Spas with revenues of under us$1m a year fi nd it the most diffi cult to optimise profi tability
with total revenues greater than us$3m. T e diff erences in departmental profi ts
are even greater – from us$10,700 (€7,600, £6,700) in spas with revenues of less than us$1m to us$68,700 (€48,900, £43,000) departmental profi t per treatment room in spas with revenues of US$3m or more. Table 1 shows the variations on a per
square foot basis and confi rms, as did the 2009 survey, that those spas with revenues of under us$1m per annum fi nd it most dif- fi cult to optimise profi tability.
FOLLOWING SUIT
As the economic downturn had such a debil- itating impact on hotels in the US, it’s not surprising that spas – as an operating depart- ment of hotels – followed suit. “Hotels suff ered an unprecedented 35.4 per cent decline in the [US] dollar value of profi ts in 2009”, according to Robert Mandelbaum, director of Research Information Services at PKF Hospitality Research (PKF-HR). He says that this was on top of the “3.8 per cent drop in the dol- lar value of profi ts recorded for 2008”. T is is the steepest decline in the eight decades in which PKF-HR has been surveying the indus- try. In fact, it was found that 95 per cent of the hotels in the 2010 PKF-HR Trends® in the Hotel Industry USA suff ered a decline in net operating income from 2008 to 2009. Man- delbaum adds: “Hoteliers tried to cut expenses
SPA BUSINESS 2 2011 ©Cybertrek 2011
GROUP BUSINESS, WHICH WAS GENERATING SUBSTANTIAL LEVELS OF DEMAND HAS VIRTUALLY DISAPPEARED... YET THE LOCAL PIECE OF THE PIE INCREASED FROM 13 TO 52 PER CENT IN ONE CASE
in all departments, but just couldn’t overcome the tremendous declines in revenue”.
CHANGING MARKET SECTORS
So, which market sectors declined causing the revenues to drop so dramatically? McCa- rthy says: “While all market sectors cut back, it was the group business which was previ- ously generating substantial levels of demand that has now virtually disappeared as a result of the fi nancial crisis. Companies simply felt it was too lavish to include a spa treatment as part of an incentive group booking, that is, if they even came to the hotel at all.” As hotels discounted in order to maintain
volumes, many found that the demographic of their clientele changed. Shane Bird, direc- tor of Aji Spa at the Sheraton Wild Horse Resort in Chandler, Arizona says: “When someone can pay us$89 (€63, £56) for their room, it is hard to get them into the spa for a us$135 (€96, £84) service.” As reported in the PKF-HR spa review last year (see sb10/2 p30), many hotels turned
to their local community to boost demand levels in the downturn. Lorraine Park, vice- president of spas at Remington Hospitality Services in the US says: “It is the locals that have been our saving grace. We really rely on them throughout the year to keep us busy... We have a LOL promotion – Love our Locals”. Bird adds: “During the crisis, the local piece of the pie increased from 13 to 52 per cent of revenue at Aji Spa”.
CREATIVE COMMUNICATION
So, how did spas react to the declining rev- enues? Spa directors had to cut costs across the board and, McCarthy says, “suddenly in the face of no support from PR fi rms or advertising agencies, they had to roll up their sleeves and be creative in terms of communi- cating with their customers. T ose who have been most successful have created a local buzz within their communities by partici- pating in charity events, for example.” Bird says: “Guerilla marketing and social media were the main tools used. Word of
Read Spa Business online
spabusiness.com / digital 33
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