottom line, hotel and resort spas must consistently mine for customers, both internal to the property and externally.

Spa Memberships are Often Overlooked

This is a potential source of income for many spas which often goes unnoticed. A spa membership (in combination with fitness center use) can be created for the non-guest populace. These memberships are very popular with local clientele and an excellent source of potential revenue from treatments, programs (e.g. personal training) and product sales. Also, one can consider a separate daily usage fee for non hotel guests who simply want to stop in and use the spa's wet areas and locker rooms; this can produce a tidy sum of ancillary revenue which flows directly to the spa's bottom line.

Gift Certificates Can Be Huge

Many times, spas aren't focused on one of the most profitable revenue sources; namely, the sale of gift certificates. This is such an important area that it should be dispensed throughout the year and particular attention should be paid to the effective promotion in advance of holidays and special occasions (Christmas, Mother's Day, Valentines Day, etc.). A well designed attractive gift certificate combined with a proactive approach to advertising and exposing them to your existing and prospective customer base will yield significant dividends over time. For certain spas, the sale of gift certificates represents an inordinate percentage of spa proceeds and is a cornerstone of profitability.

Keep a Tight Rein on Cost Controls

Runaway staffing costs are the bane of many spas. This can quickly lead to the financial demise of the facility. Ensure that the Spa Director continuously evaluates this area and that the organization chart and staffing schedules are constantly monitored. Keep tight controls as to how the service providers are paid; many spas don't put themselves on a successful course through overpayment of staff. Consider the possible setup of a flat rate (plus gratuities) for the spa staff as opposed to a percentage. Also, keep a close eye on other cost centers including inventory control for retail goods, laundry costs, COG and operating supplies as these items can also spin out of control readily.

Don't Overlook Data Management

This is one item that is vital to the ongoing management of the spa which doesn't get the attention it deserves. Don't make the mistake of not evaluating carefully what system makes the most sense. There are several excellent ones that are on the market today. Bring in a consultant if need be to help source through the options in this area.

Remember to Pay Attention to Customer Service

At the end of the day, it is the "experience" that your spa guests will remember. Design and signature elements are important, but service delivery and the many "little things" that relate to customer service are all important in guest retention and creating a memorable experience.

Spa operations are not unlike that of a hotel. They are very complex in what has to be done to consistently ensure operational and financial success. There needs to be continuous vigilance with regard to standards of customer service, payroll/staffing, marketing/promotion, cost controls, scheduling and other areas critical to financial viability and maximizing profits. Avoiding these pitfalls will ensure that your spa meets your goals and expectations.

President and Founder of WTS International, Gary Henkin has 30 years in the planning, design and management of health clubs, spas and athletic facilities. He has developed feasibility and needs assessment studies for spa and/or health club properties. WTS has become one of the world’s largest and fastest-growing leisure consulting and operating firms. The firm has about 1,000 employees worldwide and provides services to hotels, resorts, luxury residential properties, exclusive golf and country clubs, day spas and real estate developments throughout the United States and overseas. Mr. Henkin can be contacted at 301-622-7800 or ghenkin@wtsinternational.com Extended Bio...

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