The Risks and Rewards of In-House vs. Outsourced Spa Operations

Spa

It is far from a secret that the business of spa is a difficult one to get right. The hard truth is that there are many operations in this space that are running at a loss or falling short from an experiential perspective.

Determining the best starting position or continued path forward for a hotel or resort spa can be a complicated and confusing process. It is one that involves gaining a firm understanding of the options available, balancing the risks and rewards of each, and examining considerations as they relate to the core values and positioning of the property.

The end goal is seemingly simple to define, yet has proven difficult for many operators to achieve: to offer a phenomenal spa on-property that delivers consistent and exceptional guest experiences and boosts key performance indicators—including ADR, occupancy rates, average guest spend, and, in cases with a residential component, drives real estate sales and overall price premiums.

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The harsh reality is that there is no one size fits all prescription to achieve this goal. There are benefits and drawbacks to both internally operating and outsourcing a spa to a third party group. Below are some of the key factors that should be considered when navigating the spa business.

In-House Spa Operations

RISKS

  • One of the greatest risks to internally operating a spa is doing so in the absence of having the right in-house skill sets to lead and manage this business.
  • It is a business that can be challenging to get right and, if struggling, will underperform financially, operationally, and experientially.
  • It is a potential drain on resources, specifically time and money.
  • In-house spa operations are a potential headache for owners and resort managers who are already wearing a number of hats and juggling a variety of other roles and responsibilities.
  • Finding qualified staff and managing high turn-over rates can be a challenge.

REWARDS

  • Independent and soft-brand hotels can cater to an increasing number of travelers seeking innovative, authentic, one-off spa and wellness experiences.
  • Curated spa and wellness concepts, along with signature programming, can blend seamlessly and further enhance the greater guest experience and core brand values of a property.
  • The spa business itself is able to be flexible and agile in response to seasonal and market changes, pivoting fluidly to meet immediate operational and experiential demands.
  • Owners and operators do not have to conform to a set of pre-determined standards provided by the operator that may not be suited to meet the needs of their guests in their location.
  • Owners and operators do not have to relinquish control, instead maintaining the ultimate say over key business decisions, staffing, and performance goals.
  • A well-operated spa business will function as an additional profit center for the hotel, drive property-wide key performance indicators, and deliver experiential wins that fuel loyalty, word of mouth referral, and virtual recommendation, adding immeasurable value to the property’s core brand.

Outsourced Spa Operations

RISKS

  • There is a potential disconnection between the property and outlet, both operationally and experientially—a disconnect that can challenge hotel owner and spa operator relations.
  • Hotels are at risk for potential misalignment of the overarching brand with the spa brand.
  • Hotels lose control over key business decisions and direction.
  • Hotels lose control over the end user experience, which could reflect poorly on the hotel and not just the outlet itself.
  • Hotels must finalize a favorable contractual agreement with the third-party operator as it pertains to lease terms, associated brand/royalty fees, and/or revenue/profit share terms.
  • Hotels experience a lost opportunity on revenue and profits generated.

REWARDS

  • Established third-party spa brands can don familiar and recognizable names, immediately increasing property-wide visibility and favorably impacting capture rates and spa occupancy levels.
  • ‘Plug and play’ formulas take the guess-work out of the initial development as well as the ongoing operations, offering a level of confidence and comfort to ownership.
  • Tried, tested, and established standards as well as operating protocols and procedures can produce consistent and exceptional guest experiences.
  • The hotel can share the investment costs of a spa.
  • The hotel has guaranteed revenue in the form of consistent monthly lease payments.
  • A successful partnership can be a headache-free, rewarding solution to the complex business of spa.

As in any decision, there are a number of potential pathways forward. Perhaps, in this case, the one question to be carefully considered above all else is: ‘Who is your guest, and what do they want?’ The more hoteliers understand this as business owners and operators while being realistic about their own capabilities, the easier the complex world of service—spa included—is to navigate.