The Business of Spas... Still no Metrics
By Judy Singer President & Co-Owner, Health Fitness Dynamics, Inc. | July 03, 2016
Co-authored by Ben Campsey, Chief Financial Officer, Nemacolin Woodlands Resort
In 1983, HFD became the first full-service spa consulting company in the US. Our mission was to develop, plan, market and manage spas primarily for up-scale hotels, resorts and mixed-use developments. Our focus was to create spas that appealed to guests, staff, lodging operators, developers and investors. We created the blueprint for what we called the "business of spas." We wanted all our clients to have spas that would be profit centers in and of themselves as well as tangible assets to the company's "core" business of selling hotel rooms and real estate. We always told our clients that they do not want to be in the "spa business"... if the spa cannot enhance their "core" business don't build it. It is very difficult to market and manage a profitable spa.
HFD has consulted on almost US$800 million of completed spa ventures throughout the world. As I reflect on the growth of the industry, there are certainly a lot more spas; they are more opulent and grandiose than ever; they are charging exorbitant facility and treatment fees; they are challenged to find and retain staff and appropriately compensate them; and they are having to be more accountable yet the spa directors are not being trained in the "business of spas." While the spa industry has grown in many ways, spas are still in their infancy when it comes to understanding some of the basic financial metrics and working as an industry to improve their economic viability. Spas might generate more revenue, but this does not mean they are more profitable.
While there are lots of financial management reports in every spa software program, it's important to know which reports have the highest value in helping the spa director, the director of finance, the director of marketing, the general manager and the asset manager to understand some of the basic financial realities of spas and their contribution to the "core" business.
Individual spas typically challenge themselves on a daily, weekly, monthly, etc. basis to increase revenues, decrease payroll and operating expenses and increase profits as per their budgets and historical analysis. While this is important, there is a bigger picture that is being missed, actually ignored, e.g., evaluating a spa's performance within its competitive set and the establishment of industry benchmarks. It continues to amaze me that spas still do not have a benchmarking program similar to what STR does for hotels. It's very easy to micro-manage your spa, but how are you REALLY doing compared to industry norms? The problem is no one is collecting, measuring, monitoring and reporting data to establish reliable benchmarks so spas can see how well they are doing or are not doing. A few companies, including mine, have tried to develop an industry-wide benchmarking program, but we have all met with resistance in terms of getting spas and hotels to participate. Spas do not want to share their data in the same way that hotel data is shared with STR. It totally bewilders me why lodging operators aren't supportive of a spa benchmarking program. Their properties have multi-million dollar spa facilities with million dollar operating budgets, yet they aren't curious or even insistent on knowing if they are really being operated for peak performance.
In 2003, HFD conducted a landmark economic research study. I have since written numerous articles on spa economics and benchmarking. In 2008, I wrote a benchmarking article with Ben Campsey, currently the Chief Financial Officer at Nemacolin Woodlands Resort in Pennsylvania. It was widely published and became the platform for discussion on the viability of an industry-wide spa benchmarking endeavor. Ten years later, we are still talking.
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