CoStar News is reporting that after sharp declines in 2020, revenues at luxury hotel spas are making a comeback.
Published by: Jan Freitag/CoStarNews
Published date: April 2021
As leisure travelers take to the sky and the roads again, high-end hotel spas are experiencing something of a renaissance.
The COVID-19 pandemic that devastated the hotel industry also had a significant impact on the spa operations of luxury hotels. Even those travelers who stayed in hotels in the summer of 2020 were probably not comfortable being close to a massage therapist or aesthetician, since most of their work is performed quite literally in your face.
However, the latest monthly profit-and-loss data collected by STR, CoStar’s hospitality analytics firm, finds that travelers who have been vaccinated and choose to stay in a luxury hotel are increasingly opting to experience all that the hotel has to offer, from fine cuisine in the hotel’s restaurants to spa treatments.
The indexed performance of rooms revenue and spa revenue shows that, after declining sharply in April, May and June of 2020, room and spa revenues at luxury properties have since recovered to almost half the value of January 2019. Spa revenues are not lagging in the rooms revenue recovery velocity, as profitability continues to climb back from last year’s plunge.
When comparing departmental expenses to achieved spa revenues, the summer months of 2020 proved exceedingly difficult and the spa departments in our sample set showed no departmental income over a period of four months. Whereas in 2019 and early 2020, the figure ranged from 20% to 30%, it was negative for a four-month period, as staff initially stayed on before they were furloughed or laid off. It is encouraging to see that in February 2021 operating profits were getting closer to the 2019 long-run average.
Historically, retail in luxury hotel spas is an important revenue source and accounted for between 5% and 10% of revenues in the sample set. As hotel visitors avoided spas at the onset of the pandemic, retail revenues declined as well.
However, when looking at the retail revenues as a portion of total spa revenue, an interesting picture emerges — the ratio increased in the most challenging months.
It stands to reason that, while clients may not have been comfortable getting spa treatments, they were still able to visit the spa’s retail store or simply shop online to stock up on products for a self-care regimen at home. Alternatively, these revenues may have been partially driven by gift certificates for future retail visits.
Revenues dropped considerably in retail and overall spa operations, but the drop was relatively less pronounced in the retail area. In the middle of the pandemic, the ratio of retail revenue to total spa revenue increased to as much as 30%.
Looking ahead, as the economy rebounds and more travelers get inoculated, luxury hotels will likely continue to experience an upswing in visitors and their spa operations stand to benefit accordingly.