RESEARCH
Closer Look
LEONOR STANTON » CONTRIBUTING EDITOR » SPA BUSINESS T
rends® in the Hotel Spa Indus- try 2011 by PKF Hospitality Research (PKF-HR) gives an in-depth report on how the US hotel spa industry fared
in 2010 and what lessons owners and opera- tors can learn from this moving forwards. Now in its fi ſt h year, the 2011 report is
based on the largest sample yet – 151 prop- erties, of which 64 per cent (97) were resort and 36 per cent (54) were urban hotels. At an average of 14,646sq ſt (1,361sq m),
the resort hotels are 80 per cent larger than urban hotels and off er an average of four more treatment rooms, as well as other non- revenue earning amenities. It’s important to note that unlike hotel
EBITDA, spa departmental income in this report is before undistributed expenses – such as marketing, utilities, maintenance and administration – and fi xed charges such as fi nance charges are taken into account.
KEY FINDINGS
As with previous years (sb11/2 p32), fi ndings show that larger properties achieve signif- icantly higher revenues and departmental income per square foot, particularly when analysed by spa turnover. Hotel spas with revenues of over us$3m and an average of 22 treatment rooms generate us$144 (€111, £89) per square foot and us$43 (€33, £27) in depart- mental income – representing 30 per cent of turnover. T e smaller spas, with revenues of under us$1m, generate a departmental profi t of 16 per cent, us$77 (€59, £48) and us$12 (€9, £7) in departmental income per square foot. T is is to be expected according to Mary Tabacchi, associate professor of spa develop-
ment and management at Cornell University, who regularly contributes to the report. She says: “T e fact that those resorts with an average of 22 treatment rooms tend to make more money on a per spa basis is likely as they have a captive guest; a guest who has time to use the spa – and who in fact may plan to spend money in the spa as part of their vacation experience – these guests are there for leisure and for a longer time. In the smaller urban spas, hotel guests tend to be there on business: they’re not likely spa goers
– they are usually there for a short period of time, do their work and head home. T ey’re also likely to be travelling alone”. However, when analysed by square feet,
it’s the smaller spas which have a higher rev- enue and departmental profi t (see Table 1). T is is signifi cant for investors as these spas are therefore likely to have a higher return on investment levels. Tabacchi adds, “the reason smaller spas oſt en do better on a per square foot basis is because there is less ‘non- revenue’ space – few luxurious spa lobbies and relaxation rooms.” T e profi t conversion of smaller spas is nevertheless lower than the larger ones – 19 per cent versus 25 per cent when measured on a square foot basis. Interestingly, the middle-sized spas –
those which PKF-HR categorises in the us$1m-3m turnover category – appear to have suff ered the most in 2010. When meas- ured on a per treatment room basis, this middle category saw revenues decline by 14.3 per cent. In comparison, larger spas (with revenues of over us$3m) had an 8.8 per cent drop in revenue and smaller spas (with rev- enues less than us$1m) only suff ered a 1.9 per cent decrease.
Middle-sized spas in the US$1m-3m turnover category appear to have suffered the most in 2010... and when analysed on the number of treatment rooms, declines are even more signifi cant
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Resort spas with more treatment rooms make more money on a per spa basis, but smaller spas have higher revenue per square foot
Furthermore, middle category spas also
showed departmental profi t declines of 38.9 per cent compared with a 13.1 per cent fall and a rise of 1.0 per cent for the larger and smaller spas, respectively. This is partly explained by higher payroll costs in the middle category: us$74.14 (€57, £46) spent on payroll per square foot, compared with us$71.53 (€55, £44) in the larger spas and us$46.60 (€36, £29) in smaller spas. When analysed on the basis of the
number of treatment rooms, the declines in the middle category are even more sig- nifi cant. At departmental profi t level, the middle category (10-20 treatment rooms per spa) experienced declines of 46.5 per cent, compared with an increase in prof- its in both the larger (up 8.1 per cent) and smaller (up 4.8 per cent) spas.
OVERBUILDING IN SPAS
PKF-HR attribute the decline in the middle- sized group in part to possible overbuilding. They believe that “medium-sized spas are oſt en found in hotels that likely should
SPA BUSINESS 2 2012 ©Cybertrek 2012
Leonor Stanton drills down into PKF’s latest US hotel spa industry fi gures and gauges the industry’s response
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