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24 Sep 2017 Spa Business Handbook
 

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Spa Business Handbook - Healthy Outlook

North America Research

From Spa Business Handbook 2016 issue 1
Healthy Outlook


Hotel spa profits in the US are increasing and the facilities give properties a competitive edge according to CBRE Hotels’ latest report

Massage continues to generate the most revenue (54.5 per cent) for hotel spas out of all treatments photo: shutterstock/Kzenon
Spas limited the rise in labour costs to just 2.9 per cent, helping to boost profits photo: shutterstock/Phil Date

US hotel spa department revenues grew 5.1 per cent in 2014, while profits shot up 10.5 per cent, according to the 2015 edition of Trends® in the Hotel Spa Industry, conducted by CBRE Hotels.

The report also found that hotel properties which had on-site spas had a higher average daily rate in 2014 compared to similar non-spa hotels and were able to increase room rates to a greater degree. In urban sites the difference was more than US$50 (€44, £35) as shown in Table 1.

“The benefit of having a hotel spa can go beyond the direct financial contributions of the spa department,” said CBRE Hotels managing director Andrea Foster who recently moved to a development role at Marcus Hotels & Resorts. 

Foster said the numbers suggest that guests find greater value in properties that have more extensive amenities and services available. 

In addition, spas can help to position a site as a wellness hotel if it also offers beneficial lifestyle options in other departments – bedrooms, food and beverage, retail and more – that support guests’ desire to keep healthy. “More and more travellers want to maintain their fitness and nutrition routines while on the road,” Foster added.

Spa income
The annual report, which is based on a sample of 174 US hotel spas, covers 19 revenue and expense items. It shows that spas operating in urban hotels enjoyed a stronger 7 per cent gain in revenue in 2014, compared to 4.4 per cent at resort hotel spas. 

“This is consistent with the strong performance of the primary urban markets and the return of group demand,” said Foster in her analysis. 

What’s interesting is that a more detailed look at the numbers reveals that spa revenue per treatment and per customer actually dipped by 10 per cent and 4.8 per cent respectively in urban hotel spas. In contrast, they went up by 5.2 per cent (per treatment) and 1.9 per cent (per customer) in resort spas. Yet the urban hotel spas were still able to increase revenue overall which, according to the report, suggests that “urban spas were able to capture more customers and treatments by selling shorter and thus lower-priced services, discounting and/or special promotions.”

Massage services continue to generate the most revenue for hotel spas, comprising 54.5 per cent of total spa revenue. This was followed by sales from skincare/bodywork (17.1 per cent), salon services (10.4 per cent) and retail operations (9.9 per cent). Revenues from these sources all increased by between 4-5 per cent in 2014. 

Leading in spa revenue growth on a percentage basis in urban hotels were the fees which were generated from selling memberships to local patrons. “Revenues from local residents and members contribute 59 per cent of the revenue earned by urban hotel spas, compared to just 38 per cent at resort hotels,” Foster confirmed. 

Expenses and profits
The cost of operating a hotel spa in the US increased by 3.4 per cent in 2014 and Table 2 shows the breakdown of expenses. Despite the rise in expenditure, spa managers were able to suppress expense growth by limiting the rise in labour costs – the greatest overhead in hotel spas – to just 2.9 per cent. 

With revenues growing greater than expenses, hotel spa departments posted a healthy 10.5 per cent increase in department profits. Benefitting from the stronger gains in revenue, urban spas enjoyed a 13.1 per cent boost on the bottom-line, while resort hotels saw a 9.8 per cent profit gain. 

Spa department profit margins averaged 25.4 per cent for the overall samples. Resort hotels (28.1 per cent) were more efficient than urban hotels (18.4 per cent) in converting spa revenues to profits. Meanwhile, higher wages in major cities contributed to a greater labour cost for urban hotel spas. 

Bright future
Foster said the future looks bright for hotel spas in the US, with occupancy rates at the upper-priced lodging segments – in which most hotel spas operate – forecast to achieve all-time record levels from 2015 through 2017. 

“Increased guest counts, combined with a growing desire for maintaining healthy lifestyles and enjoying unique experiences while travelling should result in a continuation of solid gains in spa department revenues and profits,” she concluded.

Table 1:

Spa Hotels – Comparative Performance

 



*Source: 2015 Trends® in the Hotel Spa Industry, PKF Consulting/CBRE Hotels **Source: Trends® in the Hotel Industry, PKF Consulting/CBRE Hotels
Table 2:

2014 Hotel Spa Department Expenses (Per cent of Total Spa Department Revenue)*

 



*Source: 2015 Trends® in the Hotel Spa Industry, PKF Consulting/CBRE Hotels
About the research

Trends®in the Hotel Spa Industry is an annual survey of hotel spa departments in the USA by CBRE Hotels. It should be noted that day, destination and third-party operated spas were not included in the sample.
For an analysis of the 2014 edition, see Spa Business, issue 1 2015, p74.

To purchase the full 2015 edition of the report, visit www.pkfc.com/store.


Originally published in Spa Business Handbook magazine 2016 issue 1

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