Due to the large variety of management contracts out there, choosing the right one for your spa can be a challenging task. In the following two post entries, we will explain the different types of contracts that are being used in the market. More importantly, we will try to provide you with a better understanding of which contract fits the needs of both hoteliers and spa owners.
Management contracts for spas and wellness centres
While some contracts are simple management contracts where the owner carries most of the risk, other are leasing contracts where the spa operator bares the majority of the risk. However, today many owners and operators are testing a risk-sharing model, where both parties “share” the risk.
The management assistance contract appears to be the most appropriate and lucrative solution. But, what is a management assistance contract? It is an option that allows the hotelier or the spa owner to keep full control over operations while receiving the support of spa management experts who create the conditions to make the spa financially viable. This type of contract, which usually lasts between 1.5 and 3 years, is usually shorter than the normal management contract whose duration is around 10 years. However, it is also longer than a standard consulting contract, which in the long-run tends to work out very expensive.
An ideal situation
The ideal situation for the spa or hotelier would be that of hiring a top level spa director who has extensive experience in business management as well as technical knowledge of treatments and marketing strategies. It is also imperative that the spa director possesses a global understanding of the importance and complexity of integrating the spa into the hotel’s operations.
However, this ideal model has a problem: Most of the profit and loss accounts of the spas cannot sustain the high salary of a spa director of this level. As a result of this, the hotelier has no choice but putting a therapist in charge of the daily management of the spa, which involves tasks such as team planning, placing orders, managing bookings and creating spa packages for the commercial activities of the hotel. What many hoteliers do not keep in mind is that a therapist knows how to give a treatment but not how to run a spa. Therapists are not usually administrative people, a task that may appear simple but that has an important effect on revenues generated.
The common trap: Product house companies & spa equipment suppliers offering complimentary consultancy services
An emerging trend is cosmetic brand companies or spa equipment suppliers offering consulting services at the operational level as a complimentary add-on service with the intention of selling their products or equipment. In many cases, however, the result is that the spa staff end up with a training limited to the sales and marketing training of the products provided by these companies and leaving out other important aspects of spa management such as yield management, customer service, and human capital management, among others.
Now that we have discussed the different types of management contracts, defined the management assistance contract, and talked about the ideal situation and the most common trap in the business, it is time to move to the second entry. In part 2, we will discuss how a management assistance contract can help you and which formula can be mutually beneficial for the hotelier or the owner as well as for the operator.