Pricing your Spa Menu and the services you provide is not as complicated as it may first appear. When you know the basic cost components (Therapist, Products, Laundry, Utilities) you have the basis to start from.
In pricing our spa menu, the biggest cost will almost always be that of the therapist performing the treatment. Calculate the cost of the therapist’s hourly wage and multiply this by the number of hours the treatment requires. Example: A $20 hourly wage rate for a 90-minute Thai Massage, equates to a direct cost allocation for the treatment of $30 – or 1.5 times the hourly rate.
Additional to this (and depending on how you operate your business), you have to add hidden costs. Is the therapist is responsible for the set-up or turn-around procedures, preparing a welcome drink, performing a pre-treatment consultation or offering post-treatment retail recommendations? These tasks all take time, so must be included in the total cost allocation, even if performed by a Spa Attendant or other team member.
Then you have the employee on-costs such as Social Security contributions paid by the employer, staff meals, and accommodation (if provided). It is important to factor all these into your hourly staff cost calculations.
Usually, the cost of products (oils, lotions, creams) used in spa treatments is quite low even if the unit purchase price is expensive as the quantities used per treatment are small. The exception to this is products used in facial treatments as regardless of the small area of the face, guests expect high-performance skincare – and that means a more expensive product. Also, there are multiple products used for a facial. For the body, it is generally a single product used. These costs must all be considered when pricing your spa menu
Laundry & Linen
Laundry and linen can be a major cost component of a spa treatment. The massage bed can often be set with multiple pieces of linen including sheets, towels, face cradle cover and mattress protectors. Even before Covid-19 protocols demanded it, most of these items were laundered after each treatment. There is also the cost of washing linens used for showers or bath facilities, relaxation beds, and cloth slippers.
Electricity and water are the main utility costs when it comes to providing a spa treatment. The good news for many hotel spa operators is that these costs are often not attributed directly to their P&L. If you are a third-party spa operator, the hotel may decide to put a separate meter on the spa so that they can charge you for utilities based on your usage.
In the allocation of utilities if the pool, steam, sauna and jacuzzi are considered part of the spa, these facilities are generally the bulk of utility costs – and frequently non revenue generating despite their operating costs.
Price is Relative
Once you have a clear understanding of your costs, you now have the baseline for pricing your spa menu. Obviously, you need to ensure that your selling price is higher than your costs, but how much higher?
There is no definitive answer to this question, but there are some simple references to consider.
Hotel guests will compare the price of a spa treatment to the price of the hotel room. If they pay $200 for one night in the hotel, they might be willing to pay 50 – 60% of that for a one-hour massage, or up to 75% if the offering is truly unique.
Another gauge comparison is the price of a restaurant meal. If the restaurant charge is $40, you should be able to price a one hour massage at 100 – 200% above this price.
Other hotel activities such as a half-day excursion or an introductory diving lesson are also good reference points. Consciously or subconsciously hotel guests will make a comparison with these and a one hour massage with a one to one being the generally accepted pricing. Example: If an introductory dive is priced at $115, or a half-day excursion costs $100 that is the price the guest would pay for a one-hour treatment.
Value is in the eye of the perceiver
Value, just like cost is personal. Something that is valuable to me may not be valuable to you. If I as the consumer believe something has value, then it does. It does not matter how many people have different value perceptions, mine is the only one that matters – to me.
Complimentary use of the steam, jacuzzi and sauna. Additional Foot Ritual at no extra cost. Free skincare products with each treatment over $120. All of these are examples of a value-add, and some people will think they are great, while others will see little value there at all. Maybe we had better not think of this as value-add but rather as free.
The Discount Addiction
People get addicted to discounts, but do not get addicted to ‘free’. If you get a 10% discount at the spa today, you will expect at least the same discount next time. If you get a free gift today, you will not expect to get a free gift every time you return.
So do not discount, offer something for free. But do not kid yourself that you are offering something of real value to the guest, unless it is.
Note: If what you are offering costs you to provide it, then that cost must be factored into the pricing. If may be free to the guest, but somewhere someone has paid something for it.
The Price of Human Touch
It is also worth noting that when pricing your spa menu treatments, we often charge more when there is a fancy machine involved. Whether it is a highly technical facial machine or just a high-tech massage bed with special features to enhance the treatment, it will cost more if we use a machine. But ironically, what guests often value the most, certainly in the case of a massage, is the touch of the therapist. No doubt when it comes to results-driven facial treatments, the technology matters, but spas need to re-evaluate where they place the premium when it comes to pricing, and consider placing it on the human touch.
This post is an abridged version of “How to Price your Spa Menu – A Simple Guide” by Trent Munday first published Nov-2018