There have been many recent discussions close the idea of adding a spa to an existing hotel and how to determine if it is a worthy investment. Unfortunately there is no simple solution and every property and marketplace is unique. Many matters must be considered before making icing a decision. It is first important to identify the reasons why you want to build a spa. Next, you must evaluate your marketplace, competitors, current commercial enterprise data and projections to determine whether or not a spa is right for your property. Working with a spa and/or hotel adviser is an important step that you need to fancy help to analyze the viability, assist with the deciding process and the details of the design, but this clause will at to the worst degree give you some insight on how to evaluate the feasibility of adding a spa to your hotel. This clause will get a load at the reasons a hotel would add a spa and the commercial enterprises to back it up.
It is first important to begin by understanding few matters about the spa industry. In Diagonal Report's 2010 USA Spa Market report, the size of the spa market in 2009 was a $15.5 billion dollar industry. According to ISPA's 2010 industry report, spa consumers made 143 million visits to 20,600 spas crosswise the US. While these numbers show a decline from the previous year (in both reports with contradictory figures) we must remember that 2009 was very different from today. With a helpful economy and consumers becoming more aware of the benefits of receiving spa treatments, these numbers are only expected to grow. Diagonal Reports points out that the spa industry will start to see a 1.5% upturn in 2011 which most spas are seeing more than that with some coverage 15% or more. The spa industry has tough exponential growth since 1999 when there were only 4,140 spa businesses serving $4.2 billion dollars cover 4.2 million visits. If we relate the spa market to the leisure industry, it falls in 4th place behind Golf, Health and Racquet Clubs and Cruise Lines. The reason I point this out is that the emerging trend in the spa world is to create a synergism with the other leisure industries like those mentioned above, which means that spas are also making up a small percentage of these industry's revenues. This is a trend that will only continue and club and hotel owners are noticing this in a big way.
It is also important to visibility your clients to make a point that the demographics of your client match up with those of the spa goer. This information also varies by age, e.g. some spa consumers are interested in alternative healing, some in fitness and education, and some in just relaxation. As you can see there is a pot to consider to determine what your spa's conception will be and it is important to find a adviser who understands your guest and what they want. A spa designed for the business traveler is very different than the one designed for the vacationing young professionals, baby boomers, and families (and yes there is an emerging market for family spas). That being said, according to Coyle Hospitality's 2011 consumer priorities study, relaxation and stress direction remain the primary reason that consumers visit the spa. And what is the primary reason that people vacation? Now you can see the correlation between the spa and the hotel which is nomatter new. Bottom line, spas remain mostly a luxury as does vacation and the two go hand in hand with one other. Now on to the point.
DENTAL MARKETING
According to July's issue of Hotel Management, there are 2,951 new hotels and 354,100 new suite being built as of Q1. While there is no data available that I could find, I would guess that at to the worst degree 70% of the 4 Star or better projects will admit spas. Why? It really is a very simple answer when you look at the reason that hotels build a spa in the first place. You likely already know the disadvantages to having a hotel without a spa which is why you are reading this. Let us identify the advantages and why adding a spa would add up. The most rife disadvantage is that you are likely losing market share to your competitors who already have a spa and you are likely discounting your suite in attempt to attract some of that market share. While you can make an argument that not every individual who books a hotel wants a spa treatment, you also need to realize that there is a large universe that does. Even if your guests are not interested in having a knead or facial, they can still enjoy your spa by utilizing non-treatment areas such as sauna, steam suite and pool. This is also a huge advantage that hotel spas have over free standing spas or day spas. Traditionally, the spa industry calls these areas "non revenue generating space" because it is considered as part an agreeableness for guests who are receiving a treatment. The same is true for hotels, but to improve your revPOR, you can charge a fee for your guests to use just the wet areas, in some cases as much a $75/day.
Other reasons a hotel would want to add a spa besides gaining market share or prevent losing it to hotels with a spa admit the following. First, you can increase your ADR because of your extra "frills" which will improve your revPAR and your revPOR. Another marvelous advantage of adding a spa to your hotel is that you can begin to attract a local and loyal clientel and increase your package gross revenue and offerings. This also allows you to continue to generate revenue in your low season. This makes the potential of the spa revenue nearly limitless with good marketing scheme in a receptive market. So if you have been keeping up, you gain market share, retain guests, increase your occupancy rate, increase your ADR by somemultiplication as a pot like 10%, and increase local business. It would appear that you are already ahead right? On the surface, it sure enough makes sense but there are a pot of matters to consider and evaluate. You must perform a feasibility study, competitive analysis, and crunch some consider then consider the better details such as how big the spa should be, what theme, what treatments, what products, etc. While these matters are equally important and will determine the spa's achiever or failure, the aim of this clause is to discuss evaluating the benefit and impact of adding a spa and how it can impact your bottom line.
Often multiplication, hotel owners tend to look at a spa as a single unit to determine if it is profitable or not or a viable investment. While it seems to add up it is not always the best to decide whether or not to add a spa. Where the spa fits into your profit-and-loss statement also depends on how you structure the direction of the spa (tenant, hotel closely-held and operated, hotel closely-held but run by direction company, etc.). Spas are extremely labor intensive and you must work hard to develop a steady stream of clients. Most hotel spas, according to a recent report promulgated by STR Global run at a 33% treatment room exercise rate. There are many fixed labor costs but in most compensation models for spas create an astounding amount of variable labor costs. This makes the COGS very high and profit margins very low. The other interest remember about having a spa is that the treatment suite can be occupied twofold multiplication per day unlike a hotel room that can only be occupied once per day. This is also important to consider when determinative the size of your spa. There are also myriad compensation models and cost structures to evaluate to decide which will be most profitable for your business. This is why coverage a profit for the spa alone becomes very challenging and sensitive. The point is that the stand alone spa, in most cases, is not an especially attractive investment unless it serves a unique and attentive niche such as a health or specialized resort. Monte Zwang of Wellness Capital Management declared in Nashville's Day Spa Association's Pro Knowledge Network that the average day spa has a lucre of only 4 to 15%.
Because of these few topics, you must look at a hotel spa otherwise to determine its value. This is best illustrated in an example. Suppose a hotel decides to build a moderately luxurious 6000 sq ft spa which costs $2,000,000. Your feasibility study forecasts the spa will generate an extra $1,200,000 as a department. After general operative costs, the spa's income is approximately $240,000. This plainly seems that you ROI will be a years coming. But let's look at this a different way.
Suppose in the same example, the hotel has 300 keys at an ADR of $150.00 and is running at an occupancy rate of 70% yielding a revPAR of $64,695 and revPOR of $253 including extra department revenues. Its total revenue is $19,408,623 with a net operative income of $6,573,664 The feasibility study forecasts that by adding a spa, occupancy will increase 5.7% and the hotel can increase its ADR by 10%. Since the hotel's occupancy will increase, it can also expect similar increases in other department revenues. With this forecast and adding the extra revenue generated from the new spa department, suite revenues will increase 16.29% ($1,872,450) and total revenue will increase 22.47% ($4,360,834) before division expenses and general operative costs. Net operative income improves by 19.11% ($1,256,328). By analyzing the addition of a spa this way, you can see that the ROI is much greater and happens more apace than if you were to only evaluate the ROI exploitation the spa's 20% profit ($240,000) Factor this into your capitalization rate and you can see how much your property's value has increased. To simplify, see the summary below.
Total Revenues: Without Spa - $ 19,408,628; With Spa - $ 23,769,456; Increase - $ 4,360,834 (22.47%)
NOI: Without Spa - $ 6,573,664; With Spa - $ 7,829,992; Increase - $ 1,256,328 (19.11)
Net Profit: Without Spa - $ 4,351,377; With Spa - $ 5,153,389; Increase - $ 802,012 (18.43%)
RevPAR: Without Spa - $ 64,695; With Spa - $ 79,232; Increase - $ 14,537 (22.47%)
RevPOR: Without Spa - $253; With Spa - $293; Increase - $40 (15.81%)
Occupancy: Without Spa - 70%; With Spa - 74%
Average Daily Rate: Without Spa - $150; With Spa - $165
Some of you may be thinking that this is too good to be true and you power be right. These projections are supported a feasibility study that was performed in a market that made sense to add a spa. Not all spa's can project $1,200,000 in revenue and not all hotels can get away with increasing their ADR and every hotel's expenses are different. You have to relate this example to your own situation. Having said that, let's look at other example. If the same property does not increase their ADR but did improve their occupancy, they would sill realize an increase in net operative income of $561,397 and improve the lucre by 7.9%, still making the investment attractive. On the flip side, if the spa makes no money ($0 in revenue) and you do not increase your ADR, your NOI declines 3.1% and your lucre decreases by 7.4%, which after outlay $2,000,000 which would not be the best situation given the chance cost of the investment. Another interest look at is if the spa makes no money ($0 in revenue) and you can at to the worst degree increase the average daily rate and occupancy, NOI improves 7% and lucre 3% which is still up, but think of the investment. It would take 15 years to see any return. The challenge is, and this does not take any expertise to realize, if you aren't making money in the spa, you are still outlay it. Then at this point, you can investigate either rental the space out, doing a joint venture or working with a direction company who shares the revenue but absorbs the operative costs.
I hope that this has not confused you and remember that this idea is only to be applied to your situation and expenses and especially your market and consumers. It does not work for everyone and doing the proper feasibility, structuring, budgeting and projections is crucial. This has not been reviewed by any commercial enterprise guru or accountant, this is simply the way I look at the investment for a hotel to make my recommendations.
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