Spa Business issue 2 2012 - Leisure Opportunities

RESEARCH
In 2010, the larger spas, with revenues of over US$3m, reduced
their total labour and operating expenses by 7.7 per cent... middle
and smaller-revenue spas only cut total expenses by 2.8 per cent
aff ected by a decline in the economy,” he says.
“Th is doesn’t necessarily mean that medium-sized
spas are overbuilt. Th e facilities in
these medium sized spas have also allowed
many of them to cater to a local clientele in
a way that they couldn’t if they were merely
designed to serve as a hotel amenity.”
Tabacchi adds: “Departmental income
from spas is small compared with room sales
– so that needs to be kept in perspective also
when considering this. After all, if spas
increase ADR they may pay for themselves
in that way. And there is another theory that
people who go to the spa also spend more
money elsewhere in the hotel.”
Turn to p26 to read Spa Business’ investigation
on the overbuilding of spas.
SPA DIRECTOR IMPORTANCE
In the face of declining revenues, all spas
have been cutting expenses. In 2010, the
larger spas, with revenues of over us$3m,
reduced their total labour and operating
expenses by 7.7 per cent. Th is is signifi cantly
more than the middle and the smaller-revenue
spas where total expenses were cut by
2.8 per cent in each category.
PKF-HR attributes these variations partly
to differences in management expertise.
“Larger spas with greater revenue streams
can aff ord to carry the expense of a seasoned
spa director, while smaller spas oft en do not
have that luxury. Th erefore, expenses may
be more carefully and creatively managed
in larger hotel spas.”
However, McCarthy says: “[although] it
is diffi cult for smaller spas to aff ord a manager
who has all of the skills and experience
necessary to master all of the complexities
of the spa operation, hotels can overcome
this by bringing other resources to support
the spa, for example, having the hotel’s marketing,
PR and sales teams helping to build
46 Read Spa Business online spabusiness.com / digital
the business and not expecting a
junior manager to do this while
also managing the staff , controlling
costs, etc.”
Fenard feels education
and training are key industry
challenges: “Th ere’s a gap
in educating spa directors. As
an industry we need to consider
how to address this. How
we mentor and support junior
spa directors and managers will
ultimately dictate how our spas
operate as profi t centres.”
Tabacchi agrees: “Experience
and business education alone
are not predictors of good management.
We have spa schools
that teach technique but not
much business and universities that teach
excellent management theory but not much
technique. Strong business students may not
understand how an excellent practitioner
works, while those interested in being practitioners
may not be interested or have the
aptitude for a strong business curriculum. In
summary, increasing management ability is
not well studied.”
Spa Business explores the state of global spa
management education in depth on p38.
SHOWING PROFITABILITY
Although overall spa profi t levels declined in
2010 by 27.4 per cent, there was an improvement
in the number of hotel spas which
show positive profi tability and above average
profi t margins (see Table 2).
Th e departmental profi t of hotel spas as
analysed in the PKF-HR survey ranges from
us$99,000 (€76,000, £61,300) on average
per spa for those spas with revenues under
us$1m to a departmental profi t per spa of
us$1.2m (€0.9m, £0.7m) for the larger spas
TABLE 2: PROFITABILITY OF CONTRIBUTING HOTELS – NUMBER OF HOTELS*
Spa Department Profi t Departmental Profi t Margin
Year Negative Positive Below Average Above Average
Resort 2010 9 88 81 16
Resort 2009 11 86 89 8
Urban 2010 5 49 39 15
Urban
*Source: PKF-HR
2009 12 42 39 15
MONKEY BUSINESS IMAGES / SHUTTERSTOCK.COM
Larger spas are more
likely to be able to
afford a seasoned spa
director so can manage
expenses more
carefully and creatively
with turnover greater than us$3m. The
profi tability of the smaller spas is therefore
relatively low once undistributed expenses
and fixed charges are deducted. Every
PKF-HR Trends® in the Hotel Spa Industry
survey has shown that smaller hotel spas
struggle to convert revenues into profi t.
FUTURE CHALLENGES
It is widely reported that 2011 was a better
year for most spas. Th e 2011 ISPA US Spa
Industry Study (sb11/4 p38) which surveys all
spa sectors, shows average revenues for the
resort/hotel sector to be us$1.461m (€1.1m,
£0.9m). Th is is not too diff erent to the average
revenue reported in the 2011 PKF-HR
survey – us$1.4m (€1m, £0.8m).
Colin Mcllheney, global research director
at PwC, who conducted the ISPA study says:
“When asked about the trend in profi tability,
resort/hotel spas responding to the survey
were more likely (64 per cent) than other
spas (49 per cent) to report an increase in
profi tability when comparing the six months
of September 2010 to March 2011 to the same
period in the previous year.”
But it’s clear, nevertheless, that many
spas are yet to see profi ts increase and that
improving overall profi tability remains a
major challenge for the industry against the
backdrop of a fragile economy. ●
Th e full Trends® in the Hotel Spa Industry
2011 report costs us$295 (€226, £183) and can
be purchased at www.pkfc.com/store or by
calling +1 866 842 8754.
SPA BUSINESS 2 2012 © Cybertrek 2012