Mr. Henkin

Spas, Health & Fitness

How to Maximize Your Spa's Bottom Line

By Gary Henkin, President & Founder, WTS International

With the popularity of spas at hotels and resorts growing at a tremendous rate during the past several years, so has competition and the challenges to produce a positive financial result. Whether you are planning to add a spa or you already have one, it is important to realize that the spa isn't just a viable amenity. Right from the very beginning of the planning and design process through pre and post opening, one should develop the most appropriate operating and promotional modality in order to produce black ink to the bottom line. This is particularly true in the very challenging economic environment that pervades the entire hospitality industry worldwide.

Numerous factors have an impact on bottom line potential (e.g. location, competition, spa size and design, outside local market potential, operating structure, et. al.); however, the two most critical factors influencing net operating income are: operational efficiency and a successful marketing approach. Spa revenue can come from a variety of sources, but the typical drivers come most frequently from the number and types of services, retail product sales and from membership and/or daily usage fees. Expenses that need to be monitored to foster a positive bottom line include first and foremost salaries and wages for staff. Other expense items that require constant evaluation are administrative costs, operating supplies, laundry costs, professional products and marketing expenses.

To produce the best opportunity to maximize your spa's net operating income potential, below are our "Top 16" suggestions for consideration. They are:

1. Prepare from the start to produce net profits. This sounds overtly simplistic, but too often owners and developers do not. They are often caught up in their "vision" for the spa. Therefore, think through your staffing module, marketing plan and operating budget carefully before you come out of the gate.

2. Create a simple, clear and compelling sales and promotional plan which can readily be understood and executed by your spa management staff. Unfortunately, too many of these plans are riddled with complexity and excessive items that, to many spa personnel, are confusing and can't be easily executed. Take 3-5 items focused on "capturing" the hotel or resort guest internally and an equal number focused on maximizing non-guest traffic; the simpler plans that have clarity and are compelling to the customer are the ones that have the greatest chance for implementation and success.

3. Work to consistently increase the average guest ticket. As this rises, so too will your financial outcome. An increase in this average (which includes both service and product revenue) by as little as $5-$10 can make an enormous difference in your profit picture.

4. Hire upper tier staff for success, and don't be afraid to consider options outside the spa industry. Most management staff are trained to deliver a truly memorable experience to the spa consumer. However, in many instances, they simply don't view the spa as a business unit or "store." Hiring a Director based solely on spa service and product knowledge doesn't ensure that the spa will indeed produce a favorable financial result. The "spa experience" is crucial and shouldn't be under emphasized, but so is looking at the spa's operation from a business perspective. Thus, individuals who have a business background in facility operations, cost controls and sales/marketing can and should be considered even if they don't come directly from the typical spa pool.

5. Offer continuous training for the spa staff at the direction of the Spa Manager. Too many times, once the spa has opened, training goes by the wayside and service providers (therapists, estheticians, nail technicians and salon personal) don't receive continuous education and support. It is vital that your Spa Director/Manager calls frequent staff meetings and that there is a constant emphasis on the delivery of not only a professional and high-end customer service ethic, but also training in sales, up-selling, how to drive the average ticket price, cost efficiencies, inventory control, and all other items that can dramatically influence the spa's financial viability.

6. Integrate the spa into the hotel. Integrate at all touch points including easy to read signage in the lobby and elevators, collateral materials at reception and concierge, in-room materials and welcome message to guests, and inclusion on the hotel's TV channel.

7. Make sure that the hotel's sales and marketing department is actually aware of the spa and its offerings and that they are communicating regularly with the Spa Director. The Spa Director should attend all pre-con meetings and be in touch with groups prior to their arrival on property to book in advance spa services. In many hotels, the Spa Director and the hotel's sales staff aren't in close enough communication. Make sure that sales personnel actually take a few spa services to better their knowledge.

8. Don't neglect the importance of gift certificate sales. Evidence of their availability should be present at the spa reception desk. This is a great way to boost annually revenue at your spa. Gift certificate sales for special occasions such as birthdays, graduation, Valentines and Mother's Day gifts, spa memberships, etc. can really enhance the spa's chance for profitability. Too many spas don't do a good job of exposing gift certificates either within the spa or to local businesses, law firms, restaurants, residential properties, etc. outside the hotel.

9. Yield management should be a part of your program to ensure maximum profits. Not enough attention is paid to this initiative. Thus, one should develop creative ways (including special packages and/or pricing) to fill spa treatment rooms when they are least utilized, typically from Monday through Thursday. Special inducements can be offered to stimulate use of your spa rooms during down times. If you do offer discounts on certain days or certain hours, don't offer a percentage off the treatments; instead, offer a specific dollar amount (e.g. $89) as consumers relate much better to a dollar figure then to a percentage.

10. Constantly interface with meeting planners, wedding coordinators and others who can help the spa's exposure and bring business.

11. Don't underestimate the importance of selling retail products at the spa. Staff should receive consistent training in this area supported by product vendors who are usually more than willing to come to the site.

12. Design your spa experience to keep your guests at the spa as long as possible. This can include time before or after treatments in the spa lounge(s), a spa lunch, special classes; etc. The longer the timeframe spent at the spa by the guest, the more opportunity for a higher average ticket spend.

13. Spa memberships should be considered which can include use of the spa, pool and fitness center by a local patronage. These can be highly profitable and a valuable addition to overall spa proceeds. Offer an occasional "open house" event for the non-guest populace. This is a great way to expose the spa to potential members.

14. Connect the spa to the local community at large. Spa events tied to charitable causes such as breast cancer, heart disease prevention, etc. is a great way to establish a local following while giving back to the community.

15. Watch your staffing costs! Evaluate periodically your organization chart and how you are paying your staff from service providers to administrative support. This is arguably the single most important expense management item as it can impact your bottom line significantly. Regulate not only what you pay staff, but staff scheduling as well. One should also monitor other operating costs including expenses associated with professional and operating supplies, laundry costs and retail products.

16. The Spa Director needs to walk around in the owner's shoes and consistently ask "what would I do differently or better if I owned the spa." Only in this way will he/she have the owner's interest at heart.

These are but a few of the initiatives that should be considered if your spa is to maximize chances for a positive bottom line. A combination of creative promotions, consistent staff training and support, reaching out proactively to increase capture rate from guests and the local market combined with effective cost controls will lead to the best prognosis for financial success.

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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