Evaluating Your Return on Investment When Adding a Spa to a Hotel

February 24, 2023

There have been many recent discussions surrounding the idea of adding a spa to an existing hotel and how to determine if it is a worthwhile investment. Unfortunately there is no simple solution and every property and marketplace is unique. Many things 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 financial data and projections to determine whether or not a spa is right for your property. Working with a spa and/or hotel consultant is an important step that you need to take to help to analyze the viability, assist with the decision making process and the details of the design, but this article will at least give you some insight on how to evaluate the feasibility of adding a spa to your hotel. This article will take a look at the reasons a hotel would add a spa and the financials to back it up.

It is first important to begin by understanding a few things 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 across 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 stabilizing 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 reporting 15% or more. The spa industry has experienced exponential growth since 1999 when there were only 4,140 spa businesses serving $4.2 billion dollars spread over 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 synergy 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 profile your clients to make sure that the demographics of your client match up with those of the spa goer. This information also varies by age, for instance 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 lot to consider to determine what your spa’s concept will be and it is important to find a consultant 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 Cleveland med spa market for family spas). That being said, according to Coyle Hospitality’s 2011 consumer priorities study, relaxation and stress management 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 nothing new. Bottom line, spas remain mostly a luxury as does vacation and the two go hand in hand with one another. Now on to the point.

According to July’s issue of Hotel Management, there are 2,951 new hotels and 354,100 new rooms being built as of Q1. While there is no data available that I could find, I would guess that at least 70% of the 4 Star or better projects will include 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 make sense. The most prevalent disadvantage is that you are likely losing market share to your competitors who already have a spa and you are likely discounting your rooms in attempt to attract some of that market share. While you can make an argument that not every person who books a hotel wants a spa treatment, you also need to realize that there is a large population that does. Even if your guests are not interested in having a massage or facial, they can still enjoy your spa by utilizing non-treatment areas such as sauna, steam rooms 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 amenity 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.

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