Making Sense of the Hotel Spa

13 May, 2016

After significant economic, financial and geopolitical turmoil over the last years, the global spa and wellness industry is not only surviving but thriving. Data recently released by the Global Spa & Wellness Economy Monitor reveals that the sector is stronger than ever with an annual growth rate of 7.7%. 

In today's world, the hotel spa still remains either a cost center or a profit center, depending on how it is run. If either role can be beneficial to the hotel, knowing which one you are looking to pursue, to what end, with which partner and in what context, is essential.

“In the luxury segment the role of the spa has been elevated to a position of being an expected amenity. The motivation for guests in resorts are naturally rather different from urban hotels, and we see a higher level of spa visitation at resorts. Urban hotels can also tap into this demand, but need to modify their offering and focus either on overall wellness programs, that include a significant fitness and nutrition component as well as shorter beauty and pampering offerings. The potential for membership sales in urban spas is also a critical financial consideration.” explains Karan Kaul, (AEHL 2004) Director of Development at Six Senses Hotels Resorts Spas

Prior to 20 years ago, hotels spas were found only at the most exclusive resorts. Today, however, they are found in hotels of all sizes. When the spa boom began, hotels assumed that adding a spa to their offerings would draw in guests easily. Unfortunately, as the addition of spas became more common among hotels, the spa lost its exotic appeal.

Out of competitiveness and desperation, hotels made their spas bigger and more elaborate. Because of the expense involved, turning a profit became more and more challenging. Even today, many hotel owners struggle to achieve a decent ROI.

“Consistent evolution, improvement and rejuvenation of the programs and treatments offered is vital to a spa’s success. Six Senses had made this their philosophy and has set its strategy on a foundation of rigorous training of its therapists worldwide (A full time global training team) and managerial team.” assures Kaul.

In spite of the issues, spas can still be an integral part of the establishment. In order to operate a spa successfully, one must learn from the mistakes others have made and apply them to the development of their spa. However, because of the complexity of the spa business, it is nearly impossible for a hotel manager to make all of the right decisions without help.

A qualified spa manager can act as a designer, consultant and advisor. He/she can also oversee the daily operations of the spa once it is established. If a hotel hire the right person, this option provides it with a competent staff member dedicated completely to the operation of its spa. However, with the wrong person on board, one may not realize his/her deficiencies until they have already had a profound effect on the development of the spa.

Spa management companies are similar to hotel management companies. They typically employ one of two business models: a management contract model or a revenue share model. With a management contract model, the company receives a percentage of the gross operating revenue and the gross operating profit. With a revenue share model, the company receives a portion of the top line revenue.

This option alleviates most of the hotel responsibility for the spa's day-to-day operations, allowing its manager to focus its attention on other issues. However, it implies less control over decisions made by the spa, such as the retail products sold, pricing and treatments offered. In addition, this option may reduce the amount of revenue one takes in from the spa.

“Operating both hotels and independent spas under a management contract structure enables one to focus on brand building and management. These are Six Senses’ core competencies and has proven to be a successful business model for us but more so for our international luxury property clients like Ritz Carlton properties in Doha and Muscat. Moreover, it allowed us to branch out of the traditional application and develop a long running partnership with Etihad Airways to manage spas in the first and business class lounges of the airline in London and Abu Dhabi.” comments Kaul.

Another option involves contracting with a product house, which is a skin care or cosmetic brand that will run the spa under its own name. As with a spa management company, this option relieves the hotel of the burden of managing the spa's daily operations, but it will also prevent it from having control over important decisions made within the spa. In addition, because many product houses impose a minimum annual product order requirement on their clients, one may lose money if the products don't sell quickly enough.

“Skin care or beauty products alone will offer a certain level of quality for those items but does not necessarily translate to quality services or skills in the execution of treatments or in other areas. At Six Senses, we can use locally sourced products but operate all group-wide spas under the Six Senses brand and product line.” continues Kaul.

A spa consultant is a professional who comes to the hotel to help its management team establish or revitalize its spa. Once the spa is up and running, the hotel resumes control. However, one can continue to contact the consultant if they have questions or concerns in the future.

Hiring a spa consultant offers several advantages, including retained control over the decision-making process and flexibility. Spa consultants don't have to follow any guidelines with regard to treatment menus or product lines, nor will they require the hotel to purchase a minimum amount of product each year. That being said, finding the right spa consultant can be a challenge. In addition, once the spa consultant leaves, the hotel is left to manage the spa on a daily basis.

“There are certainly situations where owners would like this level of defined input as opposed to the structure required by a brand. Six Senses’ sister company Raison D’Etre, is a great example. They set up the spa divisions of multiple well-known brands such as Aman, Kempinski, Taj in addition to numerous independent properties.” says Kaul.

Each of the options above comes with unique advantages and disadvantages, making it difficult to determine which is best for your hotel. In many cases, hotels decide to combine two or more of the options above to maximize benefits and minimize risks. Regardless of the options chosen, one needs to set clear, realistic goals for their spa and focus on them every step of the way. Managed properly, the spa will be an invaluable asset to any establishment. Managed poorly, it will drain its resources and damage its reputation.

“Apart from the general management and operational aspect of running a successful spa, offering as broad and as flexible choices to guests as possible is a key driver of success. Six Senses Spas follow a layered approach that allows to propose various levels of intensity and engagement to our guests. Finally, bear in mind, like any other department, spas relies on significant payroll expenses so the mix needs to be managed carefully. Bigger is not necessarily better, more professional with a diverse treatment offering is key.” concludes Kaul.