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Will Owning a Day Spa be Profitable?

f you dream of operating your own luxury day spa, now may be the perfect time to get started.

While running a successful day spa can be challenging, according to Lynne McNees, president of the International Spa Association, the spa industry has the bonus of being (nearly) recession proof.

The reason is simple: When times get tough, the need for stress relief increases.

For millions of people, this means visiting a spa to help them disconnect and recharge their batteries. In fact, during the height of the 2008 recession, the U.S. spa industry recorded more than 160 million visits, an increase of almost 16 percent from the previous year, with total revenues of $12.8 billion. By 2013, the number of annual spa visits had increased to 164 million, with total revenues of $14.7 billion.

What makes these numbers even more impressive is that the spa industry is mainly composed of thousands of individually owned spas. While there are a number of chain spas, none of them hold a dominant position in the industry.

How Much Does it Cost to Start a Day Spa?

Start-up costs for your spa may exceed $100,000. You will need to have significant start-up capital to pay for training, your lease, equipment, payroll, advertising, furniture, supplies, licenses, insurance and permits. Developing a detailed plan will significantly increase your chances of obtaining funding. Most new businesses won’t qualify for business loans. Instead, look into a U.S. Small Business Administration loan, a personal loan or an investor. Use sample spa business plans found online to help you develop a plan that identifies all of your expenses, potential income and potential obstacles.

Will Owning a Day Spa be profitable?

Profit margins vary tremendously; they depend on which business model you have. It’s different for resort spas, medical spas, and day spas. In resort spas, the spa normally has no major expenses. The hotel or resort operates the spa and, in most cases, it is not a standalone business model. Therefore, the spa does not pay rent, laundry, electricity, maintenance, etc. The main cost the resort spa has is product cost and human capital payroll. The reality is it’s easy to earn 40 percent in profit when you don’t have to pay for major operating expenses.

The other main differential between destination spas and day spas is spa marketing. With most resort spas and med-spas, clients are on location already, so all you have to do is motivate them to visit the spa. Stand-alone spas have a broader challenge. They have to be very creative in driving traffic into their spa and generally have larger marketing expenses. The day spa business model is the most challenging.

The biggest challenge facing day spa owners is compensation rate. This is the number one concern we hear about all the time. Most day spas are running 50 percent and higher compensation rates, leading to minimal or no profits.

 

 

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