Spa Business issue 2 2012 - Leisure Opportunities

RESEARCH
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LEONOR STANTON » CONTRIBUTING EDITOR » SPA BUSINESS
�rends® in the Hotel Spa Industry
2011 by PKF Hospitality
Research (PKF-HR) gives an
in-depth report on how the
US hotel spa industry fared
in 2010 and what lessons owners and operators
can learn from this moving forwards.
Now in its fi ft h year, the 2011 report is
based on the largest sample yet – 151 properties,
of which 64 per cent (97) were resort
and 36 per cent (54) were urban hotels.
At an average of 14,646sq ft (1,361sq m),
the resort hotels are 80 per cent larger than
urban hotels and off er an average of four
more treatment rooms, as well as other nonrevenue
earning amenities.
It’s important to note that unlike hotel
EBITDA, spa departmental income in this
report is before undistributed expenses –
such as marketing, utilities, maintenance
and administration – and fi xed charges such
as fi nance charges are taken into account.
KEY FINDINGS
As with previous years (sb11/2 p32), fi ndings
show that larger properties achieve significantly
higher revenues and departmental
income per square foot, particularly when
analysed by spa turnover. Hotel spas with
revenues of over us$3m and an average of 22
treatment rooms generate us$144 (€111, £89)
per square foot and us$43 (€33, £27) in departmental
income – representing 30 per cent of
turnover. Th e smaller spas, with revenues of
under us$1m, generate a departmental profi t
of 16 per cent, us$77 (€59, £48) and us$12 (€9,
£7) in departmental income per square foot.
Th is is to be expected according to Mary
Tabacchi, associate professor of spa develop-
44 Read Spa Business online spabusiness.com / digital
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ment and management at Cornell University,
who regularly contributes to the report. She
says: “Th e fact that those resorts with an
average of 22 treatment rooms tend to make
more money on a per spa basis is likely as
they have a captive guest; a guest who has
time to use the spa – and who in fact may
plan to spend money in the spa as part of
their vacation experience – these guests are
there for leisure and for a longer time. In the
smaller urban spas, hotel guests tend to be
there on business: they’re not likely spa goers
– they are usually there for a short period of
time, do their work and head home. Th ey’re
also likely to be travelling alone”.
However, when analysed by square feet,
it’s the smaller spas which have a higher revenue
and departmental profi t (see Table 1).
Th is is signifi cant for investors as these spas
are therefore likely to have a higher return
on investment levels. Tabacchi adds, “the
reason smaller spas oft en do better on a per
square foot basis is because there is less ‘nonrevenue’
space – few luxurious spa lobbies
and relaxation rooms.” Th e profi t conversion
of smaller spas is nevertheless lower than the
larger ones – 19 per cent versus 25 per cent
when measured on a square foot basis.
Interestingly, the middle-sized spas –
those which PKF-HR categorises in the
us$1m-3m turnover category – appear to
have suff ered the most in 2010. When measured
on a per treatment room basis, this
middle category saw revenues decline by 14.3
per cent. In comparison, larger spas (with
revenues of over us$3m) had an 8.8 per cent
drop in revenue and smaller spas (with revenues
less than us$1m) only suff ered a 1.9
per cent decrease.
Middle-sized spas in the US$1m-3m turnover category appear
to have suffered the most in 2010... and when analysed on the
number of treatment rooms, declines are even more signifi cant
Resort spas with more treatment
rooms make more money on a per
spa basis, but smaller spas have
higher revenue per square foot
Furthermore, middle category spas also
showed departmental profi t declines of 38.9
per cent compared with a 13.1 per cent fall
and a rise of 1.0 per cent for the larger and
smaller spas, respectively. This is partly
explained by higher payroll costs in the
middle category: us$74.14 (€57, £46) spent
on payroll per square foot, compared with
us$71.53 (€55, £44) in the larger spas and
us$46.60 (€36, £29) in smaller spas.
When analysed on the basis of the
number of treatment rooms, the declines
in the middle category are even more signifi
cant. At departmental profi t level, the
middle category (10-20 treatment rooms
per spa) experienced declines of 46.5 per
cent, compared with an increase in profits
in both the larger (up 8.1 per cent) and
smaller (up 4.8 per cent) spas.
OVERBUILDING IN SPAS
PKF-HR attribute the decline in the middlesized
group in part to possible overbuilding.
They believe that “medium-sized spas
are oft en found in hotels that likely should
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