5 Spa & Wellness Financial Drivers To Improve Strategies & Performance

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1.  Understanding Spa Occupancy

Capture Rate

The capture can depend on various factors, but as a guideline:

• 3-8% for city hotels
• 8-12% for resorts
• 20–35% for destination resorts
• 50–70% for wellness resorts
• 100% for wellness-inclusive resorts and wellness retreats
  

Spa Room Occupancy

Typically, the treatment room utilisation varies between 40–60% of occupancy.

Spa Bed Occupancy

Treatment bed and chair utilisation frequently ranges between 40% and 60% of occupancy.

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2.  Measuring Spa Revenue

Revenue Comparisons

Taking into consideration the type of resort and spa offerings, spa revenue can be approximately 5% of hotel revenue for standard spas in hotels and grow in ratios when more integrated into packaging with a wellness-oriented sales approach.

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Retail Revenue Reviews

Depending on various factors relating to retail, retail revenue can be anything from 5% to approx. 30% of spa revenues. It can play a significant role in building spa revenue when integrated well.

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3.  Monitoring Payroll Costs

This is an important metric to manage the utilisation of the spa team and critical for bottom-line performance as payroll is anywhere from 30–60% of the spa revenue, depending on the type of spa and management.

Typically, therapist utilisation varies between 50% (low) and 70% (high) for a normal working day (excluding calculations for annual leave and days off).

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4. Controlling Operational Expenses

Cost of sales - approx. 8-15% (depending on product, brand and pricing strategies) for regular treatments. With branded spa services, the products could be approximately 50% cost of sale and retail at around 60-80% cost of sale, depending on the type of products.

Fixed and variable costs can be allocated and monitored separately. The fixed costs usually cannot be amended, also linking more to the hotel/facility; whereas the variable costs can be fully optimised by the spa leader.

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5.  Maximizing Profitability

Gross Operating Profit (GOP)

According to an Industry Report by Howard HTL, spa departmental profit margins range between 35% and 40% in high-cost countries. In contrast, in low-cost countries, the margins may average 40% to 75% depending on the spa business model.

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Approaching Spa & Wellness with Hospitality Strategies

By approaching the spa with a hospitality mindset, similar to the way a restaurant would be analysed, consider the following when making your decisions:

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Therapist training, retention, and efficiency: As the significant cost centre of the spa but also the core human touch of the business. Are you analysing the therapist's efficiency? Do you have a policy to allow sufficient rest and recovery periods between treatments? Is the booking team trained to optimise efficiency during therapy assignments? Is your menu built to optimise efficiency? Do you track the therapist's skill sets and promote skill upgrades along with compensation upgrades?

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Menu engineering: Regularly review your menu to see which treatments are popular, which are bringing in more revenue, are longer or shorter treatments more popular, and are pricing strategies impacting the treatments selected. Refresh the menu to adapt and optimise according to the analysis at least annually.

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• Upsell opportunities: Is the team able to convert a standard treatment to a more extended treatment or with an add-on package? Are the retail upsells working well? What is required to improve this, such as displays, promotional material, special offers, etc.? Are you tracking, training, and incentivizing the team to increase upsell opportunities?
• Yield and revenue management: Does the spa have sufficient visibility throughout the resort with supporting marketing materials? Is the team actively promoting the spa? Are there special offers or value adds to activate off-peak hours, etc.? Is your treatment mix and pricing strategy working?

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_{** The statistics shown in this article are based on our private collective data, market research, and public industry reports.}

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