Hotel Spa-Specific Key Performance Indicators
By Kristi Dickinson Director of Spa & Wellness, Rancho Valencia Resort & Spa | June 23, 2019
Positioning your spa well will help sell hotel rooms but managing your spa business well will ensure your spa is also a contributing profit center. Monitoring and understanding key performance indicators (KPIs) is critical for a successful spa division.
KPIs are used for comparisons – between competitors with similar spas or between multiple locations within a brand collection, Measurement – to gain an understanding of a spa's operational results over a series of time periods, and Communication – to provide a common language regarding performance and operational efficiency for ownership, investors, asset managers, managing directors and general manager.
Begin by choosing your top priorities, establishing benchmarks, measuring and monitoring performance, and then revising strategies. Share KPIs with your line staff to validate their contributions and connect them to a feeling of purpose. Reward them for achieving goals and gather their input on strategies to attain future goals when a revised plan is needed. Regularly review the results of these plans to develop financial acumen and future leaders.
I have shared some of the more popular spa KPIs and industry averages with you below to use as a general guideline, however it is important to note that spas differ greatly depending on market segment, location, facility, offerings, and reporting procedures.
1) Treatment Room Utilization (TRU)
Number of Treatments Sold
Total Available Treatment Hours
How effectively the spa operator manages the spa's physical resources.
According to American Spa, most spas operate at a 35-40% TRU.
It is tempting to think of this metric as similar to occupancy, which is why these low percentages oftentimes alarm general managers and owners. Spa treatment rooms essentially "sell" 8-12 times per day (varies with operating hours) whereas most hotel rooms can only be sold one time per day. A spa's inventory is time not rooms. Early morning and late evening appointments are often very difficult to sell and turnaways are common on weekends and peak times. These shoulder times cause much lower TRU averages.
A 100% Treatment Room Utilization is not possible in spas that offer 60 and 90-minute appointments as they require a 15-minute turn time. Every 60-minute treatment requires 75 minutes of available treatment hours (80% max TRU) and a 90-minute treatment requires 105 minutes of available treatment hours (86% max TRU).
Also, typically both a therapist AND a facility are needed to book a service so if a spa is facing a staffing challenge, this will impact the ability to drive Treatment Room Utilization. Further, if therapists are not trained on the entire spa menu, a booking can be lost if a qualified provider is not available at the time the guest requests the service.
Most often you will only be interested in using your spa treatment rooms for this statistic, so you may need to manually modify software reports to exclude other facilities such as pool cabanas, the gym, etc.
Finally, if your spa features couples massages, it is suggested to factor the number of tables into the total available treatment hours, not just treatment rooms. This ratio is called Spa Occupancy and often includes the cabanas, gym and other ancillary facilities as well.
2) Service Provider Utilization
Service Hours Performed
Therapist Hours Available
How effectively the spa operator manages the spa's human resources. The majority of spa revenue typically comes from treatments, so this is an essential KPI. If therapists receive an hourly compensation in addition to a commission, this is a very important ratio. It can also be tied to morale. Overstaffing makes it difficult for therapists to make a living wage. Understaffing results in lost revenue so it is important to monitor this statistic on a regular basis.
According to American Spa, the "sweet spot" is 70-85%.
< 70% = overstaffing
>85% = therapist shortage
This report will show every hour a therapist is available to be booked. If the schedule is modified to start therapists later or send them home early, it is critical for the appointment books to reflect this as well as non-bookable time such as meal breaks, meetings and trainings.
It is also interesting to review this statistic by department, separating massage, esthetics, hair and nails. In most spas, massage therapist utilization rates are higher than those of salon technicians.
3) Revenue Per Treatment
Net Treatment Revenue
Number of Treatments Sold
Average ticket, how well rate is driven, and upselling is utilized. It does not take the cost to deliver the treatment into consideration, therefore it is not a measure of profitability.
According to ISPA's most recent Spa Industry Study, in 2017, the overall average price per service in resort/hotel spas was $136.
It is important to understand a spa's length of service as well as mix of offerings (for example, a 5-star luxury spa offering medically-oriented skincare vs. an urban spa specializing in blowouts). Keep in mind that shorter services will lower the average ticket and longer services will increase the metric. Revenue Per Treatment differs from hotel ADR in this way. Again, time is a factor.
Some spas offer 50- and 80-minute services, and others offer 60- and 90-minute services. When reviewing your performance against a competitor, it can be more interesting to consider average treatment rate per minute of service. Add-ons such as waxing services will also create a lower average, so it is important to look at total spend per client rather than just the average treatment rate. It is also worthwhile to look at Revenue per Treatment by day, especially in spas using variable pricing.
Finally, keep inflation in mind when considering revenue per treatment growth. Take note of menu price increases each year so that an accurate analysis can be performed to determine the drivers of rate growth.
4) Revenue per Available Treatment Room (RevPATR)
Net Treatment Revenue
Total Available Treatment Rooms
Useful both when comparing a property against a similar competitor but also when considering the impact of adding additional treatment rooms.
This figure will vary greatly across spas. It is more important to benchmark internally and consider over a series of time periods.
Again, as with Rate per Treatment, inflation impacts Net Treatment Revenue numerator.
5) Revenue per Available Treatment Hour (RevPATH)
Net Treatment Revenue
Total Available Treatment Hours (No. Of Treatment Beds x Treatment Operating Hours)
Incorporates the time factor that is essential, given that time is the true inventory of a spa.
RevPATH varies greatly between spas but can be used to evaluate the effectiveness of the spa operator to develop revenue management strategies for specific time periods. Much like a hotel may requiring a two-night minimum stay over a weekend, the spa might require a minimum of a 60- minute service to access the spa or restrict the booking of low profit services.
This metric is not only the gold standard in measuring the productivity of the spa, but it also eliminates the concerns about length variances in treatments I have mentioned above regarding Treatment Room Utilization.
RevPATH is similar to RevPAR in that the operator may choose to lower prices and drive volume or increase prices and accept a lower occupancy to maximize revenue.
When reviewing RevPATH year over year, be sure to take note of any changes in the spa's operating hours, as RevPATH stats can be artificially inflated if treatment hours are reduced or deflated if treatment hours are extended.
6) Capture Rate
Total Number of Hotel Guest Treatments and Fitness Sessions
Total Number of Hotel Guests
The percentage of hotel guests utilizing spa treatments and private fitness sessions.
Capture Rate varies greatly between spas. It is most useful in comparing against your own historical performance, as length of stay, single vs. double occupancy, and reporting all varies by property.
Guests with multiple treatments will increase this ratio. The output is only as good as the input so accurate selection of guest type by the spa reception team in your software is critical. It is important to know what percentage of the house was double occupancy during the time period for an accurate denominator.
Transient Capture Rate vs. Group Capture Rate is also interesting to consider. Knowing Capture Rate by segment is especially helpful in the budgeting process if a strategic decision is made to change the house mix.
7) Spa Revenue per Occupied Room (SRevPOR)
Total Spa Revenue
Number of Occupied Hotel Rooms
Average spa revenue generated by hotel guests.
Much like the previous standards, this figure will also vary greatly across spas. It is most useful in comparing against your own historical performance year over year and considering the effectiveness of specific marketing initiatives.
SRevPOR should only consider direct revenue resulting from hotel guests such as spa treatments and retail. Membership revenue, day passes for non-hotel guests, etc. should be excluded. A Sales by Guest type report is suggested but again the output is only as good as the input. It is also interesting to segment transient hotel guests vs. group hotel guests with this KPI.
8) Market Segmentation Ratios
Typical market segments are hotel guest, member, owner (in the case of a condo hotel model), local, group, and employee.
Which market segments are utilizing the spa to determine where to focus marketing efforts.
Varies greatly. These ratios are most interesting when reviewing the impact of a marketing effort on a specific segment.
Again, the output is only as good as the input. It is advisable to look at this alongside Capture Rate and make note of effective and ineffective marketing initiatives for future reference.
9) Profit Margin
Net Income: x100
Ability of the spa operator to generate revenue and manage expenses.
According to the 2018 Spa Industry Study by the International Spa Association (ISPA), among resort/hotel spas, (38%) operated with profit percentages below 15% or at a loss, (32%) reported their profit percentage in the range of 15.1% to 25%, (21%) were in the range of 25.1% to 35% and (9%) reported a profit percentage of 35% or higher.
Spas with membership programs will typically have higher profit margins, as do spas with strong local markets. In both cases the spa's success is not completely dependent on hotel occupancy.
10) Repeat Customer Percentage
Number of Repeat Guests
Total Spa Guests
Connection and relationship with customers, how satisfied they were with their experience, perceived value of offering against competitors.
This statistic will vary greatly across spas and markets. It is most useful in comparing against your own historical performance and for motivating your team to build relationships and exceed guest expectations.
Spas with strong local markets will inherently have higher repeat business. If a spa converts software this statistic will be skewed, as all guests will be "new" guests for a certain time period. Be sure to take note of all historical KPIs before a software conversion.
- Retail-to-Service Ratio
- Product Unit Sales to Treatments Performed Ratio
- Retail Sales Per Square Foot
- Inventory Turnover
- Contribution Margin by Treatment
- Sales Contribution Percentage by Treatment Category
- Revenue per Customer
- Direct Labor Cost Percentage
As mentioned earlier, KPIs vary greatly between properties and have several caveats as outlined above.
Monitoring KPIs helps identify problems and inefficiencies, however this will not determine where the problem lies. Thorough analysis will be necessary to address the cause and corrective action may be taken via:
- Marketing efforts to drive revenue
- Menu engineering and comp set analysis
- Labor management
- Controlling operating expenses
A strong spa offering is essential for attracting both hotel guests and local business. Regular review and reporting of spa KPIs can transform a spa division from a loss leader into a powerhouse. It is critical for general managers and finance directors to groom spa directors and develop their financial savvy. I encourage you to openly share your KPIs with your peers, discuss consistency in reporting, challenge each other to keep moving the needle, and work together as informed industry leaders to drive the economic viability of spa.
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