Spa Business issue 2 2012 - Leisure Opportunities

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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
ORGANIC EFFECTIVE ANTI-AGING AWARD WINNING ORGANIC SEAWEED SPA TREATMENTS AND RETAIL PRODUCTS. Take an organic approach to well being with the exclusive VOYA spa and retail line. Formulated using hand-harvested seaweed from the pristine Northwest coast of Ireland, our treatments have been popular since 1912 when the first seaweed baths opened in Sligo. VOYA products and therapies are the result of 8 years work by the Walton family to bring you the world’s first range of USDA and Soil Association certified organic seaweed based products. Derived from the seaweed bath tradition which has been popular for over 300 years in Ireland. We have combined our traditional knowledge of the therapeutic properties of seaweed with the scientific expertise of the best cosmetic scientists, marine biologists and dermatologists. info@voya.ie www.voya.ie
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