Jan.
6, 2009 -- Spas continued to contribute to the top and bottom lines of U.S. hotels
in 2007. Total spa department revenue increased 5.0 percent from 2006 to 2007,
while spa department profits grew 5.8 percent. These are among the findings reported
in PKF Consulting's (PKF-C) recently released 2008 edition of Trends in the Hotel
Spa Industry, a report that examines the revenue, expenses, and profits of hotel-operated
spas in the United States.
"Lodging industry owners and
operators fully realize that a well-run spa operation can benefit a hotel in many
ways," said Bruce Baltin, senior vice president in the Los Angeles office
of PKF Consulting. "In addition to the monetary contribution, a spa can help
define the market position of a hotel, provide a competitive asset that is attractive
to multiple demand segments, and diversify a hotel's revenue stream. It is this
type of product differentiation that managers hope will provide a competitive
advantage in 2009."
During challenging times like these,
the spa industry has the potential to be buoyant. However, it is not invincible.
"The dynamics of the spa industry enable it to persevere longer than other
industries for several reasons," Baltin noted. "A large portion of its
consumers are affluent, an increase in stress can further emphasize the importance
of staying healthy, and in difficult times people tend to seek out experiences
rather than material objects. All that being said, hotel spa usage will likely
decrease due to expected declines in occupancy rates and guest counts for the
lodging industry in general." In its December 2008 Hotel HorizonsSM report,
PKF Hospitality Research (PKF-HR) is forecasting that the typical U.S. hotel will
experience a 5.3 percent drop in occupancy in 2009.
The 2008
Trends in the Hotel Spa Industry report analyzes the 2007 financial performance
of 116 spas operated by hotels located throughout the United States. In aggregate,
the 116 hotels that voluntarily submitted their data for the survey averaged 405
guest rooms in size and achieved an occupancy of 70.8 percent and average daily
room rate of $257.14 in 2007. Both urban and resort hotel spas were included in
the research, while day spas, medical spas, destination spas, and hotel spas that
independently lease space were excluded. For the purposes of this research, departmental
profits are calculated before deductions for undistributed expenses and fixed
charges.
Spa Revenues
Since the number
of occupied rooms for the survey sample remained relatively flat (0.2 percent
decline), the 5.0 percent rise in spa revenue was likely due to an increase in
the price for spa services, increase in number of services utilized per hotel
guest, or a stronger mix of local patronage. "Recent research has shown that
although consumers are tightening their belts, they are still traveling albeit
with a different mindset and expectation of services. People increasingly are
requiring greater value and a heightened level of experience. Hotels with spas
can meet those needs by providing promotional packages, special offers, and discounts,"
observed Gabrielle Lerner, associate in the Los Angeles office of PKF-C.
For
the hotel spas that participated in the survey, department sales represented 3.9
percent of total hotel revenue in 2007. Within the spa department, massage continued
to be the greatest source of revenue (55.6 percent), followed by skin care and
body work (18.8 percent) and salon services (10.7 percent).
Spa
Expenses
Overall, spa department expenses increased 4.7
percent from 2006 to 2007, driven mainly by a 6.6 percent increase in labor costs.
Like all departments within a hotel, labor-related costs are the biggest operating
expense for spas, representing 57.2 percent of department revenue. "Labor
costs in urban hotel spas tend to be somewhat higher than in resort spas. Urban
hotel spas have lower revenues and inconsistent demand for services making scheduling
more complicated," Lerner said.
Spa Profits
The
average departmental profit margin for the spas in the survey sample was 24.1
percent. For comparison purposes, the average profit margin for all other operated
departments in PKF's Trends in the Hotel Industry survey was 29.4 percent.
From
2006 to 2007, hotel spa department profits grew 5.8 percent. Profit growth was
greater for urban spas (12.3 percent) versus resort spas (4.6 percent). "While
5.8 percent is a healthy rise over the previous year, it was less than the 6.7
growth rate for total hotel operated department income, which demonstrates the
evolving spa industry still has room to improve," Baltin noted.
Hotel
Spas In 2009
"As U.S. hotels are forecast to struggle
with declines in occupancy, ADR, and revenue, we believe there is an opportunity
for spa operators to capitalize on operational and competitive advantages,"
Baltin said. "Hotel spas are an important amenity to all market segments
and should be leveraged with regards to meetings, conventions, and other special
events. Innovative marketing can also be created to promote the spa as a 'staycation,'
thereby providing a refuge for local residents."
To purchase
the 53-page 2008 edition of Trends in the Hotel Spa Industry, please visit the
firm's online store at www.pkfc.com/store,
or call (866) 842-8754. In addition to multiple data tables that display revenue,
expense, and profitability benchmarks, the report includes editorial content from
the following guest authors: Lynne McNees - ISPA, John Korpi - ISPA Foundation,
Mary Tabacchi - Cornell University, Jennifer DiFrancesco - Miramonte Resort and
Spa, and Judith Singer - Health Fitness Dynamics, Inc. In addition Brett Blumenthal
- Gensler, Jeanie Klueter - WATC, Julia Monk - BBG-BBGM, and Chris White - WTS
International participated in a roundtable discussion on spa design trends.
PKF
Hospitality Research (PKF-HR), headquartered in Atlanta, is the research affiliate
of PKF Consulting, a consulting and real estate firm specializing in the hospitality
industry. PKF Consulting has offices in Boston, New York, Philadelphia, Washington
DC, Atlanta, Indianapolis, Houston, Dallas, Bozeman, Sacramento, Seattle, Los
Angeles, and San Francisco.
U.S. Hotel
Spas
Sources of Revenue
(2007 Percent of Department Revenue)
Revenue Percent of Total Revenue
Massage 55.7%
Skin
Care and Body Work 18.8%
Salon Services 10.7%
Daily Facility Use 0.9%
Fitness and Personal Training 1.9%
Health and Wellness 0.3%
Retail 10.3%
Other 1.4%
Total 100.0%
Source: PKF Hospitality Research,
2008 Trends in the Hotel Spa Industry report.
U.S. Hotel Spas
Select Revenues and Expenses
(Change From 2006 to 2007)
Revenue/Expense Change from 2006 to 2007
Massage Revenue
5.6%
Skin Care and Body Work Revenue 2.4%
Salon Services Revenue 5.2%
Retail Revenue 8.8%
Total Department Revenue 5.0%
Labor Costs 6.6%
Non-Labor Related Expenses -0.5%
Department Income* 5.8%
Note: * Before deductions for undistributed expenses and fixed charges.
Source: PKF Hospitality Research, 2008 Trends in the Hotel Spa Industry report.
