Cover Story

Sparring for healthy bottomlines

Spas have been touted as the biggest trend to hit the hospitality and tourism industries on a positive and profitable note, worldwide. But in India, hoteliers need to rework the concept to make it a viable business element, discovers Vyas Sivanand

Let's face it. Indian hotels definitely need booster shots to get their innovative strings on a roll. Since time immemorial and in an Indian context, hotels across the country have always relied on the West for ideas. Even an aspect as purely Indian as ayurveda was revitalised by hoteliers, thanks to the discerning West. But today, ayurveda too has completely lost its original form with commercialisation emphasising the fact that given an idea, Indian hotels lose track in the midst, to hurriedly cash in on it. Now, the spa mania is the flavour of the season and hoteliers are falling over themselves to squeeze every dollar that this trend can give them.

World over, it is only recently that spas have started to generate profit. In most Indian hotels, spas are still considered as an amenity for the guest. Specialised spas like Ananda in the Himalayas, Angsana, Golden Palms or the spas of The Oberoi group are trying hard to create a niche and provide the spa experience in its actual form as experienced the world over. Many spas in Kerala are trying to stitch the ayurveda element into the spa outfit, which ends up making it a cacophony of sorts. Others across the country just have few elements to boast of, which hardly complete a nuance of the actual spa experience.

Lacking quality

According to Intelligent Spas' Spa Consumer Survey Asia 2003, 93 per cent of respondents looked for a spa resort or day spa when travelling. Five per cent of respondents stated India was a potential spa holiday destination.

While the spa concept in the country is overtly hyped, it is only now that hotels are becoming more business savvy and developing sophisticated financial models. This was long overdue since a large number of spas do not generate profit. According to a highly placed official from Kerala State Industrial Infrastructure Development Corporation, "Spas are considered 'amenities' and 'cost centres' instead of profit centers. In the country, a large number of hotel properties have poorly run facilities that lack quality management and are bleeding financially. Look at what happened with ayurveda. You have hundreds of outlets claiming to offer ayurvedic treatments. With the spa concept catching up, we come across many hotels claiming to provide authentic spa facilities. You even see independent spas, which are far from what they should actually be offering. The concept will stick on, but it will never become a important aspect of a hotel division if the same trend goes on."

But according to Tapan Nanda, director - sales & marketing, Golden Palms Hotel & Spa, "It is a new business stream for hotels and one cannot expect profits to come in immediately. The concept of spas’ just came to India three years back and it is only a matter of time when it will become a primary ingredient in the making of a hotel and also be at par with other main revenue sources."

Most hotels want to have a spa because it is the most evident trend, but in a lot of cases the spa is just an extension of their sauna and steam facilities. "Our entire property is designed on a spa concept. In a way it is the essence of our existence. It is only in properties, which want to ride the spa wave and have not been designed to do so, where you have a problem. But if done well the spa is a great value product. It is not a product you can force into any property. The spaces and other offerings need to synergise to offer a complete spa experience," says Nawabzada Omer Bin Jung, managing director, Prestige Leisure Resorts Pvt Ltd, which developed the Angsana Oasis Spa & Resort. Adds Ashok Khanna, managing director, Ananda in the Himalayas, "Most spas offer guest pampering rather than a complete wellness programme."

Keeping tabs

When this reporter randomly contacted twelve spas across the country to check on a worldwide phenomenon about their knowledge on whether the spa was a tangible asset, a profitable and viable business in itself, none of them could quantify or were not willing to provide the same even in percentage.

"I can't give a break-up for reasons of confidentiality. But you only can take it that our spas are profitable and provide a valuable contribution to the hotel profit & loss," said Paul Simmons, executive vice president - sales and marketing, The Oberoi Group.

While spas need to be planned, marketed and operated as profitable business ventures in themselves, six hotels chains which had spas as a guest amenity were focussed on the spa as a marketing tool and did not believe or really cared if it made money.

"Spas are more relevant for our resort brand as they are ones who concentrate on promoting the destinations as a rejuvenating experience along with luxury and have very elaborate set-ups. Ours is primarily a business hotel and thus our focus is not so much on the spa. We do have a compact and competitive setup run by the 'Banyan Tree' brand of Thailand, but, the same is only a part of the repertoire of guest facilities which are a part of a 5-Star Deluxe hotel. It is not a focal selling point for us," said a source from The Oberoi, Bangalore.

But according to Simmons, "For Oberoi at least, the spa and spiritual experiences, which include yoga, meditation etc, that we can offer are a major USP. Therefore our spas are extremely popular, both in resort and city locations. They are also rapidly gaining worldwide recognition. For example, our spas at the Oberoi Hotels in Mumbai, Delhi, Jaipur, Udaipur, Agra, Ranthambore and Wildflower Hall have all been accorded 'Leading Spas' status by The Leading Hotels of the World. They are the only hotels in India to have reached such a level. All Oberoi spas are for the exclusive use of resident hotel guests only."

Also, spas as a stand alone entity do not contribute largely towards the overall hotel revenue, but as spa packages it does, because then the F&B as well as the room is included. The number of in-house guests using the spa would be in the range of 10-15 per cent and they form the chunk of long staying guests. The rest are mainly guests who come for short treatments.

"The spa is no doubt a futuristic concept currently at a migrating stage. It satisfies the aspirational aspect of a luxury product consumer. Essentially it still remains an in-house facility primarily to address the exclusiveness and privacy need of the resident guest. There is no doubt that any such facility aimed at the wellness value will eventually become a mainstream revenue spinner and settle down as a profit centre" says P K Mohankumar, area director - Bangalore & general manager, The Taj West End.

Need of the hour

Hotels have to necessarily focus on the business side of spa marketing and operations. Just as spas have grown in number, there is tremendous potential for them to increase their revenues, control payroll and operating expenses and increase profits.

Says Lalan Kakkanattu, resort designer and consultant, Artec, "India is largely known as an ayurvedic destination, but with some quality spas and more coming, the perception is changing. The future of the spa industry will be based on helping spas be economically viable business ventures. Proving the financial feasibility and economic viability of a spa will be of significant importance to developers, investors, stockholders, asset managers and resort operators. Now the mandate is that the marketing value of a spa is not enough. It needs to be profitable. We need to be able to measure their contribution to the overall business, whether it is to fill more rooms, sell real estate, higher RevPAR, etc."

As an international tourist destination, hotels and resorts in India should carefully consider the option of providing spa services to remain competitive, as spa facilities are now classified as a factor in guests' decision making. According to Julie Garrow, director, Intelligent Spas Pte Ltd, "Some tips for attracting more spa visitors include providing scripts and booking procedures for reservation and front office staff to encourage hotel guests to visit the spa, displaying spa promotions in lifts to increase awareness of the spa, spoiling guests with spa product samples instead of fruit baskets and offering packages that include both hotel and spa experiences."

Another major factor that needs to be addressed is that hotels with spa facilities need to realise the importance of having a uniform system of financial reporting that all spas can use. Says Kakkanattu, "While the number of spas have increased significantly, there is a lack of business management tools to measure a spa's success or to establish reliable financial benchmarks. Spas have never had a uniform system of accounting so it has been difficult to gather 100 per cent reliable data."

If these and some other challenges are addressed, then spas might just be able conduct better economic research on the financial realities of being in the spa business.

Costly affair

The Spa Cost Factors

In order to deliver the "high touch" experience desired by spa guests, spas are labour intensive operations. But the costs are highly placed when it comes to equipments. For a modern state-of-the-art spa, equipments play a major role and they do not come cheap. Labour costs along with operating supplies, health and beauty products also make for a huge expense item within the spa department. Other significant expense items include the cost of merchandise and clothing sold, laundry and dry cleaning.

"Spa equipments are definitely very costly. It is a major requirement to have state-of-the-art equipments otherwise you just cannot provide them the total experience. Vichy shower, hydro bath, dry floatation, etc, are imperative to a spa and they come at a heavy price," says Nanda. These factors end up finally on the guest's bill, which is why even today, spas in India are still a very high-end product.

The Distribution of the various spa types in India

Sub-branding

Hotels are often faced with the dilemma of whether to manage their spa or outsource it. Many hotels like control of the facilities to make sure the guest's experience is managed in a way that would be consistent with the brand. Most hotels are bringing international spa brands to gain a competitive advantage. Hotels have also begun to brand their own spa concepts and standardise their services.

"We have a business arrangement with Banyan Tree, the leading spa operator in Thailand. They supply the therapists but we manage the spas. The arrangement works very well because we have access to a constant pool of well-trained and highly professional Thai therapists. We then offer a spa menu that blends Thai and Western treatments with traditional Indian treatments, to create a comprehensive and authentic range of options for our guests," said Simmons.

By outsourcing the operation they would have an operator who is very keen on profit and loss responsibility, while also maintaining the SOP's (Standard Operating Procedures) that the chain develops.

"Most hotels that tie-up with international spa companies do not have the expertise nor desire to run spa operations. This is why they outsource it as it's not their core business. More than the brand its the quality of the offering that differentiates one spa from another. If the offering is international and good then automatically the branding helps. International people feel more comfortable when they see a recognised spa operator purely because they are assured a certain standard of service and product and they relate to the brand," says Omer.

Hotels looking at spas as an amenity rather than a profit centre in India

Conclusion

Though the spa industry has been around for years, it still remains in its infancy. Rapid growth in the popularity of resort and hotel spas, and the increase in its departmental revenues, are among the first steps toward the future success of spas. With an aging population, significant disposable incomes, people focused on taking better care of themselves and living more luxurious and healthier lifestyles, the spa industry is poised to permeate other aspects of our daily lives. But there are several issues to be addressed by individual spas as well as spas attached to hotels and resorts whose USP is the spa, especially in the Indian context.

The Indian spa industry, the hotels and resorts need to adopt a more matured approach. They have to have their marketing tools in place and look at spas as a revenue area with a complete audit on a monthly basis, keeping a check on quality as well as meeting international standards and norms.

Also, it has to evolve continuously as the hotel industry will yield many new trends in the spa industry, due to the fact that once every hotel has a spa, they will need to differentiate themselves from the competition.