RESEARCH GRAPH 1: DUBAI BEACH HOTEL SPAS
500 400 300 200 100 0
Av treatment revenue per
Av daily treatment revenue per
treatment sold JAN–MARCH 2009
treatment room
Av daily treatment revenue generated by therapist
JAN–MARCH 2010
500 400 300 200 100 0
Av treatment revenue per
treatment sold
Av daily treatment revenue per
treatment room JAN–MARCH 2009
Av daily treatment revenue generated by therapist
JAN–MARCH 2010 GRAPH 2: DUBAI CITY HOTEL SPAS
In Jordan, although Amman is only 45
minutes away, the PwC survey authors con- cede that there is a “lack of affl uent local population in the immediate area surround- ing the Dead Sea”. Consequently, only 10 per cent of treatments were booked by non-ho- tel residents between January and April 2010, making these spa operations vulnerable to any downturn in hotel occupancy levels. However, the authors believe that opera- tors could do more “to improve visitation from the local population”.
ADDITIONAL REVENUES Two other revenue sources are considered in the surveys – fi tness membership and retail – that the authors believe should be promoted further. As a proportion of total spa revenue, fi tness revenue in Dubai declined between Q1 2009 and Q1 2010, but this still represents around 34 per cent to 46 per cent of spa revenue, depending on loca- tion. Considering the overall increase in revenues, the proportional decline is again to be expected. Spas in hotels in the Dead Sea area in Jordan derive no income at all from fi tness memberships. Yohaan Freitas, senior manager
– advisory services, at PwC says that this is due to “the lack of mid- to-high income households in the Dead Sea area”. Overall, retail represents between 7 per cent and 13 per cent of
spa revenue, depending on location – this includes spas in hotels in both Jordan and Dubai. Both surveys suggest that there are further opportunities to make more of this revenue source. PwC’s Dahmash confi rms this: “at approximately 8 per cent of total revenue, retail remains an under-capitalised revenue stream”. Based on their fi ndings, the E&Y report authors believe spa oper- ators need to concentrate their eff orts on maintaining quality staff
– because of the downturn in demand in 2009, a number of opera- tors trimmed expenses, notably labour costs, and were then caught short when demand suddenly picked up in Q4 2009.
A QUESTION OF PROFIT Neither the E&Y nor the PwC studies consider costs or profi tability levels in their benchmarking surveys. Yet taking into consideration the utilisation reported in the surveys and the consequent average treatment room revenues, investors certainly might be interested in the potential profi tability levels. For example, it’s not until speaking to E&Y’s Sarkar that we fi nd out that “although selling prices might be lower in spas Dubai hotels,
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In Q1 2010, Dubai beach hotel spas outperformed city hotel spas in terms of daily treatment revenue per treatment room, yet city hotel spas generated more revenue from fi tness memberships
than say in New York, labour costs are lower than those in the US or Europe”, thus resulting in reasonable profi t levels. Further, PwC’s Dahmash stresses that spas are now becoming an
integral and expected service in the luxury hotel market. It’s not just the profi tability of the spa itself that is important, but the eff ect the spa has on the hotel’s performance. He says: “Spas are an anchor component in these luxury hotels and especially in the Dead Sea, where the attraction is the sea, the salt and the diff erent treatments associated with the Dead Sea. Profi tability of the spa operations can- not only be measured in terms of the departmental profi tability, it’s also critical to note the eff ect that the off er has on room occupancy and average achieved room rate levels of the hotel operations.” PwC’s Freitas adds: “Profi tability is a key issue particularly for
developers and we may consider it in future once we explore this sector a bit more.” However, accounting consistency will be neces- sary before it will be possible to benchmark profi tability. ●
For a free copy of the E&Y Spa Benchmark Survey on Dubai hotel spas, email
paul.arnold@
ae.ey.com or
nikita.sarkar@
ae.ey.com. For a free copy of the PwC Dead Sea Spa Benchmarking Survey, email
yohaan.freitas@
ae.pwc.com.
SPA BUSINESS 3 2010 ©Cybertrek 2010
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