The spa world is experiencing unprecedented pressures and changes which will continue to greatly impact the industry’s performance. Intelligent Spas’ 2019 Global Research captured updated spa benchmarks from over 200 properties across 43 countries just before the COVID-19 outbreak and provides all industry stakeholders with a clear state of the sector over the last three years, plus an opportunity to measure the rate of disruption and recovery as the situation evolves.
Julie Garrow, founder and managing director of Intelligent Spas says: “We’ve been tracking global spa performance over the last 10 years and our latest survey shows that average revenue per spa halved during that time due to a supply and demand imbalance, in essence, too many spas opened compared to the level of demand for spa services. A 47 per cent decrease in average spa occupancy rates between 2008 and 2018 prove this. On the positive side, revenue per visit increased 29 per cent to US$129 (€118, £104). Overall, the findings confirm many revenue and visit indicators have decreased significantly and even before the coronavirus, the business environment for spa owners and managers was challenging.”
Spa occupancy and capture rates
The number of people visiting spas in comparison to the number of available spas and treatments is alarming. Although some spas have performed really well over the last three years, the average occupancy rates indicate that many spas have not. The global spa occupancy rate in 2018 was 17.9 per cent and it was forecast to slightly decrease to 17.7 per cent in 2019 (see Graph 1).
The massive declines in visits due to lockdowns associated with the current pandemic will inevitably greatly impact 2020 occupancy rates. Intelligent Spas’ survey breaks down occupancy by some spa marketplaces, which highlights key differences in results. Maldives performed well predicting a 36 per cent occupancy rate in 2019, down from 40.4 per cent the previous year. In comparison, spas in Greece reported 14.7 per cent occupancy and were forecasting a slight decline for 2019.
The research also recorded two spa capture rate statistics for hotels and resorts in 2019. Spas in the Americas reported the highest in both benchmarks, with 23 per cent of all hotel/resort guests visiting the spa and 52 per cent of total spa visits being from hotel/resort guests. Spas in the Middle East and Africa reported the lowest rates, with 14 per cent of all hotel/resort guests visiting the spa and 36 per cent of total spa visits being from hotel/resort guests. On average, spa capture rates around the world were 16.2 per cent of all hotel/resort guests visiting the spa and 45.8 per cent of total spa visits were from hotel/resort guests.
The average treatment price benchmark in spas is the ratio for annual treatment revenue received and the number of treatments sold. It assesses the performance of treatments alone, without including other revenue sources such as retail revenue, which are included in the average revenue per visit benchmark ratio calculation. If a spa menu offers a variety of lower priced services, such as express services, the average treatment price will be lower, versus if a spa is more focused on higher ticket treatments, the result will be higher assuming the same number of treatments are sold. Spas in the USA predicted an average treatment price of US$125 (€115, £100) in 2019, compared to spas in India which predicted less than half that at US$50 (€46, £40) (see Graph 2).
It’s interesting to breakdown spa treatment revenue per therapist as this clearly identifies if the cost of the therapist is more or less than what they’re generating for the business. Spas in the Americas experienced a sharp decline in treatment revenue per therapist between 2017 and 2018, however that was forecast to stabilise in 2019 at around US$57,000 (€52,251, £45,800)(see Graph 3). In comparison, spas in the Asia Pacific region reported the lowest levels in the three years collated, achieving between US$33,000 (€30,251, £26,515) and US$35,000 (€32,084, £28,122) treatment revenue per therapist.
In Asia, treatment prices and average revenue per visit are generally lower than the USA so these limit an Asian spa’s ability to generate the same levels of revenue. Labour rates are also lower in comparison, so this balances the costs associated with the revenue generated.
The research was also broken down by spa type to identify a range of variations between day spas, hotel spas and resort spas and some of the biggest differences were found in daily retail revenues. Hotel spas recorded the lowest daily retail revenue between 2017 and 2018, however that was forecast to improve in 2019 to be US$91 (€83, £73), passing that of day spas, which predicted daily retail revenue to be US$84 (€77, £67) last year. Resort spas have consistently performed the best over the three years and generated a predicted US$162 (€149, £130) in daily retail revenue in 2019. Resort guests have more time to shop because they’re typically on vacation and resort spas generally contain larger retail spaces with a greater range of products.
Changes since 2008
The global spa industry has experienced some interesting changes over the last decade as shown in the difference in key performance indicators in Table 1. Intelligent Spas’ findings confirm many revenue and visit indicators have decreased significantly and spas continued to be challenged by financial and operational issues, ranging from maintaining existing clients, attracting new guests and managing revenue targets, while new spas entered their marketplace.
The aim of Intelligent Spas’ research is to help spa owners, managers, investors and other stakeholders tackle the ever-changing conditions of their business environment and to measure and enhance their performance.
The recent events caused by COVID-19 highlight the very important need for spas to closely monitor their businesses and plan for downturns in the market. Unfortunately, based on significant changes experienced in the last 10 years, the unprecedented impact of COVID-19 will push some spas into permanent closure. The businesses which continue to operate are encouraged to track their performance regularly, put financial buffers in place to protect them during slow periods and ensure they have a loyal client base to support them when normality resumes. These policies and procedures empower owners and managers to understand how their business is performing at any point in time, identify new risks in a timely manner and make informed decisions to maximise their success.
Julie Garrow is the founder and managing director of Intelligent Spas | [email protected]