For the last two years Smith Travel Research has collected performance metrics for a variety of hotel spas, mirroring the Smith Travel Analysis Report. The Spa STAR data consists of revenue and utilization data for treatments, salon stations and retail area.
We specifically collect monthly performance metrics for both the treatment and the salon side of the business which include: Revenue, Hours of Availability, Hours Used, and Number of Treatments/Services.
In addition to these metrics we also examine the retail revenue generated in the spa shop.
The data sample currently skews towards the higher end of the market, and since 2006, many luxury chains have submitted their spa property data to STR. The research shown in this article consists of a sample of 43 luxury spas.
For the last 25 years, STR, headquartered in Hendersonville, Tennessee, has led the hospitality industry in research and benchmarking. Offering monthly, weekly and daily STAR benchmarking reports, STR reports to a clientele over 36,000 and represents almost five million rooms globally.
The accompanying charts show some interesting developments for our survey universe, but it stands to reason that the trends observed here can likely be applied to the industry as a whole.
Treatment and salon service revenues in 2008 were reported in line with the revenues for the year 2007. Average treatment revenues were reported at around $138, and average salon revenues at around $70. Assuming that the average massage takes about an hour and the average manicure and/or pedicure takes just as long, while keeping in mind that the data providers are high end spas, it is probable that the implied price per treatment is correct.
In 2008, STR reported a slowdown in demand for the hotel industry post-Labor Day and as average daily rates (ADR) growth slowed, so did the treatment revenue growth. Average salon revenues declined, although only slightly. Spa revenues suffer as a result of less occupancy in hotels.
With the introduction of utilization rates of treatment rooms and salon stations, spa revenue growth slowed. Our data shows that the average utilization of treatment rooms decreased, while the average utilization of stations increased. One way to interpret this trend is to assume that spa users are “trading down” when choosing services. Hotel guests and local residents are still using the spa, but are not spending as much money on their treatments.
As a result of this current trend, spas have increased the prices of treatments to tighten the gap caused by fewer demand. Similarly, STR has observed that the average retail revenue per treatment has increased in the last two years.
While part of that trend can be explained with the declining number of treatments, part of the explanation is probably also the “staycation” effect. Customers who experience a blissful spa treatment in the hotel are spending more on retail purchases to recreate part of the experience in their own home. A long-term continuation of this trend obviously hurts spa treatment revenues.
In 2008, the U.S. spa and hotel industry saw growth, but as of the economic downturn of 2009, revenues have slowly decreased and probably will for some time. In an October 2008 report released by STR, representing its forecast for 2008 and 2009, CEO of STR, Randy Smith, spoke about the future of the industry.
“We look for things to get tougher before they get better,” Smith said. Meanwhile, STR president, Mark Limanno, saw positive signs in the industry. He believes that although the economic climate is turbulent, ADR growth will stay positive. This report shows positive signs for the future of spas in hotels.
It will be interesting to observe the spa performance throughout 2009, as high end hotel ADR and occupancy have deteriorated significantly in the beginning of the year. Spa treatments are probably an auxiliary expense which is easily put off if the general macro economic situation does not improve. That said, the spa industry is in the business of alleviating stress, so given the current times, demand for their services may actually increase.
The spa industry might be down, but it certainly is not out. The need for the relaxation treatments and salons that luxury spas offer will always be in demand. Although there is a decrease in demand due to the current economy, the hospitality industry will adjust accordingly to weather the economic climate, which will inevitably support the spa and wellness industry.
Jan Freitag is Vice President of Global Development for Smith Travel Research. He oversees all projects charged with the accumulation and interpretation of global lodging data. He may be reached at [email protected] and www.strglobal.com.
