Revenue, costs up in US spas: PKF

Spa department revenue at U.S. hotels in 2012 increased by 5%, according to research from PKF Consulting USA, comparing favorably to the 2.3% increase in food and beverage revenue, the second largest source of revenue for most hotel.

However, while revenues were growing at 5% in 2012, total spa department expenses grew by 5.2%. Accordingly, spa department profit margins declined slightly from 21.6% in 2011 to 21.4% in 2012.

Labor costs are the single greatest expense within hotel spa departments. The combined costs of salaries, wages, bonuses, and payroll-related expenses (benefits) equaled 58.6% of total department revenue in 2012, or 74.5% of total departmental expense. Because of the high levels of personal service required at spas, labor costs increased by a relatively strong 5.7% from 2011 to 2012.

Despite the decline in department profit margins, hotel spas were able to achieve growth in departmental income. In aggregate, spa department profits for the spa survey sample increased by 4.2% in 2012.  Achieving greater revenue growth, urban hotel spas also were able to enjoy more growth on the bottom-line compared to resort hotel spas.

“Due to its historical stigma as a luxurious amenity, spa revenue initially lagged behind the growth of other revenue sources during the early stages of the recovery,” said Andrea Foster, vice president and national director of spa and wellness consulting for PKFC.  “However, the 2012 increase in spa revenue is a trend we anticipated would occur.  There has been a notable focus shift to wellness, specifically taking better care of ourselves for improved health and quality of life, of which spas are an important part.”

According to “Trends in the Hotel Spa Industry,” spas located in both urban hotels and resort properties enjoyed increases in revenue, though each achieved their growth in different ways.  Urban hotels not only were able to induce more guests to avail themselves of spa services, but they were able to increase prices, as well.  The net result was an attractive 7.2% gain in revenue.  On the other hand, resort spa revenue grew by just 3.8%.

“With occupancy levels at resorts rising by 2.4%, it can be assumed that resort spa managers struggled with the pricing of their services or were unable to up-sell additional treatments to the newly captured hotel guest demand,” Foster surmised.

A total of 125 hotels submitted data for 20 of the most important revenue and expense categories within their spa departments.  The report allows hotel spa owners and operators to benchmark their revenue and expense ratios on a per-available-room, per-occupied-room, per-square-foot, and per-treatment-room basis.  Not included in the survey sample were day spas, destination spas, or leased spa operations.

Spa revenue mix

Massage, skin care and body work treatments continue to generate the most revenue at hotel spas.  Combined, these services represented 72.6% of total spa revenue at the properties in the survey and grew by 4.7% in 2012. While the “core” spa services grew in 2012, salon service revenue declined by 0.1% during the year.

At the same time, combined revenue from facility use and membership fees, fitness and personal training, and health and wellness services increased by 4.6% in 2012.

Spa managers also were successful at increasing the purchase of spa merchandise and clothing.  Retail revenue for hotel spas grew by 6.6% in 2012.