ESTABLISHED 1992, A4M REPRESENTS 24,000 PHYSICIANS AND SCIENTISTS FROM 110 COUNTRIES WORLDWIDE
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SAVE THE DATE! THE FUTURE OF MEDICINE TODAY CELEBRATING 20 YEARS OF INNOVATION IN ANTI-AGING AND REGENERATIVE MEDICINE
DECEMBER 13-15, 2012 LAS VEGAS, NV
THE VENETIAN RESORT, HOTEL & CASINO
22nd ANNIVERSARY VOL. 22 NO.10 OCTOBER 2012
William Davis, MD
COVER STORY SPAS, HEALTH & FITNESS – SPA PROFIT MAXIMIZATION: HOW TO GO FROM REVENUES TO PROFITS By Judy Singer, President & Co-Owner, Health Fitness Dynamics, Inc. Co-authored by Ben Campsey, CPA, MBA, CHAE, Director of Finance, The Umstead Hotel & Spa Do you want your spa to be profitable? Do you want your spa to help improve your hotel's occupancy and increase the revenue per guest? If yes, have you invested any resources (money, training or coaching) to help your spa director to be a better financial business manager? If you haven't invested in educating your spa director to be a spa "business" director, don't expect your spa to be as profitable as it could and should be.
EDITORIAL Monica T. Brown Hannelore R. Leavy Bernard Burt Jonathan Paul de Vierville Shirley Meerson Jon Canas Dr. Ronald Klatz Douglas Preston Dr. Robert Goldman Raoul Andrews Janet McCormick Melinda Minton DESTINATION EDITOR ASIA Jean-Pierre Képinski MEDICAL TOURISM EDITOR Michael McCaffrey DESTINATION EDITOR EUROPE James Knight SEND EDITORIAL INFORMATION email@example.com or P.O. Box 2699 Champlain NY 12919-2699 Fax (450) 833-2444 Please forward all advertising material, insertion orders to: IMS / SPA MANAGEMENT 100 Walnut Street, #1, Champlain, NY 12919 (450) 833-2400 • Fax: (450) 833-2444
Daniel Amen, MD
Michael A. Schmidt, PhD
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Dr. Schmidt did his Ph.D. research in molecular medicine within the Life Sciences Division at NASA Ames Research Center. He is a member of the Society for Neuroscience and the Metabolomics Society, and is the author of Brain-Building Nutrition and of Beyond Antibiotics: Strategies for Living in a World of Emerging Infections and Antibiotic-Resistant Bacteria (2009).
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SENIOR EDITOR Bernard Burt
Dr. Morgentaler, the Director of Men’s Health Boston, is an Associate Clinical Professor of Urology at Harvard Medical School, Beth Israel Deaconess Medical Center. Dr. Morgentaler and his clinical work with testosterone were featured in The New Yorker, and his comments have been published in journals such as Newsweek and US News and World Report.
Dr. Amen is a psychiatrist, brain imaging and brain enhancement expert and four time New York Times bestselling author. He is the medical director of Amen Clinics, Inc. in Newport Beach and Fairfield, California, Bellevue, Washington, and Reston, Virginia, which have the world’s largest database of brain SPECT studies.
www.spamanagement.com FOUNDER & EDITOR IN CHIEF Guy J. Jonkman
Abraham Morgentaler, MD, FACS
In the June 2012 study commissioned by the Global Spa & Wellness Summit, SRI International examined the many challenges faced by the global spa industry in "hiring strong, well-qualified spa management personnel, as well as the root causes of these challenges."
People & Places Crystal Light Therapy
ANNE BOLDUC Group Publisher & President
Dr. Davis is a cardiologist and author of the New York Times Bestseller, Wheat Belly: Lose the Wheat, Lose the Weight and Find Your Path Back to Health, the book that introduced the dangers of modern high-yield wheat, altered by genetics research in the 1970s, to the public.
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PEOPLE & PLACES SPA MANAGEMENT
PEOPLE & PLACES
DR. CARMONA WILL HELP SHAPE HEALTH CARE POLICY
ABOUT THE AUTHOR Bernard Burt is senior editor and columnist for Spa Management Journal.
Canyon Ranch’s Dr. Richard Carmona Seeks U. S. Senate Seat
He authored “100 Best Spas of the World” and “Fodor's Healthy Escapes.”
Dr. Richard Carmona has a prescription for the U. S. Senate:
Updates and industry news are on his website SpaGoer.com As founding director of the International Spa Association (ISPA), Burt tracked international trends and brought together European, American, and Asian health resorts. In 2011 he became co-chair of the Washington Spa Alliance, creating a forum for health tourism and the spa community of the national capital region.
By BERNARD BURT
he former Surgeon General of the United States is the Democratic nominee for one of Arizona’s two seats in the Senate which will be decided in November. If elected, he will help shape health care policy in the new administration.
SPA MANAGEMENT • OCTOBER 2012
Democrats are hoping the accusations of hypocrisy, broken promises, and flip-flopping that marked the GOP primary weakened GOP Senate nominee Jeff Flake and his bank account enough to give Carmona the best shot in years. Arizona hasn't elected a Democrat to the Senate since Dennis DeConcini won his third term in 1988. www.spamanagement.com
PEOPLE & PLACES SPA MANAGEMENT
PEOPLE & PLACES
DR. CARMONA HAS BEEN A HEALTH DIPLOMAT FOR THE PAST DECADE Dr. Carmona has been a health diplomat for the past decade. As the 17th Surgeon General, he focused on prevention, preparedness, health disparities, health literacy, and global health. During his four-year tenure the definitive Surgeon General’s Report about the dangers of second-hand smoke went into effect. Arizona Rep. Flake vowed to repeal President Barack Obama's economic and health care policies. "This will be a great race because there are big differences between our philosophies," Flake said of his Democratic opponent. Dr. Carmona, a moderate who served as surgeon general under Republican President George W. Bush, has been vice chairman of Canyon Ranch since 2006. He also serves as chief executive of the company’s Health division, and oversees health strategy and policy for all Canyon Ranch businesses, resorts, and day spas. As president of the nonprofit Canyon Ranch Institute, Dr. Carmona has extended community health services throughout the Southwest. The University of Arizona named him the first Distinguished Professor of Public Health at the Mel and Enid Zuckerman College of Public Health. The push by Carmona comes as the GOP is fighting to pick up four more seats to wrest control of the chamber in advance of votes on key policy issues such as the possible repeal of President Barack Obama's health care law and changes to the tax code.
No stranger to Washington ways, Dr. Carmona has been a health diplomat for the past decade. As the SPA MANAGEMENT • OCTOBER 2012
17th Surgeon General, he focused on prevention, preparedness, health disparities, health literacy, and global health. During his four-year tenure the definitive Surgeon General’s Report about the dangers of second-hand smoke went into effect. The George Washington University Strategies to Overcome and Prevent Obesity Alliance (STOP) named Dr. Carmona Health and Wellness chairperson. Under his leadership, the Partnership to Fight Chronic Disease worked with diverse organizations, from the Clorox Healthline Networks to the Vascular Disease Foundation. Trained in general and vascular surgery, Dr. Carmona also specializes in treatment of trauma and burns, and served for over 20 years with the Pima County Sheriff ’s Department in Tucson. As SWAT team leader he received the National Top Cop Award. After the shooting of Rep. Gabrielle Gifford, he helped victims recuperate at Canyon Ranch. Born in a poor Hispanic family in New York City, the experienced 69-year-old Dr. Carmona homelessness, hunger, and health disparities during his youth. Enlisting in the Army, he became a www.spamanagement.com
PEOPLE & PLACES SPA MANAGEMENT
PEOPLE & PLACES
PEOPLE & PLACES
IN 2014 THE AFFORDABLE CARE ACT WILL GO INTO EFFECT
A SIGNIFICANT PORTION OF HEALTH CARE COSTS ARE PREVENTABLE
While the majority of Americans do not have insurance plans that offer health club reimbursement, those that do should take advantage of this benefit. combat-decorated Special Forces Vietnam veteran. Dr. Carmona’s interest in public health stemmed from the realization that most of his patients’ illnesses and injuries were completely preventable. Prevention as an effective means to improve public health and reduce health care costs will continue to motivate his career if elected to the United States Senate. SUGGEST PAIRING CARMONA PIECE WITH NEW WAYS SPAS CAN CAPITALIZE ON HEALTH CARE REFORM IN U.S.:
In 2014, the Affordable Care Act will fully go into effect, but already there are several wellness, prevention and fitness aspects of the law available to both employers and the public. These programs are designed to encourage and reward preventative healthcare measures with a goal to improve the overall health of the insurance pool with millions more now being insured. According to American Council on Exercise <http://www.acefitness.org/> (ACE) CEO Scott Goudeseune, a significant portion of healthcare costs are preventable through the long term adoption of exercise, proper nutrition and SPA MANAGEMENT • OCTOBER 2012
wellness programs. These aspects of the Act will help the public make better choices at home and in the workplace for a significant impact on overall health. With Open Enrollment Periods beginning, ACE breaks down the top four prevention aspects of the Act and suggests next steps for the public and employers to implement its benefits. 1. The change: Increase in the level of insurance discounts provided to employees who participate in workplace wellness programs. The programs must help participants meet certain goals before the discount is available, including body mass index (BMI), cholesterol, or blood pressure. Beginning in 2014 under the Act, participants who meet these health targets may be eligible for up to a 30 percent discount on their insurance premiums (vs. 20 percent formerly) at the employer’s discretion. The U.S. Health and Humans services (HHS) division also has the ability to increase this to 50 percent. This gives plan participants an extra www.spamanagement.com
financial incentive to reduce their health risks. Studies show that a healthier workforce means more productivity, and employers who choose to implement these discounts for their employees may see benefits for promoting health in the workplace including reduced absenteeism as well as lower future health costs. ACE’s suggested action: The increased financial benefit provides a great ROI opportunity for participants to invest in a properly skilled partner to help them meet the criteria. Trained Health Coaches are a great resource to help guide employees through the lifestyle and behavior modification required to enact change. To find a Lifestyle and Weight Management/Health Coach certified by ACE, visit www.acefitness.org/findanacepro. 2. The change: Unlimited reimbursement for fitness and health club memberships allowed in insurance plans. ACE’s suggested action: While the majority of Americans do not have insurance plans that offer www.spamanagement.com
health club reimbursement, those that do should take advantage of this benefit. With discounts now available to employers with workforces that meet health requirements, employers should consider investing in membership discount offers. As an alternative, ACE’s Get Fit <http://www.acefitness.org/getfit> program offers hundreds of free exercises, videos and effective workout plans that can be done at home, with little to no equipment for those without gym access. 3. The change: Both insurance plans and Medicare must now covers the full cost of an “annual wellness visit” to include a body mass index (BMI) measurement, obesity screening and provide personalized health advice and referral to counseling on healthy living, including weight loss and physical activity. Spas can provide this free service with appropriate documentation to secure reimbursement from Medicare. ACE’s suggested action: This free resource gives people the information they need to understand their numbers and where they should set their goals for improved health. Critical to success is the follow through from this visit to ensure resources are provided for support. A certified personal trainer or health coach is a great resource to help customize programs based on the individual’s specific needs and abilities. To find a certified personal trainer in your area, visit www.acefitness.org/findanacepro. 4. The change: The U.S. Department of Health and Human Services (HHS) awards Community Transformation Grants to states to develop programs that reduce obesity and improve access to nutritious food. ACE’s suggested action: Some states and counties have already taken advantage of the grants, working in schools to help promote the advantages of recess and replacing vending machine items to more nutritious offerings, improving community design for walking and biking and working with businesses to implement workplace wellness programs. ACE encourages local and state governments to review details of available grants <http://intranet.rbbpr.com/index.cfm?page=reser vations&resource=3&date=8/23/2012> and identify community partners to help implement programs. n SPA MANAGEMENT • OCTOBER 2012
CRYSTAL LIGHT THERAPY
CRYSTAL LIGHT THERAPY
AS THE LIGHTNESS OF THE FEATHER TOUCHED MY SKIN Susanne Murphy is an international educator, writer and Vice President of Colour Energy in North America. Daily she empowers people on the healing power of colour and now crystals. Susanne can be reached at 1-800-225-1226, ext 511 or by email at email@example.com
I FELT A RELEASE OF STAGNANT ENERGY
CRYSTAL LIGHT THERAPY A New Concept Spiritual Spa Treatment
Visit www.colourenergy.com or www.crystallighttherapy.com for more information on Colour Energy or Crystal Light Therapy.
During each component of the full Crystal Light Therapy treatment, my mind relaxed more, which allowed my body and spirit also to be equally soothed. By SUSANNE MURPHY
As SPA MANAGEMENT • OCTOBER 2012
Aura Cleanser touched my aura field and physical body. The smudging treatment took about 20 minutes and afterwards I felt fully refreshed.
the lightness of the feather touched my skin, I felt a release of stagnant energy. With each gentle stroke, weight seemed to lift. A tingling came over my body as a fine mist of
Then the magic of the chakra meditation journey began. As the Crystal Light Therapy® (CLT) www.spamanagement.com
practitioner took me through a visualization of opening, purifying, charging and closing each energy centre, I could feel my chakras being empowered with new vitality. As each chakra was addressed, the CLT practitioner anointed that chakra with a high powered alchemy essence while SPA MANAGEMENT • OCTOBER 2012
CRYSTAL LIGHT THERAPY
CRYSTAL LIGHT THERAPY
WITH EACH GENTLE STROKE
WEIGHT SEEMED TO LIFT had never had a therapist use the power of their voice to imprint a vibration within me. The third part of the CLT treatment came as a complete surprise. In this therapy the crystal wands are activated to create a piezoelectrical charge. Basically, a soft vibration enters into your body, clearing away blockages.As the treatment climaxed I felt my body shiver with delight, not just once, but over and over again.
reciting some correlating chakra words. Next, she placed a specialty cut crystal on the chakra and toned into the gemstone.
Her voice was truly angelic as she sang a simple tonation to balance my masculine and feminine (yin/yang) energies. The experience was unique as I
To describe such a deeply profound energy treatment is beyond words. I am a well-known expert in colour and the chakra system.
For almost 20 years I have been teaching people how to harness the power of Colour Energy® through sunlight, foods, herbs, essential oils, gemstones, exercise, visualizations, words, etc. to revitalize their spiritual, emotional, mental and physical body. I cannot compare a CLT treatment to any other type of physical or energetic treatment that I have ever had, as it was a completely new experience for me. The crystal point wand massage was “electrifying”. This treatment recharged my energy matrix and brightened and expanded my aura like a brand new lightbulb.
28 SPA MANAGEMENT • OCTOBER 2012
SPA MANAGEMENT • OCTOBER 2012
CRYSTAL LIGHT THERAPY
CRYSTAL LIGHT THERAPY
A TINGLING CAME OVER MY BODY
AS A FINE MIST TOUCHED MY AURA FIELD
Crystal Light Therapy is a complete body, mind and soul rejuvenation system and its effects penetrate on multiple levels. Unlike many other spa treatments, CLT is very ethereal. As I got off the massage table, I felt my spirit renewed and my vitality stronger. I perceived a deeper connection to my inner-self and to the source of my being. Prior to the treatment my mind was racing over all the things that I needed to do. My job is very demanding and I oversee several departments in my corporation. However, all the tenseness that I felt earlier was released and a sense of peace and calmness was present.
Decades of holistic study and applied practice (including a myriad of training in various energy medicine areas as well as researching over 10,000 people using the revolutionary Biopulsar aura biofeedback diagnostic device) has taught me how varying healing modalities have a profound effect on our organs, moods, thoughts, chakra system and aura – our overall wellness.
During each component of the full Crystal Light Therapy treatment, my mind relaxed more, which allowed my body and spirit also to be equally soothed. The heavenly aromatic oils and essences that were used further increased my experience on a sensory level. My whole being was awakened and renewed. (Now why can’t I start everyday feeling this way!) A complete Crystal Light Therapy treatment should be experienced by everyone at least once to help them reach a place called Nirvana that few people can say that they have experienced in their lifetime. Crystal Light Therapy is offered at Shubui Spa, Auberge Resorts, Post Ranch Inn, Las Ventanas al Paraiso & the Ixchel Spa. For more information on where you can get a treatment please email to firstname.lastname@example.org n
30 SPA MANAGEMENT • OCTOBER 2012
SPA MANAGEMENT • OCTOBER 2012
DO YOU WANT SPA TRENDS: HAVE SPAS CHANGED THEIR YOUR SPA TO BE HOW PROFITABLE? BUSINESS TO STAY IN BUSINESS DO YOU WANT YOUR SPA TO HELP IMPROVE YOUR HOTEL'S OCCUPANCY AND INCREASE THE REVENUE PER GUEST? If yes, have you invested any resources (money, training or coaching) to help your spa director to be a better financial business manager? If you haven't invested in educating your spa director to be a spa "business" director, don't expect your spa to be as profitable as it could and should be. By J U D Y S I N G E R , President & Co-Owner, Health Fitness Dynamics, Inc. Co-authored by B E N C A M P S E Y , CPA, MBA, CHAE, Director of Finance, The Umstead Hotel & Spa Most spa directors do not come with the business skills they need, and when they are on-the-job, they are not typically given the business training that will help them to maximize the spa's profit potential. One would think that with a multi-million dollar "bricks and mortar" investment in a spa venture, investing in training the spa director to be the best possible business manager would be a "common sense priority." Unfortunately, this is rarely the case...the reality is typically to provide minimal training and support, yet have high expectations related to performance and profitability. This disconnect presents a dilemma that is the biggest current and future challenge facing the spa and hospitality industry.
In the June 2012 study commissioned by the Global Spa & Wellness Summit, SRI International examined the many challenges faced by the global spa industry in "hiring strong, well-qualified spa management personnel, as well as the root causes of these challenges." Among the findings of SRI's study are the following (all of these points are quoted from the SRI study entitled "Spa Management Workforce and Education: Addressing Market Gaps: June 2012" as presented at the GSWS June 2012): • One of the biggest challenges in the spa industry, as it exists now as well as in the future, is to find staff who have a "heart and soul" as well as "common sense and business." • Spa businesses are facing a fundamental challenge in their management workforce – they are simply not able to find enough people with the right skills to fill management-level positions. • Hard skills in business and management are considered to be the number one deficiency among today’s spa managers/directors. Revenue management was listed among the top 3 areas where spa directors need help. • Industry leaders who are currently working in a capacity in which they hire/oversee/supervise spa managers/directors, 95% stated that they have difficulties finding job candidates with the right qualifications and experience. Among that group, two-thirds also stated that the people they hire as spa managers/directors usually require a lot of additional training, coaching and mentoring once on the job. • Ninety-five percent (95%) of spa industry leaders stated that they currently face problems in hiring spa managers/directors with the right combination of qualifications and experience; 52% stated that they believe these problems will stay the same or worsen over the next decade. • While staffing challenges occur across all levels and positions in today’s spas, these challenges are especially important and especially prevalent at the management level.As for any other business, talented leadership and strong management are critical to the success of a spa. • There are only 64 spa management-related degree programs globally at universities/colleges/schools that provide education for students interested in careers in spa management. The annual number of graduates from these programs meets only a tiny fraction the spa industry’s growing hiring needs for well-trained spa management personnel (i.e., there are only around 4,000 students worldwide currently enrolled in spa management-related degree programs,but there are an estimated 130,000-180,000 spa managers/directors currently working in spa businesses globally). For this reason, industry leaders tend to place very little emphasis on educational credentials when hiring spa managers/directors. This problem is closely linked with the gaps in “hard skills”and technical/business management skills that industry leaders complain are prevalent among their spa managers/directors.
DO YOU WANT YOUR
For 30 years, HFD (an international spa consulting company) has recognized and tried to address the lack of business acumen among spa directors and the lack of on-the-job "business" training as being what we considered to be the biggest "operational" problem in the spa industry. We could never understand why extraordinary amounts of money were spent on the "hard costs" (spa facility), yet very little money, time or resources (relatively speaking) would be spent on the "soft costs" (marketing, operating, training, etc.). Too many hospitality leaders still do not believe in the spa's potential; therefore, they do not provide the necessary resources to train the spa director to be directly responsible for making sure the spa is a financially successful business venture. The need to find or train qualified spa directors has become increasingly more important and has been clearly identified by SRI as the biggest challenge in the global spa industry both today and the future.
SPA TO BE
In this article, we will focus on a few techniques that we use as part of HFD's business management/ coaching program. This educational software and hands-on coaching program helps spa directors collect, measure, understand and monitor data so they can make strategic business decisions that will improve the spa's profitability.
Developing a profit management plan for your spa will take time, but if you follow this simple road map you will be able to implement a strategy built on understanding the financial consequences of your operational decisions.We will use the following process to determine the variable components of your cost structure, which will allow you to determine the impact of operational strategies and pricing decisions. 1. Distinguish between fixed costs and variable costs 2. Separate variable costs into step variable costs and true variable costs 3. Determine the drivers that cause step variable costs and true variable costs to change 4. Implement a process to evaluate the profit impact of changes in business volumes Before developing and implementing your strategy, it is important to determine the cost structure of your spa. Throughout the process, all necessary information may not be available to you. It is important that your analysis is thorough and accurate. I do advocate, however, carefully weighing the time commitment in studying data to the value it will grant. If making a reasonable estimate will save you a significant amount of time and labor, then use the estimate and proceed. For the purpose of this article, we will focus on breaking costs down into fixed costs, semi-variable costs and variable costs. Additionally, we will separate variable costs into step variable costs and true variable costs. Below are basic definitions for the terms we will be using: • FIXED COSTS: Costs that do not vary with changes in business volume. Examples of fixed costs include management salaries and service contracts.
DEVELOPING A SPA PROFIT MAXIMIZATION – EVALUATING & MEASURING PERFORMANCE Revenue management practices have long been utilized in the hotel industry to maximize financial performance. Hoteliers know that the variable cost of an occupied room, such as housekeeping labor and supplies, room amenities, utilities, etc., are minimal when compared to the room revenue generated from the sale. Even when large discounts are offered against room rate, significant margin will exist with the goal being to generate enough revenue to exceed the fixed costs of running the hotel. Spas operate differently, with variable costs being significant and fixed costs being a smaller factor. Therefore, spas should focus their strategy on profit management instead of revenue management.
• SEMI-VARIABLE COSTS: Costs which contain both a fixed and variable portion. Examples of semi-variable costs include wages for nonservice providers, locker room amenities and operating supplies. • VARIABLE COSTS: Costs that are fully dependent on business volumes. Examples of variable costs include wages to service providers (when dependent on a service) and professional supplies. • STEP VARIABLE COSTS: Costs that are uniform until a specified threshold is reached. • TRUE VARIABLE COSTS: Costs that are incurred directly when additional business volume is incurred.
DO YOU WANT YOUR SPA
While understanding the fixed costs of your operation is important for many purposes such as determining your breakeven point, our current goal is to maximize profitability through strategic operational decision-making.With this as the objective, most decisions will be based on evaluating service volumes and pricing as well as the impact these have on profitability. Therefore, variable costs will play a greater role in helping us decide between proposed operational strategies, and we will focus strictly on variable costs.
TO INCREASE THE HOTEL REVENUE PER GUEST?
The next step is to determine the drivers that cause step variable costs and true variable costs to change. Step variable costs are typically based on labor standards for front-of-the-house associates. An example of a labor standard would be to add one front desk agent for every 30 guests. Please see the chart below which lists common types of costs and describes the process used to distinguish between them.
FIXED COSTS COMMON EXAMPLES: MANAGEMENT SALARIES & WAGES ADVERTISING & PROMOTIONS CONTRACT CLEANING DUES & SUBSCRIPTIONS DECORATIONS LICENSES & PERMITS SERVICE CONTRACTS TRAVEL & ENTERTAINMENT
F I X E D C O S T D E T E R M I N AT I O N
T O TA L F I X E D FIXED COSTS OF THE
C O S T S W I L L B E T H E T O TA L O F ALONG WITH THE FIXED PORTION
S E M I - VA R I A B L E C O S T S .
S E M I - VA R I A B L E C O S T S COMMON EXAMPLES: RECEPTION DESK/LOCKER ROOM WAGES LAUNDRY & DRY CLEANING EXPENSE LOCKER ROOM AMENITIES PRINTING & STATIONARY
VA R I A B L E C O S T S COMMON EXAMPLES:
VA R I A B L E C O S T S
S T E P VA R I A B L E C O S T S
D E T E R M I N AT I O N : TOTAL VARIABLE COSTS WILL BE THE TOTAL OF ALL VARIABLE COSTS WITH
PORTION OF THE
SERVICE PROVIDER WAGES (BOOKED PORTION) COSTS. COMPS & ALLOWANCES COST OF GOODS SOLD CREDIT CARD FEES PROFESSIONAL SUPPLIES
EXAMPLE: STAFFING THE FRONT DESK USING THE METHOD OF 1 AGENT FOR EVERY 30 GUESTS. LABOR COST WILL NOT VARY WHEN ONE ADDITIONAL GUEST IS ADDED. INSTEAD IT WILL VARY ONCE A THRESHOLD IS ACHIEVE.
T R U E VA R I A B L E C O S T S
DETERMINED, THE COSTS DRIVERS MUST BE IDENTIFIED.
BE BROKEN DOWN INTO
VARIABLE COSTS VARIABLE COSTS.
TRUE VARIABLE COSTS
IN THE SPA ARE
TYPICALLY ISOLATED TO LABOR AND PRODUCT COSTS RELATED TO PROVIDING TREATMENTS.
True variable costs are most often related to the performance of treatments. Therefore, the most accurate way to obtain variable costs is to calculate the profitability of your treatments. Please see an example of this calculation below.
Service Name: 50 Minute Massage T O TA L D U R AT I O N ( M I N U T E S ) : 6 0
RETAIL PRICE THERAPIST COMPENSATION EMPLOYMENT TAXES/BENEFITS PROFESSIONAL SUPPLIES CREDIT CARD FEES COMPS/ALLOWANCES OTHER (AMENITIES, LAUNDRY) Total Variable Costs
$100.00 $35.00 $3.50 $2.00 $2.50 $1.00 $1.00 $45.00
Contribution Margin Contribution Margin % Contribution Margin/Treatment Hour
$55.00 55.0% $55.00
As we proceed, the contribution margin and contribution margin per treatment hour will be referenced frequently as they depict the profit derived from services. It is also important to calculate a weighted average contribution margin in order to evaluate decisions that impact multiple services. For example, if your spa offered 4 different massages, with the following margins:
Service Massage 1 Massage 2 Massage 3 Massage 4
% Service Mix
$50.00 $60.00 $45.00 $55.00
25.0% 15.0% 50.0% 10.0%
THE WEIGHTED AVERAGE CONTRIBUTION MARGIN IS DERIVED BY TAKING
$50 x .25 + $60 x .15 + $45 x .50 + $55 x .10 = $49.50
INVEST IN EDUCATING YOUR SPA DIRECTOR TO BE A SPA “BUSINESS” DIRECTOR
NOW THAT YOU HAVE HAD A CHANCE TO REVIEW EXAMPLES ON HOW TO DETERMINE THE DRIVERS OF STEP VARIABLE COSTS AND TRUE VARIABLE COSTS, WE WILL PROCEED WITH A FEW EXAMPLES OF HOW THIS SYSTEM CAN BE IMPLEMENTED TO ASSIST WITH
EXAMPLE 2: On average, the spa has 2 guests on the wait-list for massage each day. It is difficult to justify bringing in a staff member for a full shift and finding on-call staff is very hard. Based on history, I can bring somebody in for the 8 hours that spans the time the guests are wait-listed. I would do my best to manage labor and send the employee home if it does not appear likely that the slots will book. How can I determine whether or not I should do this from a financial standpoint?
COMMON OPERATIONAL STRATEGY PROPOSALS.
Business volumes have been slow through the week but are near capacity Friday through Sunday. I believe a 20% discount Monday through Thursday would generate more business for the spa. How many more spa treatments would I need to book to justify this decision?
• Provider wage when not booked: $8/hour
To answer this question, let’s use the profitability calculation mentioned previously to determine the difference in contribution margin between the full-price massage and the discounted massage:
• Assume no other variable expenses
Based on this information, we would earn a contribution margin of $55 if we did not offer the discount and $35.70 if we did offer the discount. To determine how many more services we would need to book to justify the discount, we divide the contribution margin of the no-discount scenario by the contribution margin of the discount scenario $55/$35.70=1.54. This ratio tells us that we must book 1.54 services at the discount price to equal the profit we would earn for every 1 service at full price. To examine further, if we could do 20 services a day without the discount, we would need to do 20 x 1.54=30.8 services with the discount to reach the same profit. Other factors to consider in this example include brand impact of offering the discount, up-sell of products or services from increased business and whether or not the additional services will result in additional cost related to step variable costs as described above.
• Taxes/Benefits: $2/hour
From our previous example, we determined that the 50 minute massage has a contribution margin of $55. If we will book 2 services during the 8 hour shift, we will net $110 from the services. We must also factor in the additional labor we will incur of ($8+$2) x 6 hours (un-booked time) = $60. This results in a $50 profit per day from making this decision. It is important to recognize that an adverse effect of this strategy is that it could cause the profit margin percentage to decrease. This should be ignored as the goal is to drive profitability in terms of dollars, as opposed to providing the highest profit margin percentage. This can be a highly contested point so must be understood and articulated. The above examples show how financial-training and coaching can help spa directors to better measure, understand and evaluate performance so that strategic, profit-oriented decisions can be made. There are numerous additional performance tools that can be used to make a significant impact on the spa's profitability. The key is to give the spa directors the tools and training/coaching so that they can be effective business managers.
DO NOT PROVIDE MINIMAL TRAINING AND EXPECT TO HAVE HIGH PERFORMANCE AND PROFITABILITY
SPA PERFORMANCE STRATEGIES IN ORDER TO GENERATE THE REVENUES SO YOU CAN USE BEN'S FINANCIAL TOOLS FOR PROFIT MAXIMIZATION, HFD INVITED 3 EXPERTS TO SHARE SOME BUSINESS STRATEGIES. HERE ARE SOME IDEAS THAT MIGHT HELP IMPROVE YOUR SPA'S PERFORMANCE:
TINA CRAWFORD, SPA DIRECTOR - RITZ CARLTON AMELIA ISLAND, FL
• DETERMINE FIXED COST: It is important to find a metric that works for you, i.e., what is the daily hurdle you need to achieve to meet your goal. We have scoreboards in the spa with monthly targeted goals. It is broken down in daily goals so that the team feel as though they can achieve results. • TREATMENT COSTS: We are constantly seeking ways to improve on the cost per treatment. We also strive to promote services that drive revenue with lower cost of sales during peak times.
KIM PARKER, EXECUTIVE SPA DIRECTOR - PINEHURST RESORT - PINEHURST, NC (EFFECTIVE JULY 2012, KIM WILL BE THE SPA DIRECTOR AT THE UMSTEAD HOTEL AND SPA - CARY, NC. INFORMATION BELOW IS FROM KIM'S EXPERIENCE AT PINEHURST.) • FORECASTING & SCHEDULING: 45% of our business is still booked in the week for the week. Staff is paid hourly plus service charge and are only on the clock when providing a treatment. Therapist scheduling requires careful balance to ensure you have staff available for short-term bookings and to ensure no guests are on the wait-list. • CAPTURING IN-HOUSE RESORT BUSINESS: Groups and Social. Marketing efforts are key: – How do we “speak” to our guests prior to arrival and when they are on property. – Suggestive selling during the reservation process. – Internal marketing through-out the property: in-room television, collateral, displays/shadow boxes, ease of booking a service, spa button on all in-room and public space phones). – STAFF are the Ambassadors of suggesting/promoting: transportation drivers, hotel desk agents, bellmen, golf cart attendants, etc.. – Social media efforts (Twitter, Facebook, etc..) • UP-SELLING: Incentivize staff by setting monthly goals for reservation agents and spa receptionists, include spa “support” staff in service charge distribution to create a "win/win" for all. • DISCOUNTING: When necessary, offer discounts when demands are low and maintain regular pricing during peak demands. It is better to add more value rather than discounting, i.e., up-grades, gift with purchase, complimentary eye serum with facial, etc. • MAINTAIN PAYROLL & EXPENSE MARGINS!!!: Efficient scheduling: “minimum nut” during slow periods/days, staff “cuts” for the day/week, portioning product, linen usage, etc.
• DEVELOP A SYSTEM TO TRACK YOUR DAILY PROGRESS: We report our daily revenue results (wins or losses) as well as what is left to achieve goals. • SCHEDULING: Use a flexible scheduling strategy based on knowing your seasons and "need" periods and ramping up during those times. Obviously, holidays/weekends for the resort locations will require additional staffing. • UP-SELLS: Incentivize front desk team with products and services by utilizing our vendors for support on the product end. • PRICING/DISCOUNTS: Pricing has been increased this year by doing a comp set. Discounts are limited to entice larger groups to enter a contract with the spa. We are trying to steer clear of discounts and prefer to add value to services by offering enhancements. • MONITOR BOOKING PACE/WAIT-LIST: Consistently monitor booking pace to ensure we have staff coverage to avoid waiting lists. Knowing what your mix of business is and what is going on in the resort will help you schedule accordingly. • PRICE ELASTICITY OF DEMAND: We yield manage the books to make sure that services which keep us from making the most monies are "managed out" on holidays and weekends. • 30 MINUTE GAPS IN SERVICE TIMES: We have trained the front desk staff and therapists to make sure they know what the books look like and when they can offer 30 minute services or service enhancements in treatment rooms.
WHO HAVE A
WITH THE RIGHT SKILLS
“HEART AND SOUL”
AS WELL AS
“COMMON SENSE AND BUSINESS”
• ADDED VALUE TO REPLACE DISCOUNTS: Offer daily, complimentary enhancements to encourage retail purchases which have been very successful in retail percentage to treatment revenue. • MARKETING OPPORTUNITIES - INTERNAL/EXTERNAL: It is very important to partner with local charities and do after hours events that will keep the community talking about your spa. Social Media is certainly the way to go if there are no restrictions for promoting your brand.
DIANA F. MESTRE, FOUNDER & PRESIDENT, MESTRE & MESTRE SPA CONSULTING POLANCO, MEXICO
• PRODUCTIVITY ANALYSIS: We monitor our treatment providers productivity with retail sales percentage to treatment revenue weekly then we discuss challenges and opportunities to improve. We have quarterly vendor training sessions in addition to trunk shows as often as we can get them (this supports retail sales as well as on-going training during free-time of spa employees).
• EVALUATE THE PROFILE OF THE TARGET MARKET OF THE GUESTS THAT VISIT THE SPA in order to know what strategies are necessary to implement social media and on-line reservations strategies: – On-line reservations verses direct spa reservations – The impact of social media interaction with the spa
• CHECKBOOK: Monthly checkbooks are in place to keep costs under control. If the resort misses forecast then our checkbook purchase reflects a decrease in spending unless spa forecast stays on target.
• SOCIAL MEDIA is now playing a very important role and can generate a more permanent connection with existing and potential clients.
• DAILY TRACKING LOG: We measure revenues daily and set weekend goals by looking at history and challenging our teams weekly by knowing the goals.
• BOOK ON-LINE from smart phones and personal computers. • DEVELOP BETTER WEB-PAGES with virtual tours that explain the Spa Experience.
• RATIO ANALYSIS – THE IMPACT OF DISCOUNTS: We know the impact that discounts can have on the bottom line of a spa, so it is better to add value to your services rather than offering a discount. • PAYROLL VARIANCE REPORT: Payroll is obviously always the challenge in making sure your fixed costs don’t eat up your profit line.Your providers are revenue producers, and you never want to skimp there. You can’t skimp on fixed payroll, but you have to be in control and know where and when you can afford to take some risks.
• MAINTAIN A PERMANENT CONNECTION with the existing guest with a maintenance blog, spa club, spa memberships that offer various incentives to members or associates. For resort spas, you can offer maintenance programs that can be monitored remotely. For local community, provide incentives to day spa guests and/or members to come once a month. • MEASURE MARKETING PERFORMANCE ESPECIALLY IN THESE AREAS: – Social media participation and generated income. – Spa club, blog or membership sign-ups. – Web page, on-line reservations.
J U D I T H L. S I N G E R , E D .D., ISHC, P R E S I D E N T & C O -O W N E R H E A LT H F I T N E S S D Y N A M I C S , I N C . (HFD S P A ): Judith L.Singer,Ed.D.,ISHC,is the President & Co-Owner of Pompano Beach,Florida-based Health Fitness Dynamics,Inc.(HFD Spa) (www.hfdspa.com) an internationally recognized and pioneering spa consulting company that specializes in planning, marketing and operational advisory services for spas within fine hotels,resorts,day spas and mixed-use developments.HFD is dedicated to helping spas be marketable and profitable business ventures. HFD has developed a highly detailed, turn-key spa development program from concept to opening. HFD has also created a unique,comprehensive business coaching program and businessmanagement tools to help spa directors, directors of finance, general managers and asset managers to collect, measure, understand and monitor financial and marketing data so spas can make strategic decisions that will improve their potential to be viable, successful business ventures. Since its inception in 1983, HFD has been the consulting firm to over US$750 million of completed spa projects. A partial list of clients includes: The Allison, Banyan Tree Mayakoba, Mount Washington Resort, The Umstead Hotel and Spa, Rosewood Mayakoba, Canyon Ranch in the Berkshires, Little Dix Bay, Four Seasons Hulalai, Miraval, Malliouhana, Cranwell, Pinehurst, The Homestead, The Greenbrier, Bacara, Silverado and the Delano. Dr. Singer is the past chairperson International Society of Hospitality Consultants (www.ISHC.com) and was on the ISPA Committee for the inaugural edition Uniform System of Financial Reporting for Spas. Dr. Singer can be contacted at 954 -942-0049 or email@example.com
B E N C A M P S E Y , MBA, CHAE THE UMSTEAD HOTEL AND SPA
This article was co-authored by Ben Campsey, CPA, MBA, CHAE, Director of Finance at The Umstead Hotel and Spa.Mr.Campsey is the Director of Finance for Cary North Carolinaâ€™s Five Star,Five Diamond,Umstead Hotel and Spa. He joined the opening team at The Umstead Hotel and Spa after nearly ten successful years with Canyon Ranch Health Resorts.While at Canyon Ranch, he recognized the void that existed in the spa industry related to effective financial management strategies. Often considered a loss leader, Mr. Campsey viewed the spa is a profit center,and one which had been neglected from an analysis standpoint.During his tenor at Canyon Ranch, Mr. Campsey successfully designed and implemented tools that measured profitability, demand and resource management that resulted in immediate financial improvement. After nearly ten successful years in varying capacities with Canyon Ranch Health Resorts, Mr. Campsey elected to join the opening team at The Umstead Hotel and Spa in 2006. Innovative in his approach t o spa financial management, Mr. Campsey has long been a proponent of establishing and measuring a common set of benchmarks in the spa industry. He has assisted HFD with developing tools and software which can be used to target areas where spas can become more profitable. It is with these benchmarks and metrics that spas can evaluate the financial success of their operational strategies. Mr. Campsey has experience in the development, opening and operating phases of luxury resorts and hotels. He understands the spa's contribution to a lodging property and knows how to help maximize the spa's potential. Mr. Campsey may be contacted at 919-447-4311 or firstname.lastname@example.org.
CONCLUSION We hope this article is a "call for action" for more business training for spa directors. Investors, owners, general managers, directors of finance and asset managers need to dedicate more resources to help their spa directors understand and put into practice all the financial business skills that are needed for the spa to be a profitable business venture. The lodging and spa industries as well as educational institutions and consulting companies need to create the business management tools to better educate and help spa directors to be better business managers. Until this happens, spas will continue to be "lazy assets." As more spas are built and as more investors/owners/operators/asset managers realistically raise their expectations and become adamant that the spa be a profitable business, there will be increasingly need to find competent spa directors and executive spa directors for the hotel chains. Right now, spa directors are primarily hired based on appearance, passion and/or experience as a spa service provider (massage therapist, aesthetician, cosmetologist, fitness instructor), front desk/reception/reservations team member or hospitality-trained employee who wants to ascend to the spa director position. While these people may come with good "spa experience," they typically do not have "spa business experience." As evidenced by HFD's 30 years of spa consulting experience and expertise as well as SRI's extensive research study, there is a definite shortage of business-educated spa directors, and the prognosis for the future is not very optimistic in terms of seeing this situation improve. If you want your spa to make money (and why wouldn't you?), you need to invest money, time and resources to help your spa director gain the skills necessary to manage your spa venture as a business. There are proven, cost-effective financial and coaching programs available, but too many leaders in the spa and hospitality industries are either not aware of them or are non-believers in the spa's ability to be a profitable business venture. Why is it so difficult and why is it taking so long for the people at the top to believe in the spa's potential? Why aren't they making the commitment for the spa to be profitable? Why would they invest millions into the "hard" resources (the building, FF&E, etc.) but not into the "soft" (education/training/coaching) resources? It's been 30 years since HFD identified the lack of business-training/education as a major challenge/problem. Unfortunately, and shockingly, we have not seen the progress that one would expect. There is no valid reason to wait any longer.We have seen the lackluster results of doing nothing.Why not make the commitment to provide business management training and reap the benefits? The time is "now" for the spa and hospitality leaders to raise their expectations and allocate the resources necessary for success...if you expect it and invest it, it will happen. Reprinted with permission from HOTEL BUSINESS REVIEW/HOTEL EXECUTIVE July 2012
ÂŠ SPA MANAGEMENT JOURNAL â€˘ OCTOBER 2012 â€˘
ÉMINENCE HOLIDAY GIFT SETS
MIRAVAL SPA DESIGN NOMINATED FOR AWARD Clodagh Design has been selected from among nearly 200 entries as a finalist in the Spa categories of the 2012 Gold Key Awards for Excellence in Hospitality Design, for Miraval Life in Balance Spa with Clarins. Presented by the International Hotel, Motel + Restaurant Show® (IHMRS) and sponsored by Hospitality Style and HOTELS magazines, the Gold Key Awards represent the most innovative hospitality properties constructed or renovated within the past 18 months. Located in the Santa Catalina mountains bordering the Sonoran desert between Tucson and Phoenix, Arizona, Miraval began a multi-million-dollar makeover when Steve Case visited and acquired the resort for his Washington-based hospitality company Revolution, LLC. The new spa is a joint venture operated by French skincare firm Clarins The spa building now has a private suite that comes with a soaking pool and shower on the desert-view patio. Gardens terrace to swimming pools and tent-like treatment cabanas. The skincare department features treatments developed for the desert by Clarins. Also featured: Red Flower, and EmerginC. And for stress relief, Miraval’s unique “Spirit Flight” based on Native American rituals combines acupuncture and massage. Gold Key Awards Breakfast ceremony will be held on Monday, November 12, 2012, from 7:30 to 9:30am, where finalists will be recognized, Grand Prize winners will be revealed, and the Designer of the Year Award will be honored. The ceremony will be held at the Mandarin Oriental New York, 60 Columbus Circle, New York City.
Giving the gift of beautiful skin this holiday season is easy with Éminence Organic Skin Care. Introducing two new, limited edition, travel-perfect holiday gift sets of active organic skin care for the face and body. The Wild Plum Berry Gift Set includes a cleanser and moisturizer for the face that combines juicy blueberries, grapes, black currants, wild plums and more to nourish and revitalize the skin. The Vanilla Almond Gift Set includes a body lotion and hand and cuticle cream that combine rich organic ingredients such as shea butter, coconut oil, sweet almond oil and vanilla for a sweet sensation. All packaged in travel-sized containers inside beautiful gift boxes with a velvet touch. Wild Plum Berry Gift Set Wild Berry Cleanser 2 oz – Hydrating, light cleansing milk with naturally exfoliating AHA Wild Plum Whip Moisturizer 1 oz – Smoothing and hydrating facial moisturizer Vanilla Almond Gift Set Vanilla Almond Shimmer Body Lotion 2 oz – Vitamin-rich moisturizer with a subtle hint of shimmer Vanilla Almond Hand & Cuticle Cream 1 oz – Rich hydrator with natural moisturizers Plus, each gift set includes an exclusive entry code for the Éminence Organic Skin Care’s Annual Holiday Contest! This year, the grand prize includes a trip for two to the stunning Waldorf Astoria and Golden Door Spa in Park City, Utah. Enjoy luxurious accommodations, spa treatments, private Pilates sessions, gourmet dinners and more! Plus, six additional lucky winners will be drawn for Éminence treatments and products. Contest closes January 31, 2013.
Tickets to the Gold Key Awards Breakfast can be purchased at a cost of $75 each through IHMRS attendee registration, at www.ihmrs.com. Show admission is FREE of charge with a Gold Key ticket purchase.
For information, please visit our web site www.eminenceorganics.com or call 888-747-6342
NEW CREDIT CARD RULES - BE AWARE - FROM MIKAL
VITELLE DERMATOLOGY LABS INC EXFOLIATE, HYDRATE AND RENEW WITH PUMPKIN Looking for something new for your fall treatment menu? Try our new Pumpkin Harvest Facial - bursting with pumpkin derived enzymes, nutrients and oils! This superb treatment is ideal for those looking to revitalize dry skin following dry summer months. For a limited time we are offering a special professional kit at a discounted promotional price which includes 4 pumpkin derived products that can be used in conjunction with your existing professional skincare products. The treatment package contains our Vitamin A Pumpkin Cleanse (18oz), Glyco Lactic Pro Pumpkin Peel (18oz), new Pumpkin Peptide Masque (18oz) and SMS Antiwrinkle Pomegranate Serum (18oz). As well our new professional protocol is included with each set sold.
DO YOU KNOW THE LATEST CREDIT CARD RULES? CREDIT CARD RULES HAVE CHANGED SINCE MAY OF 2011. DO YOU KNOW THE NEW RULES? Two BIG changes have happened in the last 12 months with regards to credit card charges and credit card processing. Failure to comply with the rules can mean audits and lawsuits. First do you use the credit card withholding option in your software to deduct the credit card processing fees from tips? It seems like a good idea BUT you must be in compliance based on the acceptable percentage you can deduct for tip processing charges. Second does your staff report all tips for taxes from credit card transactions and at least an acceptable amount from cash and check sales to avoid scrutiny? Credit cards are easy to audit and tips reporting is critical. Do you have the tip allocation in place in your systems and have the reporting available? Third are you familiar with the new law allowing credit card fees to be passed on to the consumer at the time of the sales transaction? New laws and rules are allowing this in some jurisdictions. Do you qualify?
For more information: 1.877.902.2332 toll free 1.604.279.5519 fax email@example.com
All these ideas and more can help you avoid problems, save money, and keep your business on track. For more information visit www.mikal.com
52 SPA MANAGEMENT • OCTOBER 2012
New for 2012, Two Limited Edition Organic Skin Care Gift Sets for the Face and Body!
53 OCTOBER 2012 • SPA MANAGEMENT