Watch those margins

A quick flick through the latest spa deals on Wahanda and Spa breaks shows that you can buy a spa day for just £25 including lunch! Sounds like a bargain to the customer but to the industry I have just one question. Who makes any money on this?  When I look at how it might be broken down, the sums just don’t seem to add up! – or they do and I get £0.18 profit!!

Which brings me onto margins. What is acceptable and how many spas really understand what their offer packages are costing them?  I’ve always worked to a base margin of 55% as I’ve calculated that anything under that isn’t worth it.  It’s too easy to become a busy fool in this industry.  Lots of offers, lots of customers but with little or no profit!  To ensure my clients get the best possible return I follow a simple check list which I thought might be useful to share.

  1. When discussing pricing talk about the net profit contribution not turnover.
  2. Don’t forget to deduct the VAT element before calculating your profit.
  3. Work out the true therapist costs taking into account their downtime, breaks etc.
  4. What are your operational costs for the venue?  Have you worked out the depreciation costs?  I would agree a % cost.
  5. What is the % product cost for each package/Treatment?
  6. How much is each towel ,robe and slippers costing you for each treatment?
  7. What guest services are you supplying?  If you are a hotel you will need to understand and negotiate your contribution back to the food and beverage department.
  8. Have you included reception /admin staff costs?
  9. When working with 3rd party websites have you taken into account the full costs involved?

Having a formula in place enables you to quickly calculate the profit margin on each package making for a more sustainable and successful business long term.

Good luck.

Jeremy Smith

Blue Spa & Leisure