2018 HVS Performance Report: Spa Department

This report is the first annual performance report published by HVS that will track and monitor spa department performance and profitability.
Rodney G. Clough On average, spa and wellness departments run profitably and can contribute significantly to a hotel’s bottom line. This report is the first annual performance report published by HVS that will track and monitor spa department performance and profitability. The data presented reflect spa operating-statement averages and data points from 2017 through the third quarter of 2018.

Across HVS’s 40 U.S. locations, our expert associates are continually consulting on hotels and resorts with significant spa and wellness operations, which are captured within their own departmental statement on an operating profit and loss statement. In 2017, HVS partnered with Mia Mackman, our Managing Director of Spa & Wellness Consulting, to better understand the accelerating spa and wellness assets and evolving lifestyle market.

This report reflects a sample of 51 hotels and resorts, with 25 in the upper-upscale category and 26 in the luxury category. Hotel, guestroom, and treatment-room counts are summarized in the following table, along with total spa revenue for the survey group.
 
Survey Participants
Source: HVS
 
Overall comparisons between the two hotel segments show that luxury hotels have larger spas on average, which would be expected (11 treatment rooms on average for upper-upscale hotels vs. 15 rooms on average for luxury hotels). Spa revenue generated per occupied hotel room can also be significantly different between the two product types, averaging $16 for upper-upscale vs. $46 for luxury hotels. Treatment-room averages reflect roughly $110,000 per room for upper-upscale hotels and $173,000 (rounded) for luxury hotels.
 
Survey Results

Spa Revenue per Treatment Room
Source: HVS
Per our study, expense ratios are similar between the two hotel-type categories, averaging just above 77% of revenue. Labor costs typically represent the largest percentage of spa department expenses. Departmental expenses tend to vary widely in each group, between roughly 51% to 120% overall. Most expense ratios fall between 75% and 85%, reflecting an average profitability of 23%.
 
  Spa Departmental Ratios
Source: HVS
 
Spas are becoming influential assets for hotels and resorts given the increasing demand related to wellness and lifestyle programs. With growing hotel and resort pillars being developed and dedicated to well-being, examining the depth of spa and wellness performance has become a fundamental factor of strategic growth and valuation. Moreover, understanding how these assets are performing plays a critical role in core strategic planning, including ADR and RevPAR performance.

If your spa is operating at a loss or notably above the typical expense ratio for a spa, as shown here, HVS can help. Also, if you are not driving significant revenue levels from your spa operation (a full-service spa should generate 5.0% or more of total revenue, on average), our expertise can help you derive strategies for improvement, as enhancing or modifying programs and services can reduce expense percentages and increase revenues throughout multiple departments.
 
Rod Clough, MAI, President - Americas, oversees strategy execution throughout 40 Americas locations. He recently brought together all US Valuation Consulting offices under common ownership, and has revolutionized the way the company is led and managed. This group of offices represents over 120 hotel industry professionals and executes over 4,000 assignments a year. Rod has been working in the hospitality industry for 30 years and is a graduate of Cornell's School of Hotel Administration. He is a Designated Member of the Appraisal Institute (MAI) and a state-certified general appraiser. Contact Rod at (214) 629-1136 or [email protected]
Mia Mackman, HVS Managing Director of Spa and Wellness Consulting, leads the spa and wellness aspects of our consulting engagements, encompassing market studies, feasibility studies, strategic planning, valuation, and forecasting. Mia has predicted some of the leading shifts in the transition of the spa and wellness market since 2004. Known for her agility, leadership, and intuitive insight, she works with Fortune 500 companies, private clients, industry groups, and global networks. She is recognized for her unique ability to predict and identify future value propositions and how to navigate, adapt, and excel in a fast-changing market. Contact Mia at (928) 284-8503 or [email protected]

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