Gurus, Saunas & Spas

Spa: from cost centre to thriving business

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Jeremy McCarthy is group director of leisure, spa and wellness at Mandarin Oriental Hotel Group and with him we explore what it takes to turn a spa from a cost centre into a thriving business.

Getting the balance right
Spas are complex businesses that require a great deal of knowledge in a variety of areas including leadership, customer service, wellness therapies, product and retail, finance, sales and marketing, software systems and more.

Secondly, they are low-margin operations that require a large number of well-paid and well-trained employees. Most spas simply don't make enough money to pay for the calibre of talent needed..

This trade-off between complexity and profitability is the biggest challenge facing spa owners and operators. However, many have yet to find ways to create successful businesses.. Below are some of the strategies they use.

  1. Partner
    Many successful spas can be found within the hotel premises, where they can alleviate some of the complexity by relying on the property's expertise and support in areas such as housekeeping, maintenance, marketing and food and beverage. In this synergistic relationship, the hotel also benefits by providing a great experience that generates loyalty and goodwill.
  2. Size
    A larger spa with more treatment rooms has greater revenue generation potential, which generates higher margins and supports more experienced leaders. This can create an upward spiral resulting in greater success. Unfortunately, because spa margins are not high, there is often pressure from investors to downsize and smaller facilities struggle to make enough money to offset fixed costs and turn a profit.
  3. Scale
    Having multiple locations can allow a spa company to earn enough revenue from all its operations to fund an experienced central leadership team that can share its support and expertise in each business unit.
  4. Specialise
    Spas can reduce complexity by simplifying their offering to a few key services and building a reputation for delivering those services very well. Many spas try too hard to keep up with the latest wellness trends and continually expand their menu to offer so much that it confuses customers and costs more in terms of stock and training.
  5. Passion
    Much of the spa industry's success is driven by the passion of our people. People who have given up other potentially more lucrative career opportunities in favour of working in a more meaningful industry that gives them a deep sense of purpose. The spa industry simply wouldn't be what it is today without these hard-working people who are passionate about wellness and helping people feel better. One of the best ways for a spa operator to succeed is to create a work environment that attracts the best people and allows them to do their best work.
  1. Experience
    Give your guests a great experience that they will want to have again and again and tell all their friends about. Winning spas are those that really know their guests and give them exactly what they need.
  2. Narration
    Give your guests a story to tell. The best spa is not necessarily the one with the most products or treatments. It's the one with a compelling story. And simple stories are easier to tell and remember.

Essentially, most strategies for successful spa operations work by virtue of their ability to reduce or offset the complexity of the operation. The key to success is a commitment to quality, care and, above all, simplicity.

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