19 Feb 2018 Spa Business Handbook
 

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Spa Business Handbook - Total Impact

North America Research

Total Impact


Wellness elements are moving beyond spas into other areas of hotels and department revenue is healthy, according to PKF’s latest Trends® in the Hotel Spa Industry study. Andrea Foster outlines the key statistics on the USA hotel spa sector

Andrea Foster
There’s a rise in fitness schemes like hotel bike shares photo: SHUTTERSTOCK/Antonio Guillem
In Stay Well® hotel rooms, shower water is infused with vitamin C
Treatment revenue grew by 4.2 per cent – slightly less than daily facility use photo: shutterstock/Andor Bujdoso

The USA lodging industry has climbed out of the economic downturn as demand for hotel rooms reaches record levels for the fourth consecutive year. After room revenue, spa and wellness were standout performers in revenue increase according to the 2014 edition of PKF’s Trends® in the Hotel Spa Industry, which was revealed in October and based on the previous year’s numbers.

While room revenues grew by 5.9 per cent in 2013, spa revenues in USA hotels increased by 4.6 per cent. In comparison, the combined revenues from other departments such as food and beverage and retail, rose by 4.4 per cent on average.

Hotels are slowly seeing the return of guest spending. In addition, PKF has identified a wellness ripple effect too. Both spa and wellness are becoming more prevalent in today’s society and hotels are starting to take notice of this.

Previously spas were seen as an exclusive, luxury experience, but now they’re increasingly viewed as having wellness-orientated offerings. Spa, at its root, is about health and wellbeing. And as trends in society are shifting to healthier, more active lifestyles, hotels are incorporating aspects of spa and wellness into other departments. Speciality spa menus are being introduced in restaurants/bars; meeting rooms and guestrooms are getting healthier – the Stay Well® rooms by Delos Living (see SB14/1 p28) are a prime example; and there’s a rise in fitness programmes such as hotel bike shares. In short, hotels are seeing a positive impact when integrating spa and wellness into their entire operation.

Healthy revenues
The Trends® in the Hotel Spa Industry survey shows that in 2013, both urban and resort hotel spas in the USA saw revenues grow by 7.7 and 3.6 per cent respectively. On a per occupied hotel guestroom (POR) basis, urban hotel spas saw a greater increase in total spa department revenue, driven by a combination of a rise in customers and an upturn in revenue per treatment and revenue per customer.

Revenue per treatment increased 3.2 per cent in urban hotels, while resort hotels experienced a decrease of 1.2 per cent. Revenue per customer in urban hotels went up by 1.3 per cent, compared to going down by 1.3 per cent in resorts. Yet, capture rates – calculated by dividing total occupied hotel rooms by total number of treatments from hotel guests – was much lower in urban hotel spas. On average spa capture rates sat at 7.8 per cent in 2013. Resort spa capture rate was 11 per cent and the urban spa capture rate was 4.6 per cent. With this in mind, PKF attributes a portion of the success in urban hotels to effective revenue management and selling techniques.

Hotels are continuing to reach out to locals to boost spa revenues. By pursuing local patrons, they can decrease the volatility of spa revenues relative to occupancy patterns and shift demand to off-peak periods. Daily facility use, fitness and personal training and membership fees, typically associated with locals and non-hotel guests, grew by 4.5 per cent combined (see Table 1). This is slightly more than the increase in total treatment revenue which grew by 4.2 per cent.

The good news is that spas are finally seeing a return to spending on retail and products in addition to treatments. Retail revenue rose at urban and resort hotel spas, by 10.4 and 3.3 per cent respectively, which is a healthy sign.

Cost control
An increase in hotel spa revenues is welcome and, even better, these were passed through to the bottom line. Both urban and resort hotel spas achieved a greater growth in revenues compared to their change in operating expenses, showing that these departments are becoming more efficient in their operations.

As spas are a ‘high touch’ experience, labour remains the highest expense. As spa department revenues increase, it’s no surprise that staff costs accumulated compared to the prior year as well. Labour expenses at all hotel spas in the USA increased 2.6 per cent in total in 2013, while the percentage of total labour expenses to total spa department revenue decreased from 60.8 per cent in 2012 to 59.6 per cent in 2013. As demand increases for hotel spas, higher staffing levels are needed to create the same personal high-quality experience. One notable change PKF saw in 2013 was a decrease in payroll related expenses for spas with less than US$1m in revenue. It seems reasonable that this would be driven by a shift from full-time employees to part-time, on-call and/or contract labour staff who are not offered benefits. For spas with lower volume, this can be an effective cost-saving strategy.

Due to an increase in revenues and the controlling of expenses, hotel spas were able to see high percentage increases in total spa departmental income. Combined, all hotel spas averaged a 13.9 per cent growth in profits. Leading the way were urban hotel spas, which grew their bottom line by an outstanding 40.1 per cent (see Table 2), although it should be noted that as baseline numbers are not high to start with, a small rise in revenue can result in a higher percentage increase. Resort hotels achieved a smaller department profit growth of 8.4 per cent. Despite a lower overall growth in spa departmental profit, resort hotel spas saw higher profit margins than urban hotel spas, at 23.1 per cent compared to 17.7 per cent.

Rise above rivals
With rising revenues, controlled expenses and a resulting increase in profits, the hotel spa industry in the USA is performing well. As societal trends are moving towards healthier lifestyles, there’s a clear opportunity for spas to offer experiences to a broad guest base. The challenge for hotel spas will be to offer unique, high-quality experiences to more customers, while continuing to control costs.

It will be important for hotel spas to offer innovative treatments, as this is what piques consumer interest and what generates posts and shares and creates online trending. This is significant because a presence on social media is no longer a competitive advantage, but a necessity if hotels and spas want to remain in the mix. At the same time though, spas will still need to maintain approachability and an essence of wellness.

Hotels can also use spa and wellness elements throughout their properties to rise above rivals and differentiate themselves. This will drive innovative and meaningful experiences that are Facebook- and Instagram-worthy, which will, in turn help increase the awareness of these offerings organically.

Projections for economic growth in the USA remain strong and record occupancy levels are expected in 2015. The future looks bright for hoteliers and hotel spas have the opportunity to capture more guests and revenue. By offering engaging experiences, combined with the shifting societal trend to healthier lifestyles, the health and wellness of the hotel spa industry looks equally as bright.


Liz Terry comments

 

Liz Terry
 

Liz Terry, editor of Spa Business, says: “PKFC says the good performance of hotel spas is in part explained by growth in volume – ‘as volumes increase it’s easier for managers to bring on personnel for longer shifts and to have the confidence there’ll be sufficient revenues to cover labor cost’.

“It’s exciting that consumer interest in wellness is driving urban hotel spas out of this catch-22 situation and it shows the profit potential spas have when they get critical mass.

“We need to be brave enough to learn from this and risk ramping up wellness marketing [to drive more volume] and therapist availability.”

Read more: http://lei.sr?a=G4c6e


Table 1:

Select Hotel Spa Revenues. Change from 2012 to 2013

Source: PKF Hospitality Research,
2014 Trends® in the Hotel Spa Industry

 



Table 1:
TABLE 2:

Hotel Spa Department Profits* Change from 2012 to 2013

*Does not include undistributed or fixed charges of hotel Source: PKF Hospitality Research, 2014 Trends® in the Hotel Spa Industry
 



TABLE 2:

ABOUT THE RESEARCH
Trends® in the Hotel Spa Industry is an annual survey of hotel spa departments in the USA by PKF Consulting (PKFC). A total of 152 hotels submitted 2013 data for 20 spa KPIs. It should be noted that day, destination and leased spa operations were not included in the survey sample.

Jenna Finkelstein, a consultant at PKFC, contributed to this article.

To see results from the 2013 edition see Spa Business, issue 1 2014, p62. To purchase the full 2014 edition of Trends® in the Hotel Spa Industry visit www.pkfc.com/store.


About the author:
PKF Consulting’s Andrea Foster is the publisher of the annual Trends® in the Hotel Spa Industry report. She’s been in the USA hospitality industry for 15 years and previously headed up business development and marketing at Miraval. She’s consulted on numerous hotel and spa projects.

Email: andrea.foster@pkfc.com

Tel: +1 617 488 7290


Originally published in Spa Business Handbook 2015 issue 1

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