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:

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Coming up in February 2019...

Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.