Making Sense of the Spa Business

by Gary Henkin
President
WTS International

In today’s highly demanding marketplace, hotels, resorts and other hospitality developments are seeking to be both competitive and delineative. Consumers including hotel guests, club members and the local or regional populace have become far more sophisticated and discerning with regard to “lifestyle” issues. Thus, the spa and fitness/wellness industries have grown geometrically during the past several years fueled by an ever increasing consumer demand for venues that provide a relaxing, memorable experience.

Spa growth in particular has been nothing short of spectacular with the number of US based spas increasing from about 4,000 to over 12,000 in a reasonably short timeframe. As owners, developers and property management firms have sought to offer more opportunities for consumers to relax and de-stress, so too have they come to understand that spas and fitness centers can achieve this goal while driving revenue and net profits at the same time. The day when spas were perceived to be “just another amenity” for a hotel or resort is over. Today, the expectation is that a spa and/or fitness facility should be able to drive a significant revenue stream and ultimately become a profit center unto itself. It is crucial to appropriately plan, design and operate the spa or leisure facility right from the beginning in order to offer an outcome which delivers perceived value to the spa patron while maximizing revenue and net operating income. If a spa is not prepared correctly in all areas for a successful launch, it will not deliver the goods at the end of the day.

Should you add a spa?

How then, should one best determine whether to add (or upgrade) a spa and what size and scope represents the most viable financial and operational modality? Putting it another way, how should a hotel or resort prepare a spa and leisure facility for operational and financial success? It all starts with the planning process. Before taking a “dart throw” approach as all too many properties have done, consider the potential benefits derived from the development of a feasibility study or needs assessment analysis. This step should receive due consideration prior to launching into a decision to expend significant capital dollars in a spa development and embarking head first into a formidable design process. A typical needs analysis study will offer valuable information upon which the owner or developer can make the most intelligent decision whether to actually proceed to build the spa and, if so, what type, size and location would be most viable. In addition to a market survey, the study will also contain a thorough competitive and financial analysis. If a decision to proceed is made, the planning and design process can move forward.

Design Elements Critical to Success

A spa is qualitatively different from any other resort amenity. Although real dollars will be spent and earned by a successful spa, in the end, what is being sold to the consumer is more than a simple service – it is an “experience.” As such, design aesthetics play an all-important role in the performance of the spa and in its ultimate success. This reality has several implications for design and construction.

It is important to include an experienced spa consultant or operator in the planning process right from the beginning. Before any details are finalized, the ramification of “value engineering” decisions relative to the finishes and space sizes must be fully understood. Remember that a successful spa appeals to the senses first and foremost. In addition, each property will have to consider potential construction challenges, such as upper floor sites, remote locations with difficult access, or the effect of snow or tropical climates. Similarly, each property should take into account the cost differentials for union labor, availability of exotic materials, fit out costs, etc.

Treatment Rooms

Treatment rooms are the heart of any spa facility. A basic treatment room is typically 120 – 140 square feet in size and includes appropriate lighting, hand sink, countertop and storage cabinets. All treatment room walls should be constructed to minimize the impact of sound, vibration, and odor from neighboring spaces. The basic cost of a treatment room ranges from $40 to $55 per square foot (excluding the specialized furniture, fixtures and equipment). Massage rooms will be the most numerous since this treatment, in all its forms, normally accounts for about 60 – 65 percent of the services given. An FF&E (furniture, fixtures and equipment) package costing between $2,500 and $3,500 should be sufficient to make a treatment room suitable for massage. Beginning with the basic treatment room template introduced above, a facial room can be created with a slightly more expensive treatment table and specialized equipment to administer skin care treatments. Although construction costs will probably not increase, the price for equipment can easily range from $5,000 to $8,500, or more.

Other services such as body wraps, mud treatment, and hydrotherapy require a greater investment in both construction and equipment. While room size will remain unchanged, these rooms will require floor drains, ceramic tile floors and walls, and more extensive plumbing. Construction cost for these rooms approximate those of restrooms and locker rooms – roughly $90 - $110 per square foot. Equipment packages for wraps, mud, and other body treatments can cost from $3,000 to $4,500 depending upon what specific treatments the spa offers. Hydrotherapy equipment packages are the most costly. They usually include a tub (with pumps and a water purification system), Vichy showers, and a Scots hose. An equipment package such as this can cost $20,000 to $30,000.

Salon Services

Manicures and pedicures are frequently offered in spas and require a dedicated space. Depending upon the number of manicure and pedicure stations, the nail center can range in size from 300 – 500 square feet. A manicure station occupies about 30 square feet and a pedicure station about 50 square feet. Typical equipment packages for these services range from about $2,000 to $3,500.

Hair services are a variable that should be considered as part of the spa’s strategic business planning. Seldom will a hotel or resort patron utilize a hair stylist for much more than styling services. However, spas that plan to seek recurring business from a local population base (and/or that anticipate hosting a number of weddings throughout the year) should recognize the importance of salon services and plan accordingly. Specifically, they should plan several styling stations at 35 – 45 square feet each, and associated construction and equipment costs of $50 - $60 per square foot and $4,500 per station, respectively. The hair styling needs of a typical vacationer are modest by comparison. Two to four stations for shampoo, blow-drying, and make-up re-application should be sufficient for many resort spas. Although the investment in these stations is approximately the same as for a regular salon, a resort spa needs fewer of them and will use them in a much more limited manner.

Locker Rooms

Locker rooms with changing areas, toilet facilities, showers, and the like are also important spa components. Although hotel guests will not typically be far from their own guest room, a spa treatment usually leaves a patron with little desire to travel any appreciable distance before they have had a chance to recuperate and clean up a bit. Comfortable locker rooms with lounges, quiet area, and ample bathing facilities will be necessary to complete the “spa experience.” Such areas usually cost between $85 and $100 per square foot to build (including fixtures) but can cost significantly more if high-end finishes (e.g. marble, water features) and lavish furnishings are chosen.

Fitness Centers

A reasonably sophisticated exercise facility should also be considered if there is not one already available to guests. It should contain state of the art cardiovascular, circuit weights and free weight equipment. If memberships are to be sold, the facility will also require a responsible, highly trained staff along with a host of exercise/wellness programs and activities that should be available for members and guests. Although spa patrons and exercisers have different needs, a properly designed spa and exercise facility can serve both groups quite well. If the spa will include exercise areas, they too, can be built for approximately $40 to $50 per square foot (Note: group exercise studios usually cost about the same, but require the addition of a suspended wood floor which adds $10 to $12 per square foot to the cost of the space). As a rule of thumb, exercise machines require floor space of about 50 square feet each. This includes circulation space around the station. A fitness center addition to a spa can work well but only if significant attention is paid to traffic flow and to the importance of sound attenuation. Many spas suffer due to noise coming from a fitness center that is either directly next to or on top of the spa; this is something that the developer should be acutely aware of in the design process. That said, the addition of a quality fitness facility can be a wonderful adjunct to the spa while producing a positive revenue stream and adding to the net operating income for the property.

Other Critical Factors

Clearly, there are many possibilities to consider in both the construction and equipping of a spa facility. A spa is a management-intensive area, and careful operational planning should always precede the physical design of the space. Thus, the involvement of a consultant and/or spa management entity in the early stages is vital. Other critical factors that impact the overall success of a spa include the quality and experience of the spa staff, training methodology, product selection and display, promotion and marketing, maintenance, financial and inventory controls, and the consistency of customer service.

There are many variables to consider in the design, construction and equipping of a spa. The capital investment must be justified by the projected financial performance of the facility and by the more “intangible impact” that the spa will have on resort occupancy levels, REVPAR, ADRs and the property’s competitive space in the marketplace.

Appropriate planning and design, conceptual development, the experiential components and consistency in the delivery are crucial to the success of a hotel or resort spa. An aesthetically pleasing spa that delivers a relaxing, memorable experience can attract a loyal, high-end clientele while offering the developer an opportunity to delineate the property from competitors. In addition, if a spa is staffed appropriately and is marketed and operated effectively, it should provide the owner with yet another profit center for the hotel or resort.