What Everyone Should Know About Spa Development Part III

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THE FINANCIAL REALITY

As presented at ISPA 2006
Prepared and presented by: Mitch Jucha

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THE FINANCIAL REALITY

How much revenue will the
spa generate?
How many treatment rooms
should be programmed?
Is the project financially
feasible?

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FINANCIAL PROJECTIONS
Necessary Information:
Hotel Occupancy
Guest Type
Consumer Profile
Area Foot Traffic
Local Demographics
Amount/Proximity of Competitors

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SPA GUEST TYPES

Leisure Guest
Group Incentive and NonIncentive
Business Traveler
Local Guest

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SIMPLIFIED PROJECTION
Resort Hotel X
500 rooms
75% occupancy

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Guests per room

1.50

Leisure Guests
Group Guests

450 (80%)
112 (20%)

AVERAGE CAPTURE
RATES*
**Leisure Guests

10%+

Group Guests

5 -15%

Business Traveler

5 -10%

*Many factors can impact guest capture rates. Reviewing annual industry
benchmarks for your region will ensure accurate projections.
**Leisure capture rates can vary dramatically from region to region. Spa
type will also have an impact. For example , Destination Spas will enjoy
much higher captures than other spa types, as spa is a central focus of the
guests visit.
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SIMPLIFIED PROJECTION

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Total Leisure Guests Available

Total Group Guests Available

375
94

Expected Leisure Guest Capture Rate

Expected Group Guest Capture Rate

20%
10%

Projected Leisure Guest Demand

75
Projected Group Guest Demand

Total Spa Guest Demand

84

SIMPLIFIED PROJECTION
Guest Demand

84
X

Treatments per Guest

1.50
X

Price per Treatment

$100
=

Total Revenue

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$12,600

FINANCIAL PROJECTIONS

SIZE MATTERS

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FINANCIAL FEASIBILITY
Is the project financially feasible?
Investors expect to see a minimum
of 20-25% annual rate of return and
as much as 50-100%.

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DEVELOPMENT COSTS
Architecture and Interior Design
Spa Consultant
Permits
Real Estate
Construction

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PRE-OPENING EXPENSE
Furniture, Fixtures and Equipment
(FF&E)
Operating Supplies and
Equipment (OS&E)
Payroll and Training
Marketing and Public Relations
Operational Expenses
Cash Reserves
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