While larger spas generate more income overall, their yield per square foot comes to nearly half that of smaller spas
that of smaller spas. Treatments generate 85 to 88 per cent of total spa revenues at urban and resort sites and, again, massage is confirmed as the most popular treatment, accounting for 56 per cent of total spa revenues.
LOCAL VALUE As room occupancy levels in hotels dropped in 2008 and 2009, many urban hotels turned to their local market to help maintain vol- umes of business. As a result, in 2008 (2009 survey) while resort hotels experienced a 7.4 per cent loss in total spa department revenue, the decline in urban hotels was modest at 2.4 per cent. Tis was largely due to an increase of nearly 20 per cent in daily facility use rev- enue at urban hotels compared with 2007. As a high proportion of daily facility use revenue is converted into profit – because it’s not as labour intensive – so urban hotels performed positively at a spa departmental profit level, experiencing an increase of 4 per cent com- pared with 2007. Resort hotels, however, experienced an average 16 per cent decline. Yet the local market was not sufficient enough to compensate in 2009, with resort and urban hotels experiencing a 19.2 per cent and 19.8 per cent decline in the overall spa department revenue, respectively, with a cor- responding fall in departmental profit of 18.9 per cent and 20.4 per cent.
COSTS Although urban hotels outperformed resort hotels in total spa revenue on a per square foot basis in both the 2009 and 2010 surveys, their conversion to profit was not as good. Te studies report average spa departmental profit levels at urban hotels of around 20 to 22 per
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cent compared with around 26 to 27 per cent at resort hotels. It is not necessarily the small- est spas which have a lower profit conversion rate, but hotels with a spa turnover of less than us$1m (see Table 1). Despite the decline in revenues and profit levels, the actual profit conversion within the same sample remained remarkably similar between 2008 and 2009 at around 22 per cent for urban hotels and 27.5 per cent for resort hotels. Fenard says: “Te 2009 report shows that
smaller spas are having difficulty control- ling their expenses, especially labour costs.” An analysis of the payroll in the 2009 sur- vey shows that spas with 15,000sq ſt or less,
achieve payroll expenses of just over 60 per cent, but worse still, spas with a turnover of less than us$1m experience payroll costs of nearly 70 per cent. Like all other outgoings, labour was reduced significantly in 2009, reflected in the 2010 survey. Nevertheless, the smaller spas and those with a turnover of under us$1m still experienced extremely high labour costs at between 62 per cent and 66.5 per cent (see Table 2). Although all spas reduced their payroll
between 2007 and 2008, the reductions did not compensate for the decline in overall reve- nues. Most spas reduced their labour expenses by 2 to 4 per cent (on a square foot basis),
spa business handbook 2011 35
PHOTO:
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