Hotel Spas – State of the Nation – Part I


My good friends over at Spa China recently asked me to share some of my thoughts on the current State of the Nation for hotel spas. In December, they published my article under the title : Hotel Spas – What’s broken and how to fix it. This is Part I of that article…

My current thesis is that hotel spas, as they are today, are broken. At the very least, they are sub-optimal. And that is exciting! Why? Because it means there is a massive opportunity for those of us in the industry who can work out how to fix it. And believe me, the market wants it to be fixed.

Let’s think about the perception of the spa world today. I think it’s the perception of people both inside and outside the industry.  Spa is centred. We are all spiritually, emotionally and physically, aligned and at peace. The business is great. Life is wonderful. All is good. All is well. But is this perception in fact the reality? The challenge is that those outside the industry often don’t really look too hard. So, they may not ever really know for certain what is happening. And those within the industry, often tend to be quite insular in their perspectives. We just engage with others who share similar perspectives to our own. We attend spa conference and events and come away reassured that we’re on the right track.

The challenge with these spa conferences—and I think it is the same with any industry event, in any industry – is that because we are surrounded by like-minded people, we get a form of confirmation bias. Everyone in the room believes that spa is great. We all think wellness is one of the most important things in the world and everybody needs to know about it. But when you talk to people outside of these rooms, sometimes you get a different response. That’s why I always like to see to seek out the non-spa people when I go to these events. The Finance people, the Investment folks, the Owners. I like to get their perspective because sometimes I think their reality can be quite different from ours.

Sometimes, if you invite others in from outside and show them the facts, without any previous knowledge or bias, you’ll get a very different perspective on where you are at.

So why do I say the current hotel spa model is broken?

Capture Rates

Firstly, Capture Rates are generally low. For those who don’t know, Capture Rate is the percentage of hotel guests who come down and use the spa. In a city hotel, most spas will have a Capture Rate of somewhere between 1% – 5%.  In a resort spa, you could expect anywhere from 7% to 15% Capture Rates. And by resort spa, I’m talking about one that is easily accessible so guests are not forced to stay within the resort grounds the whole time. A resort where you could drive in and out every day. Locations like Bali in Indonesia, Phuket in Thailand, for example.  Finally, for a remote resort spa, somewhere like Maldives, where the guests stay on those small islands for the duration of their stay, spas should be able to achieve Capture Rates of around 25% to 30%. But many won’t.

So, if we look at it in another way, what that says to me, is that anywhere between 70% and 99% of the guests in a hotel, don’t want what we are selling. Or at least they’re not buying what we’re selling. To any unbiased person, that does not sound optimal. So, something has to change.


Another reason I feel that the hotel spa business is a bit broken right now, is that overall profits are declining. I was actually at a spa event recently where one of the local spa operators came up to me and asked, “Are you guys still making money?”. That of course suggests to me that he probably wasn’t making money. And this is not a unique conversation. I get that question often, from both hotel operators and also from spa operators. The issue is, quite simply, that our costs keep increasing, but our revenues are not necessarily increasing along with them, at least not at the same rate.

An increase in your top line revenue of say 10%, could quite easily end up as only a 2%-3% increase in your profits. By the time you’ve covered the increase in your staff salaries, rising product and supply costs, rising utilities costs, etc., you could easily eat up well over 5% of your gross revenue increase. So, if your owner is looking for a 10% increase in her profits next year, that will mean your spa needs to increase top line revenues by at least 15%. Maybe more.

Treatment Prices

I also think we have hit the ceiling of what we can charge for a treatment. We can not expect our customers to keep pulling out more money from their wallet for a one hour treatment than they already do today. I believe we’ve reached the limit of what is a fair price for the services we are providing.

When I first started with Mandara Spa back in 2005, the conversation around budget time each year, was all about how much we are going to increase our prices. Not if we would increase, but by how much we will increase. And I am talking about above and beyond whatever increase we had in our operational costs. It was really a question of how much we felt the market (ie: the customer) was willing to pay. We would simply increase 3%, 5%, 7% every year. Because we could. Because that is what the market felt our product and service was worth.

Today, the conversation is more about can we actually increase at all, or do we need to think about maybe a decrease? Because the market is telling us they don’t want to pay any more.

Occupancy Rates

It has always been interesting to me that even though we operate in hotels, we rarely talk about the Occupancy Rate of our spas. Occupancy is of course a key statistic for hotels, but not so for many hotel spas. Maybe part of the reason is that this is another metric that doesn’t look great for most hotel spas?

A Spa Occupancy of 30% is about the average. If you have a spa with four single treatment rooms that operates for 10 hours per day, that would mean you could do potentially 40 hours of treatments per day. If you are only be doing 12 hours of treatments per day, your spa is running at a 30% Occupancy Rate. In a hotel operating at 30% occupancy, the General Manager would probably lose his job. But in spas, somehow, we just seem to accept a number like this as the norm.

Therapist Utilisation

Everywhere I go these days I keep hearing that we need more therapists. But I actually think the real issue is we need more customers. That’s what the numbers seem to suggest. Because many therapists in hotel spas are only doing three to four hours of treatments per day, on average. Assuming that they are there to work for eight hours a day, that’s not very efficient. If we consider that treatment hours performed is what generates 85% + of most spa’s revenue, it is simply not sustainable to have such a low level of productivity.

And yes, I do understand that massage is a little bit different, because it can be physically quite tiring. But let’s be honest. In most cases, with most therapists, in most hotel spas, that is not really a major factor. The simple fact is, we need to be able to operate more efficiently. We either need more treatments booked, or less therapists – not more.

Often times when we consider these types of metrics, we tend to look at the higher end hotel spas. In many cases the numbers there look a bit better. But in my job, I travel around a lot. I go to a lot of different spas in a lot of different hotels, in a lot of seasons, in a lot of different countries. And in my experience, the numbers mentioned above are what many hotel spas are seeing.


For sure the hotel spa business was not always like this. But today, like everything, the hotel spa market has changed. Unfortunately, we the spa industry haven’t done a great job of changing with it. Once upon a time, if you wanted a decent spa experience you had to go to a hotel spa. Today, with the proliferation of Day Spas, customers have many more options for a quality spa treatment.

We have to evolve. Our whole environment is changing. If we don’t evolve I think we are at risk of becoming obsolete. But if we do evolve, we have almost endless opportunities.


Next week, in Hotel Spas – State of the Nation – Part II, we’ll take a look at where we are on the Industry Life Cycle Curve and consider some options for the future.