Hotel Spas: Therapy for Tough Times

With economic forecasts for employment and income declining, professional and personal travel budgets tightening, and consumer confidence sinking, the outlook for 2009 may seem dreary. 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: 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. Yet during such economic times, the spa industry inevitably suffers as consumers re-prioritize and cut back on luxuries.

By examining the results presented in the 2008 edition of Trends in the Hotel Spa Industry produced by PKF Consulting and PKF Hospitality Research, operators and owners will hopefully be able to adjust their business model and identify areas of growth as we journey through this protracted recessionary period. The report analyzes 2007 financial performance data of 116 spas operated by hotels located throughout the United States. Comparisons are also made to the 2006 performance of the same hotel spas. 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, which translated to a 7.4 percent increase in Revenue Per Available Room (RevPAR) as compared to 2006 RevPAR. 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 hotels that participated in our Spa Trends survey, spa department sales represented 3.9 percent of total hotel revenue in 2007. Although this number may seem understated in comparison to rooms or food and beverage revenue, a spa’s indirect impact on hotel image, average daily rate, occupancy, and group bookings is noteworthy. As expected, the spa sales to total hotel revenue ratio was higher for resort hotels (4.9 percent) versus urban hotels (2.4 percent). At a resort the spa treatment may be the main focus of a guest’s stay, while programs in urban spas are usually scheduled around the guest’s business or social schedule.

Total department revenue for the spas in the survey grew 5.0 percent from 2006 to 2007, slightly less than the 5.5 percent increase in total hotel revenue achieved by all hotels in PKF’s 2008 Trends in the Hotel Industry report. Since the number of occupied rooms for the representative sample remained relatively flat (0.2 percent decline), the rise in spa revenue was likely due to an increase in 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 require value and a heightened level of experience; spas can meet that need by providing promotional packages, special offers, and discounts.

At 55.6 percent of total revenue, massage continued to be the greatest source of revenue for hotel spas. Skin care and body work (18.8 percent) and salon services (10.7 percent) also contributed significantly to spa sales. Retail sales, at 10.3 percent of total spa department revenue, enjoyed the greatest growth (8.8 percent) among all sources for revenue. Clothing and merchandise sales were generally greater in spas over 6,000 square feet or for those generating more than $3 million in revenue. Our data indicates this trend will continue as consumers are increasingly incorporating spa products into their daily routine. Retail revenue represented approximately 12.1 percent of total treatment revenue and cost of goods sold represented 56.7 percent of total retail revenue. Retail sales can be a powerful tool for improving bottom line profit. As such, spas should create or enhance retail space that provides a variety of clothing and merchandise, as well as dedicate management to control inventory levels and purchase orders.

For comparability reasons, membership fee revenue was excluded from our analysis of total spa department revenue. However, these fees made up 6.4 percent of total revenue for those spas reporting this line item and increased in 2007 as compared to 2006 by 12.2 percent. Due to the unstable economy, PKF-HR is forecasting a decline in hotel occupancy for the upcoming year. With fewer hotel guests, hotel spas may need to promote local participation via membership and daily use fees as a means of augmenting their revenue. Spas should be portrayed as an opportunity for non-hotel guests to escape from the pressures of urban life, to relax, and to be refreshed in mind and body.

Urban spas experienced a significant decline in daily use fees in 2007. However, when combined with the growth of fees at resort spas, the total sample enjoyed a 4.6 percent increase in daily use fees during 2007. The decline in urban locations may be the result of new marketing strategies that waive daily use fees in order to entice spa-goers.


Like all departments within a hotel, labor related costs are the biggest operating expense for spas, representing 57.2 percent of department revenue in 2007. Included in this amount are the costs associated with leased or contracted personnel. 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.

From 2006 to 2007, spa department labor costs for the hotels in the survey increased by 6.6 percent. The increase in labor costs were driven in part by the mounting burden of benefits which is reflected in the 8.7 percent growth in payroll related expenses.

Outside of growing labor costs, spa managers were effective in containing department operating expenses. Non-labor related costs actually declined 0.5 percent from 2006 to 2007 with the greatest savings achieved by controlling operating supplies (12.6 percent). This reduction is significant because this is an expense that can be managed to positively impact net profit. The industry should keep enforcing best management practices and cost controls so that employees take responsibility for their work and consumption.

The Bottom Line – Profit

The average departmental profit margin for the spas in the survey sample was 24.1 percent in 2007 with more operating efficiency exhibited by resort spas. It is important to note that hotel departmental profit margins are calculated before deductions for administrative and general, marketing, maintenance, and utility expenses. For comparison purposes and as a test of reasonableness, the average profit margin for all other operated departments in PKF’s Trends survey was 29.4 percent. The lower profit ratio for the spas can be attributed to the high costs of payroll, which in challenging times should be re-evaluated.

From 2006 to 2007, hotel spa department profits grew 5.8 percent with 12.3 percent growth in urban spas and 4.6 percent in resort spas. While 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.

Looking forward

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. Labor costs curb profitability, but efficient scheduling can contribute to controlling costs. 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.

We cannot ignore the current economic situation and yet there are still benefits to be gained from a spa’s operation – not only in terms of its impact to the bottom line, but as a contribution to our state of mind and outlook for the future.

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About the author: Robert Mandelbaum is Director of Research Information Services in the Atlanta office of PKF Hospitality Research. Gabrielle Lerner is an Associate in the Los Angeles office of PKF Consulting. To purchase a copy of the 2008 Trends in the Hotel Spa Industry, please visit This article was published in the February 2009 edition of Lodging.

photo of Robert Mandelbaum