Rejuvenating the Tourism Destination, pp.

42-54
K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

KAI ILLING, PhD, Full Professor

Faculty of Health Management in Tourism, University of Applied Sciences,
Bad Gleichenberg, Graz, Austria

PROFITABILITY AND ECONOMIC EFFICIENCY

OF SPAS IN EUROPE

UDC 640.41:615.83](430:436:494)
Original scientific paper

Even if a (destination) spa is managed as a profit centre, it is normally not capable of

realising big profits. The advantage of a spa as part of a spa hotel is that it can contribute to
the profitability of the hotel as a whole through increases in the room rate and the
occupation rate. The article in hand examines the spas benefits for the hotel and other
relevant information which were collected as part of a survey carried out in 2004 in
Germany, Switzerland, and Austria.
Key words: spa business, profitability, economic efficiency.

INTRODUCTION
The survey in hand is based on primary research done in 2004 focusing on
those hotels in Germany, Austria, and Switzerland that have a spa worthy of the name.
A questionnaire with a dozen of different questions targeting economic indicators was
sent out. Since many hotels were not willing to release such sensitive information, the
researchers had to redo the survey with those hotels with which the interviewers
previously had personal contact. In the end about 100 questionnaires could be analysed
offering the first study in Europe to provide a thorough analysis of the economic
impact of spas. Another source of information is the authors experience as a spa
consultant, in many European countries, including Croatia among others.
1.

SOME GENERAL INFORMATION ABOUT THE SPA BUSINESS

Some of the most important results of the study are discussed in detail before
economic conclusions can bereached.
The following chart outlines average prices of different treatments. It turns out
that beauty treatments and massages belong to the cash cows as far as the revenue side
is concerned.

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Figure 1. Price of selected treatments per minute

Facial
Ayurveda massage 45min.
Thalasso algae wrapping
Cleopatra bath
Hay bath
Back massage 25min.
Peeling
Kinesitherapy (group)

Source: Hank-Haase/Illing 2005, p. 34.

If we look at a single example, the research shows that the classical facial is
offered at a price ranging from 51-60. The average minute price in the beauty segment
is lower than 1.00.
The rate Western European spas use as a pricing rule of thumb is about 1.00
per minute if a guest is treated by someone else (a therapist). The Croatian level is
about 30% lower. An average minute price of 1.20 is quite desirable, whereas a price
of 0.70 matches the Croatian reality. In general, prices of individual spa treatments
vary between 0.60 and 2.00 per minute and even more. The price difference results
from the following factors:
a) quality and demand of the spa
b) the type of treatment (beauty treatments are generally cheaper than
medical treatments)
c) season (annually, daily)

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Figure 2. Price of selected treatments

Source: Hank-Haase/Illing 2005, p. 35.

Price differences result from the level of the hotel, from the image of the
beautician and from the location of the hotel.
Many hotels create packages to better sell their services. Common packages
include seven overnight stays. Twenty-three percent of all packages sold offer two
overnight stays.
Figure 3. Number of overnight stays of wellness packages

Source: Hank-Haase/Illing 2005, p. 37.

The price of those packages which include seven overnight stays is more than
800. Five days cost a little bit less than 600, while a four-day stay costs just slightly
under 400.

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Figure 4. Price of wellness packages

Source: Hank-Haase/Illing 2005, p. 38.

The whole study differentiates between different types of hotels with spa.
There are holiday hotels, congress hotels, and typical spa (wellness) hotels. These three
different types are characterized by
a) quite different economic indicators as far as the spa branch is concerned
b) quite different target groups and
c) quite different features in the field of size and hotel-spa-ratio.
Figure 5. Different target groups in different hotels with spa

others

private travellers

conference travellers
business travellers
wellness
hotel

business/
conference
hotel

holiday
hotel

Source: Hank-Haase/Illing 2005, p. 43.

The chart shows that the composition of guests is very different depending on
the hotel. The wellness hotel harbours mostly private guests whereas the business hotel
has a majority of guests who travel at their companys expense. Clearly, the guests in
the three different hotel types have quite different consumer behaviour with respect to
spa services.

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

The age of the majority of guests is between forty and sixty. Two thirds are
female. The more medical the spa services, the more elderly the spa goers are.
Figure 6. Age groups in spas

Source: Hank-Haase/Illing 2005, p. 45.

Another important indicator is the so called capture rate (see the chart
below). The capture rate indicates the number of hotel guests who use the spa. The
capture rate is one of the most decisive indicators revealing information about the
revenue potential of the spa. On an average, 85% of the guests in spa hotels use the spa,
while just 28% in a business hotel do.
Figure 7. Capture rate

wellness
hotel

business/
conference
hotel

holiday
hotel

Source: Hank-Haase/Illing 2005, p. 50.

Not all spa goers ask for labour-intensive services. About 30% ask for services
requiring a therapist, with the other 70% prefer just to swim or to relax without
personal care. Consequently, the majority does not need personnel intensive care such
as massages or coaching.
Closely connected with the capture rate is the so called booking motive. In
other words, what role does the spa play in the decision making process of potential
customers? The chart below shows that a spa is a prevalent booking motive for
wellness hotels, whereas the clients of other types of hotel may have other motives.
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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Figure 8. Booking motive

wellness
hotel

business/
conference
hotel

holiday
hotel

Source: Hank-Haase/Illing 2005, p. 51.

The chart below describes in more detail various aspects of hardware and
software in a spa which might serve as a basis for future investment decisions. It shows
that the sauna and the personnel belong to the most important aspects:
Figure 9. What is most important in a spa
Swimming pool
Sauna
Fitness/Sport
Far Eastern wellness treatments
F&B
Cosmetics
Personnel
Solarium

Source: Hank-Haase/Illing 2005, p. 53.

The chart shows that almost 80% of the interviewees stress the sauna as a
decisive basis for decision. The staffs quality is placed right behind the sauna.
The average length of stay differs with respect to the type of hotel (chart
below). The guests in spa hotels stay longer than those of business hotels. The different
length of stay may have an impact on the proceeds. Arrival days and departure days
tend to be weak as far as spa revenues are concerned. So spa revenues from business
guests are quite low also because of their short stay travel behaviour.
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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Figure 10. Average length of stay

days

length of
stay/days

days

days
wellness
hotel

business/
conference
hotel

holiday
hotel

Source: Hank-Haase/Illing 2005, p. 48.

2.

PROCEEDS FROM SPA-GOERS

The chart below shows that about 17% of the revenue in spa hotels stem from
the spa department. Holiday hotels take about 10% of their revenues from the spa. The
spa in business hotels is just an image factor but not a noteworthy source of income.
But it might be precisely this image factor which is responsible for a high number of
bookings. The sheer existence of the spa communicates something about the quality of
the hotel to the potential customer. In other words, an increase in the occupation rate
and a higher room rate can be ascribed to the spa, even though almost no business
men/women actually use the spa in business hotels.
Figure 11. Proceeds from the spa department

wellness
hotel

business/
conference
hotel

holiday
hotel

Source: Hank-Haase/Illing 2005, p. 63.

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

An important economic indicator in this area is the type and range of

treatments and the revenue they generate. It turns out that massages and beauty
treatments belong to the most popular services. On average the interviewed wellness
hotels sell about 3,800 massages and 3,100 beauty treatments a year, with the revenue
generated from the two types of services being almost equal. An average hotel
generates about 180,000 from massage and another 180,000 from beauty treatments.
More medical treatments such as medical baths or wellness baths (cleopatra bath)
belong to the slower-selling services. The average spa revenue from services totals
about 420,000. It has to be mentioned that spas have other sources of income, such as
selling goods (shower gel, bath foam, flip-flops) or admission tickets for external
guests. There are spas that generate as much as 20% or even more of their total revenue
by selling cosmetics, bath essences, and the like.
3.

OPERATING AND OTHER COSTS

Spas belong to the most expensive parts of a hotel with regard to the
investments in bricks and mortar and personnel expenditures. Since spas are on average
more cost-intensive, the usual facts and figures taken from hotel investment cannot
easily adapted to spas. Therefore, it was necessary to develop our own investment
indicators for spas. The average investment for one m2 of spa is as follows:

Spa area
Non-treatment (walkways,
reception, waiting room)
Equipment

Western European
countries
1,800-2,500/m2
1,100-1,400/m2

Croatia
1,700/m2
900/m2

350-600/m2

300/m2

Different areas within the spa (e.g. water, treatments, fitness, walk-ways) can
have different capital needs.
Since investments costs are considerably lower in Croatia than in Western
Europe, an average figure of 1,700/m2 is more appropriate. The considerable cost
reduction (approximately 30%) is only possible if Croatian companies serve as
contractors. If Austrian or German companies serve as contractors, the prices may be
even higher than the average in Western European countries because of transaction
costs (travel, accommodation, forwarding of goods etc.).
A thorough analysis shows that personnel and energy belong to the most
crucial cost factors. Both cost factors can vary heavily, however. As far as the
swimming pool is concerned, the energy costs can be much higher or much lower
depending on the size of the pool and its location (inside, outside). Staff costs may vary
also, depending on the medicalisation of the spa (a medical spa with a highly
qualified staff offering personnel intensive services as opposed to a simple relax spa
focusing on a sauna and solarium, for example).

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Figure 12. Comparison of cost factors of a spa

personnel
goods
energy
marketing
maintenance
maintenance technical
equipment

Source: Hank-Haase/Illing 2005, p. 77.

4.

EXAMPLE CALCULATION

The following spreadsheet shows different modes of calculation typified by a

sample hotel: 4star, 100 beds, occupation rate 60%, average room rate 90. This
method provides a simplified way to calculate the Gross Operating Profit (GOP).
Calculation no 1 is the calculation for the first fiscal year. The hotel does not
have a spa.
Calculation no 2 is the first fiscal year of the hotel with a new spa without an
increase of either capacity or average room rate or occupation rate, respectively.
Calculation no 3 is the second fiscal year of the company with the new spa
and an increase of the average room rate (8% from 90 to 97.2). Facts and figures of
the spa have not been changed.
Calculation no 4 is the second fiscal year of the company with the new spa
and an increase of the occupation rate of nine percent (from 60% to 69%). Facts and
figures of the spa have not been changed.
This simplified calculation shows a tremendously better result in calculation
no 3 and calculation no 4. The spa ends with just a small surplus (139,200), the bigger
results stem from the increase in the room rate and the occupation rate. It will not
always be possible to increase the occupation rate and the room rate simultaneously
and by the amounts used in the aforementioned calculation. But the evolution in
practise shows that a spa often enables the hotel management to increase one or even
both factors.

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Figure 13. Sample calculation

Calculation
1
200x
total revenue
hotel&spa
2,923,600
rooms/lodging
revenue
1,885,000
costs/expenditures
598,900
rooms&lodging total
1,286,100
food&beverage
revenue f&b
1,038,600
costs/expenditures
789,900
food&beverage total
248,700
spa&garden
revenue spa
0
personnel expendit.
0
goods expenditure
0
energy costs
0
marketing commun.
0
direct costs
0
maintenance
0
spa&garden total
0,00
gross profit
1,534,800
overhead administration&
general
personnel expendit.
75,000
other costs
57,400
administration&gene
ral total
132,400
marketing&sales
personnel expendit.
51,000
other costs
140,000
marketing&sales
total
191,000
maintenance
personnel expendit.
22,300
other costs
30,000
maintenance total
52,300
energy
127,000
overhead total
G.O.P I

502,700
1,041,100

Calculation
2
200x+1

Calculation
3
200x+2

Calculation
4
200x+2

2,923,600

3,157,488

4,326,032

1,885,000
598,900
1,286,100

2,035,800
641,000
1,394,800

2,363,226
699,000
1,664,226

1,038,600
789,900
248,700

1,121,688
806,700
314,988

1,301,806
878,770
423,036

661,000
297,000
31,500
76,000
35,000
31,000
51,300
139,200
1,674,000

661,000
297,000
31,500
76,000
35,000
31,000
51,300
139,200
1,848,988

661,000
297,000
31,500
76,000
35,000
31,000
51,300
139,200
2,226,462

75,000
57,400

75,000
57,400

75,000
57,400

132,400

132,400

132,400

51,000
140,000

51,000
140,000

51,000
140,000

191,000

191,000

191,000

22,300
30,000
52,300
127,000

22,300
40,000
62,300
138,000

22,300
45,000
67,300
145,000

502,700
1,171,300

523,700
1,325,288

535,700
1,690,762

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

5.

SUCCESS FACTORS OF SPAS

As far as the spa market is concerned, Europe has entered a period of

stagnation. The supply has grown much faster than the demand. Hotel spas,
destinations spas, thermal spring spas, medical spas, and clinics targeting the wealthy
self-payer, have sprung up like mushrooms.
Stagnating markets require a thoroughly developed spa strategy. Figure no. 14
shows a series of steps to be undertaken for a better future of the (medical-) spa. The
chart outlines the basic prerequisites for successful spa development:
Figure 14. Success factors of spas

Source: Illing 2005.

The spa itself is responsible for the four the boxes which are marked red
(bold), whereas the other fields represent important influence factors which cannot be
influenced by the spa directly.
Some aspects of the charts shall be explained in more detail as follows:
Field 1: Human factors
a.) The private willingness to pay higher prices depends on age, income,
profession, sex, and other aspects.
b.) There is no willingness to pay privately for consumption of health
services without physical and mental strain. This explanation is quite

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

general and may include various concrete physical complaints (e.g.

urinary incontinence) as well as social pressure (e.g. you are not pretty).
c.) Motivators are reasons people have when they spend money for spa
services (box 5).
Field 2: Framework conditions
a.) A prerequisite for the willingness to pay privately for spa treatments in
hotels is that the clients health insurance does not pay for these services,
no matter what the setting.
b.) An important instrument for assessing the situation is competition
analysis. If there are already some comparable institutions within a onehour drive, the new competitor may face serious difficulties.
c.) This point deals with the development of wellness, health and spa
tourism. The spa management has to be aware of therapy trends and of
changing societal values.
Field 3: Real estate
a.) Location and vicinity relate to the contradiction of easy access on the one
hand and remoteness and quiet on the other.
b.) Maintenance refers to building and surrounding infrastructure (e.g. foot
paths, bicycle paths).
c.) Standard refers to the quality of services according to national standards.
d.) Target group compatibility refers to possible tensions between clients sent
by the national health care system and private payers who might have a
higher aspiration level.
Field 4: Service/Personal
The spa and wellness industry, which has long concentrated on hardware (e.g.
saunas, baths, sports equipment), nowadays seems to be discovering the secrets of
software. Friendliness of the personnel, design, and fragrance-management in all rooms
as part of the wellness-product is just beginning to become a priority. This point
describes the most important characteristics the personnel must have.
1) Reliability: Ability to deliver promised services on time and accurately.
2) Empathy/Customer Consciousness: Ability to detect individual
needs/wishes of clients.
3) Responsiveness: Flexibility and readiness to immediately satisfy the
needs/wishes of clients.
4) Assurance: The staffs knowledge, friendliness, and confidence-building
capabilities in the process of delivering services in all related areas such
as accommodation, restaurant, or spa.
5) Revenue consciousness: Consciousness of how to optimize the spas
revenue without burdening the client with services he actually doesnt
want.
6) Permanence: Ability to deliver spa services at all times the spa-goer
wishes.

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K. Illing: PROFITABILITY AND ECONOMIC EFFICIENCY OF SPAS IN EUROPE

Field 5: Motivators
Empirical studies show that peoples basic needs in the field of (health) sparelated services can be put together as stated above. It is one of the cornerstones of a
professional spa management to identify and offer treatments with high affinity to selfpayers. The most important motivators are
1. Caring/Love
I want to be pampered, I want to be loved
2. Anti-stress
I need quiet, relaxation, time off from daily duties
3. Body styling
I want to be pretty, handsome, and young
4. Performance
I want to enhance my performance ability
5. Security/autonomy
I strive for an autonomous life in a healthy body
6. Sense
I need answers to crucial questions of this life
7. Healing
I want to get rid of concrete physical complaints
Field 6: Sales
The new spa cannot do without both a creative and aggressive communication
policy which uses both new (e.g. digital) and appropriate distribution channels.
REFERENCES
1.
2.
3.
4.

Hank-Haase, G., Illing, K., Wirtschaftlichkeit und Rentabilitt von Wellness Bereichen in Hotels.
Wiesbaden 2005.
Illing, K.-T. Success factors for self-payers in rehabilitation clinics. Bad Sassendorf 2005.
Non published strategy plans of Croatian spas.
Richter. Wellness und Wirtschaft - Professionell und profitabel; Konzeption, Finanzierung und
Vermarktung von Spa-Projekten. Willems Augsburg 2002.

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