Industry Update
Opinion Article10 February 2020

Benchmarking 101: Running an Effective Health Club/Spa

By David Eisen, Director of Hotel Intelligence and Customer Solutions for HotStats

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Health clubs and spas have taken off in recent years. Revenue for health clubs in places like the U.S. has risen steadily for the past decade. But when it comes to benchmarking your hotel's health club or spa, focusing on these revenue numbers alone can actually cause your hotel strategy to crash and burn.

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Why?

Health clubs and spas often come with high operating costs. This means that if you're fixated on shallow revenue numbers, you're only measuring the tip of the iceberg.

Luckily, there's a better way to launch your health club and spa benchmarking 101 strategies. Here's how to use benchmarking to create real value with your health club and spa operation.

How Health Clubs and Spas Fit a Benchmarking 101 Strategy

Hoteliers have long recognized health clubs and spas as a revenue driver. Unfortunately, this has caused many hotel pros to rely solely on revenue benchmarking metrics to measure value.

This is a big mistake if you want your benchmarking 101 strategy to make a true impact on your operation.

Although revenue can help lay the groundwork for things like budgeting, it's nowhere near being the best metric to monitor health club and spa success.

Instead, look to the guts of the operation. This means monitoring profit and setting benchmarks to drive a healthier overall spa and health club unit.

Metrics to Watch

You can't build a house without raw materials, and when it comes to setting up benchmarks, data is your only resource. If you want a profitable spa and health club, start with more in-depth metrics.

Yes, this means measuring revenue, but it shouldn't be your sole tool. Instead, dig into labor costs, payroll and expenses. These deeper metrics will tell you a more honest story about how much money is coming out of your spa and health clubs at the end of the day.

Which metric should be your guide? Successful hotel pros use net profit as their guiding star and focus on operational growth.

Broad Benchmarking Strategies

When you've laid the groundwork with the right metrics, you'll have all the tools you need to set up benchmarking strategies. Again, if you want to drive profit, take a holistic approach. This means analyzing not only what's coming in, but also how that money is spent and how it's turning into profit.

Getting a Handle on Payroll

A good place to start is labor costs. With strong data, you can set benchmarks to stretch this high cost further and up productivity. For instance, you may want to stack up base pay against commission or incentive programs. Perhaps you're having to deal with high turnover in seasonal lulls or increasing hiring costs during high seasons. All of these insider clues will affect your bottom line.

Key labor KPI to track:

Payroll as a percentage of total spa revenue

Cut Operational Costs

It doesn't matter how much business is pouring in, if your operational costs are too high, the money that comes in will turn to smoke. When you look at operational costs, such as inventory, product usage and equipment, opportunities for savings will reveal themselves.

Maybe an expensive product is being overused or wasted. Perhaps equipment costs are too high. Overall, keep your eyes on the bottom line and set benchmarks that make your operation leaner.

Key operational benchmarking KPIs to track:

Gross operating profit and cost of goods sold

Increase Revenue

Despite being overhyped, revenue can still be a key piece to the greater profitability puzzle. Just remember to use it in tandem with operational figures. For your spa and health clubs, you can use revenue numbers to measure marketing and upselling efforts. Revenue benchmarking gives you a good look into demand and which treatments to emphasize.

Key operational KPI to track:

Total spa revenue

Launching Spa and Health Club Benchmarking

As you set up benchmarks, remember that your spa and health club metrics should always give you insight into your operations. These numbers open up opportunities to leverage your assets for what matters: profit.

Remember, data is king, but it's a lousy ruler when it's used the wrong way. For a better benchmarking 101 strategy, don't view metrics in a vacuum. Set up a holistic strategy, where operations, payroll numbers, inventory costs and revenue feed profit into your entire hotel or resort.

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