7 Spa & Wellness Business Models for Hospitality
Spa and wellness facilities and services have always been an indispensable component of 4-5 star or luxury hotels and resorts. Traditionally, property owners and managers may choose to run the spa department by themselves (self-managed), hire a third-party spa operator to do it (management service), or lease out the space to a spa operator (lease).
However, with the knowledge that existing spa models are not necessarily working, and the rapidly changing spa & wellness landscape post-COVID, there are opportunities and scopes for innovation.
The Global Spa & Wellness Monitor reports that “businesses are innovating to serve an expanding base of wellness consumers. As more consumers adopt wellness as part of their lifestyles, they create new demand for multiple price points, increased convenience, and accessibility. This has given rise to new business models.”
Below, Luminary Wellness explores 7 spa & wellness business models within hotels and resorts, and the challenges and benefits of each model.
In this model, the spa is self-managed by the property operator. The spa manager operates the spa and wellness services and reports directly to the general manager. The benefit of this model is that the property holds full control over the operations, finances, and ability to adapt to the resort.
The challenge of this model relates to the general manager’s personal knowledge/experience/focus on spa and wellness to drive the strategies, as well as the personal expertise of the spa manager, which may lead to inconsistency in the products and services with any leadership changes. Development expertise needs may be covered by spa consultants, but the value of the investment may be lost if it is not integrated into a cohesive spa & wellness vision and, once implemented, if it is not applied consistently.
Generally speaking, the spa & wellness services that are self-managed tend not to be driven as strongly as a key profit-centre, but rather as a value-added service to the overall guest experience of the property.
2. Self-Managed with Branded Products and/or Programmes
In this case, the spa is also self-managed by the property, with the spa manager reporting directly to the general manager. While the spa manager oversees the development and delivery of services, there is a section of the menu that is branded (either by well-recognized products, treatments, programmes, or retreat services).
This elevates the self-managed service by providing brand recognition and wellness authenticity with a specialist-designed programme. Generally, this inclusion would be supported by protocols, products, signature services, and specific training required. However, if the spa quality is not maintained by the in-house team, the branded partner may pull out, which would impact the spa's reputation negatively.
3. Self-Managed with Quality Assurance Support
As above, the spa is also self-managed by the property, with the Spa Manager reporting directly to the General Manager. By contracting a spa and wellness consultant to provide a Quality Assurance support service with a quarterly audit, the leadership receives a report from specialised spa and wellness providers that can be used as a tool to ensure that the quality of the spa is maintained and where to focus development or improvements and includes refresher therapy training to cover the skill gaps identified in the audit.
This approach gives confidence to the owner and management that the spa is ‘on-track’ with international spa standards. This also helps to alleviate some of the quality transitions between different Spa Managers by having one audit standard as a consistent guideline. The resort could request additional consulting to support innovation and development annually based on the results of the previous year and changing guest demands to stay fresh in the market.
4. Self-Managed with Licensed Brand or Franchise
From the self-managed models, this is the strongest option, which provides the property with a high degree of autonomy to manage the business while receiving strong support to deliver a quality branded spa and wellness experience and receive ongoing updates. When the brand is developed as a Franchise/Licensed brand, it will continue to innovate to maintain a strong spa and wellness position in the market.
Licensing involves the brand owner (licensor) granting the property owner (licensee) permission to use their brand name, products, and services in exchange for a fee or royalty. The licensee is responsible for setting up and operating the spa and must follow the guidelines and standards set by the licensor. The licensor may also provide training, marketing support, and ongoing assistance to ensure the success of the licensed spa.
Franchising, on the other hand, involves a more comprehensive relationship between the brand owner (the franchisor) and you (the franchisee). The franchisor provides a complete business model, including branding, products, services, marketing, and operational support. The franchisee pays an initial fee and ongoing royalty to the franchisor in exchange for the right to use the franchisor’s business model and brand name. The franchisor also provides training, ongoing support, and assistance to ensure the success of the franchisee’s spa.
In both cases, the brand owner (i.e., the licensor or franchisor) retains control over the brand and the quality of the products and services offered, with a higher level of control in the licensing vs. franchising model. The licensee or franchisee benefits from the established brand recognition and support provided by the brand owner.
5. Management Service - White Label with Own Brand
In this model, the spa is fully operated by a third-party management company, with the Spa Manager reporting directly to the management company and not to the resort’s general manager. All investment and operational costs are covered by the owner, and all labour contracts are signed with the owner, similar to a typical hotel management model. In this scenario, the Spa Manager is guided by the management head office with specialist expertise in spa and wellness, including strategy, finance, sales and marketing, human resources with recruitment and training, and operational quality assurance.
The management fee structure may vary - usually with a fixed component and a variable component based on the revenue and profit performance of the spa. The leadership drive in this model is generally stronger as it is incentivized by performance, and full responsibility for the quality of service also lies with the spa operator and includes a long-term vision to develop the business.
6. Management Service - Licensed Brand
In this case, the spa is also fully operated by the management company, with the Spa Manager reporting directly to the management company. The investment and operational costs are covered by the owner. The services, benefits, and fees remain similar to the above option, with the exception of additional fees for licensing or using the Partner’s Brand name.
This option should yield a variety of benefits, including brand recognition, the potential to bring in customers, and the management company's drive for the business as they need to deliver the promised experience.
7. Lease Agreement
This route is usually explored when both the owner and management have no interest in overseeing the spa and wellness services in any way. The benefits mean that the owner does not need to invest at all in building the spa and wellness business.
The spa operator leases the space and operates fully independently. However, as the space is leased out, there is limited to no control over the fit-out, quality of service, and impact on your property. Also, as the operator is investing, there is an expectation for a long-term commitment.
It is recommended that this be explored with a carefully selected brand for alignment with the market, service expectations, and brand experience.
Comparison of the 7 Spa & Wellness business models
Note: 0 represents the lowest ratio and 5 represents highest ratio. These are guidelines for understanding only and may vary in different cases.
To explore the options most suited to your business needs and budget, get in touch with us for an initial consultation, and discuss how we can help elevate your wellness offerings.