Members appreciate holistic, relaxing services that complement exercise programs.
Meet Elsa, a 45-year-old career woman. She is stressed.
To ease her tension, Elsa exercises at a health club. She burns calories in the cardio area. She unwinds by attending a yoga class.
After her workout, Elsa steams and showers — but she doesn't leave the club. Instead, she indulges herself with a little luxury — and she doesn't have to get dressed, or travel to another location, to do it. Elsa simply robes up and strolls through the locker room to the club's day spa.
Elsa opens the pink door and enters another world. Soft instrumental music plays in the background, paintings of tranquil landscapes adorn the walls, and the scent of lavender is in the air. The day spa's attendant greets Elsa by name, and an employee leads her to a private room for a shiatsu aromatherapy massage. For someone as stressed as Elsa, this treatment is the ultimate antidote.
Two hours ago, Elsa felt time-starved and tense. Thanks to the combination of exercise and day spa services, however, she leaves the club relaxed and rejuvenated.
Does Elsa sound like one of your members? Do these services sound like something that you offer? If not, they could be. Any club can deliver spa services, improving retention and increasing profitability.
“If a club is selling a lifestyle rather than a fitness program, then a day spa can greatly enhance the experience,” says Francis X. Accunzo, president of Sage Management, a Branford, Conn., company that services organizations within the fitness, beauty and hospitality industry. “And depending on its focus, a spa can accomplish a variety of things.
“For example, if you want to shore up your wellness component, you create a program in your spa that offers acupuncture, acupressure and other alternative health modalities. For beauty services, you can add hair, nails, makeup, or a focus on skin care. Your club members will shop for beauty products at the spa, and this will increase per-member revenue.”
Before adding any services, however, clubs must determine how much they are willing to invest in a spa component. Operators need to ask themselves some questions. Are you planning to build the spa into an existing space? Will you have to add electrical lines? Will you need to bring in plumbing? Will you need new windows? How much remodeling and other conversion work do you need to do?
Start on the Right (Square) Foot
If you start with a plain space with everything in place, your final investment will depend on the “feel” that you want. “The easiest way to look at it is on a per-square-foot basis,” Accunzo says. “This cost will vary depending on your market. You want to align your day spa with your club. Your market tells you how much you can spend per square foot. It could be a mid-market spa, an upscale spa or a luxury spa.
“Depending on which category you're in, the range for building the facility is $75 to $135 per square foot. To equip the facility, you have to figure approximately $50 per square foot, and for startup costs — including pre-opening marketing and printed materials — another $50.”
When the Atlantic Club in Red Bank, N.J., decided to expand its existing spa — moving it from downstairs to upstairs — the facility leaned toward the high end. The club's investment reflected that choice.
“The cost depends on what you choose to put into your day spa,” says Kevin McHugh, the club's president. “And the day spa has to reflect the quality of your club. We did a lot of research on what the competition was doing, then we tended to go premium. Our spa, when we move upstairs, will have come in at about $200 per square foot, including the equipment, the artwork and the construction.”
The costs don't necessarily stop with the construction, either. “There is a minimal amount of additional insurance to pay,” McHugh explains, “but if you're carrying a big policy, it doesn't really impact the bottom line very much.”
In addition to staying on top of insurance, club operators expanding into spa services must understand local ordinances. Getting the required approvals is crucial. Researching these procedures not only helps the club, but also offers an operator an opportunity to initiate positive relationships with town officials.
“What you are looking for is the exact requirements the town, the county and state have for licensing your operation and the technicians,” Accunzo adds.
Operators who go through the trouble of obtaining licenses and building a spa will want to make sure that they earn a good return on their investment. To get what they deserve, operators should base their service charges on the alignment of their clubs in the marketplace, according to Accunzo.
“Pricing in the mid-market spa for a one-hour massage in the U.S. is typically $55 to $70, for an upscale spa we're looking at $70 to $90, and a luxury spa would be $90 to $120, $130,” he says. “For a one-hour facial, mid-market is $50 to $65, upscale $65 to $85, luxury $85 to $120.”
Pricing the Products
To get a better feel for what they should charge for services, operators can also examine the competition. “You have to know who you are before you price your product,” Accunzo says.
“If I'm upscale, I'm going to find all the upscale spas within a 5-to-10-mile radius. I'm going to test their pricing, and then make a judgment call based on that assessment. The judgment call could be that we want to be less than our competition. It might be we want to charge less than our competition for members but the same for nonmembers. If we think what we have is significantly better than what our competition is offering — locker rooms, saunas, steams and access to an indoor pool and whirlpool — we may want to set our fees at the upper limit of our price category.”
As operators set the fees, they should keep in mind that they are initially pricing for existing members.
“Your primary market is your current club membership,” Accunzo explains. “First you will reach out to your club members and sell them on your services. You want to talk to them directly and at the same time nurture referrals.”
Operators accomplish this outreach/nurturing goal with in-house promotions: signage, member letters, circulars, and visuals on the desk and in the locker rooms. Once clubs have captured members, these clients may bring in family and friends for spa services.
After clubs have successfully marketed to members — who, by the way, deserve incentives such as special introductory offers — it is time to address the local market, drawing nonmembers. Clubs can introduce themselves (and their day spa) to the community through local ads, fliers, radio and TV spots, and personal visits to business establishments.
Propagation Through Donation
Clubs can also bring nonmembers into the spa area by establishing referral sources. For example, a spa gift certificate for a popular local hairdresser may ultimately bring more referrals than a radio spot.
Health clubs can also donate gift certificates to local charitable organizations for their raffles and fund-raising auctions. In turn, everyone on the organizations' mailing lists will read about the generous donation and spa services.
Still, before reaching out to new prospects, health clubs must decide whether they have enough existing members to launch a spa business in the first place. “The spa's primary market is the club membership, so you have to be sure that you have a sufficient and adequate potential market within that membership,” Accunzo reminds. “We recommend a minimum of 1,500 females between the ages of 24 and 64, with household incomes of $75,000-plus.”
This may be an unrealistic number for many health clubs. However, club operators can still determine whether their membership can sustain a profitable spa business.
“In a health club, typically you are looking at a departmental profit that consists of the revenues minus direct cost, and the cost of labor, supplies and the marketing specific to the operation of the spa department,” Accunzo says. “We see profit margins in this case ranging anywhere from 20 percent to 30 percent.
“[W]hen a spa runs as a department of a club, [it gives] you economies of management, marketing, physical plant maintenance and human resources. Because all those functions currently take place in the club anyway, you have minimal additional costs when the same functions take place in the spa.”
Sign of Success
McHugh of the Atlantic Club believes that a 15 to 20 percent profit marks a successful spa. And he knows all about successful spas. Since converting some empty space into a massage area 10 years ago, the Atlantic Club has grown its spa services into a $1 million business.
“The concept was if we've got 4,000 members in the club and put together a nice quality team, the club member would shop with us rather than someplace else for spa services,” McHugh says.
With good planning, club operators can take a similar route, complementing existing services and adding new profit centers. If feasible, a day spa is an opportunity that shouldn't be missed by clubs.
Wendy Bosalavage is president of American Leisure Corp., New York, a consulting and management company for fitness and spas. She can be reached at (800) FIT-MGMT, ext. 113, or [email protected].