Spa Business Model Series : #5 Rent The Space

Spa Business Model Series : #5 Rent The Space

Welcome to our fifth and final instalment in the Spa Business Model Series. So far, we’ve considered Self Managing your hotel spa and working with a Spa Management Company , partnering with a Product House and even getting more our of your Spa Consultant. This week, we’ll finish off with what is perhaps the simplest of all alternatives. Rent The Space. However, though it may seem simple enough, this option is not without some challenges too.

What then for the hotel manager who does not want to self-manage the spa, cannot agree on suitable terms with a management company, is not prepared to sign an agreement with a Product House and has not been able to find the right consultant? Simple. Rent the space to a local spa operator. Just like a normal rental or tenancy agreement.

Hotels are often reluctant to do this because they worry about whether or not their new spa tenant will take the same good care of their guests as the hotel itself would. Regardless of how it is branded and communicated, the hotel guest will still assume if the spa is within the hotel, that it is operated by the hotel.

Blame the Brand – not us

A big part of the ownership perception of the spa comes back to the strength of the spa brand. If the hotel has a McDonald’s restaurant in the lobby, guests would not assume that is managed by the hotel. If there was an issue with the food, guests would not complain to the hotel reception. They would attribute the blame to McDonalds. But the reality is that spa brands do not have that same level of brand recall or recognition with hotel guests. If they did, a simple rental model such as suggested here would be an easy choice.

Being the spa tenant in a hotel also has challenges for the operator, especially when it comes to rental terms for the facility. Hotels often expect to get higher-than-market rental rates because the hotels offer a captive audience. In the same way, rates in a shopping mall would be higher than in a free-standing street front location because they are providing a guaranteed footfall of customers.

Not all feet are created equal

On the surface, this makes sense, but it is not about how many feet pass my store. The important measure is how many of those feet belong to potential customers. If the footfall is 75% females, aged 45 to 65 and my store sells male clothing for the modern man, that does not help my business much. The same applies to a spa in the hotel. The perception that all hotel guests are potential spa guests is optimistic at best. Hotels wanting to attract a good spa tenant need to be realistic about the rental charges.

So if a better option cannot be found, renting the space to a spa operator, is not a bad solution. The key, as with any agreement, is to be clear on all terms, both financial and operational. Make sure the rent is realistic. Operating hours should be clearly defined, just as they are in a shopping mall. The service offering, pricing and marketing strategies are all areas where there should be collaboration, or at least discussion. But the ultimate decision on these matters should rest with the tenant. It is, after all, their business.

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