A management fee keeps the spa's revenue, costs and upside with the hotel and pays the operator for running it. A revenue share or a lease moves most of the costs and risk to the operator, in return for a smaller, more predictable income for the hotel. The right choice depends on how much demand the spa has, how much control the hotel wants, and how much risk the owner is willing to carry.
This article is general information, not legal, tax or financial advice. Contract terms should be checked by your own advisers.
What are the main ways to contract a hotel spa operator?
Management fee. The spa stays on the hotel's books: spa revenue is the hotel's revenue, and payroll, products, laundry and marketing are the hotel's costs. The operator runs the department for a base fee on revenue plus an incentive on profit. DLA Piper's country guide describes a revenue-based base fee plus a profit-based incentive as the standard structure for hotel management agreements in the United Kingdom, and the usual one in the Netherlands (DLA Piper); spa agreements tend to follow the same shape.
Revenue share. The operator runs the spa as its own business inside the hotel and pays the hotel a percentage of top-line revenue. The operator carries the operating costs and keeps what is left. As spa operator and consultant Trent Munday puts it, the hotel receives "a percentage of the top line revenue of the spa, and nothing more", so the better the operator controls its expenses, the more it earns (Munday, December 2018).
Lease. The operator pays rent for the space and keeps all revenue and profit. HVS calls leasing "the most risk-averse operating model for owners": stable income and no operational duties, but no upside and little say in how the business is run (HVS, 2020).
Concession. A cousin of the lease: a specialist, often a product brand or salon operator, trades under its own name from the hotel and pays rent, a percentage of turnover, or both.
Hybrid. Any mix of the above: a base fee plus a share of profit above a hurdle, a revenue share with a minimum guarantee to the hotel, or a variable rent on top of a fixed base rent, which HVS calls "the most balanced structure in terms of risk and reward" for operator and owner (HVS, 2020).
Who keeps the revenue, who pays the costs, and who decides?
| Model | Revenue goes to | Costs paid by | Risk sits with | Hotel's control | Shape of the deal |
|---|---|---|---|---|---|
| In-house | Hotel | Hotel | Hotel | Full | No contract |
| Management fee | Hotel | Hotel | Hotel; operator's incentive at risk | High: budget, menu, pricing | Base fee + incentive; performance tests |
| Revenue share | Operator, remits a % | Operator (payroll, products); hotel keeps building and capex | Shared: cost risk with operator, demand risk with hotel | Medium: operator wants final say on menu and pricing | % of gross revenue, often a minimum guarantee |
| Lease | Operator | Operator | Operator | Low: landlord rights | Fixed or indexed rent; longer term; harder to end |
| Concession | Concessionaire | Concessionaire | Concessionaire | Low | Rent and/or % of turnover; concessionaire's brand |
| Hybrid | Depends on mix | Depends on mix | Shared | Negotiated | Base + variable, hurdles, guarantees |
Under a revenue share or lease the hotel still usually owns the pool, the plant room and the capital expenditure. Shared costs such as electricity, water, laundry and staff meals need an allocation method agreed in the contract, ideally metered or counted, or the monthly reconciliation turns into a running dispute (Munday, December 2018).
What fee levels and contract terms does the market use?
We found no published survey of spa-specific fee levels in the UK or the Netherlands. The benchmarks that exist are hotel-wide and mostly from outside Europe. HVS's 2024 analysis, written for the US market, reports base fees of 2 to 4 per cent of total operating revenue, with 3 per cent the most common, and incentive fees of 10 to 20 per cent of cash flow above an agreed threshold (HVS, 2024). Third-party operators, as opposed to brands, typically earn 4 to 6 per cent of total revenue (HVS, 2020), with initial terms of 5 to 10 years and more flexible exits (HVS, 2020; HVS, 2025).
Spa deals are priced differently because the base is so much smaller. Across 297 US hotels that ran their own spa in CBRE's 2023 and 2024 surveys, spa revenue averaged 3.4 per cent of total hotel revenue in 2024, and 4.2 per cent at luxury hotels (CBRE, 2025). A 3 per cent fee on a department that size would not cover an operator's time, which is why spa fees are negotiated as a percentage of spa revenue, at higher rates than hotel-wide fees. Treat any figure you are quoted as a negotiation, not a market rate. The drivers are:
- Scope. Treatment rooms only, or also pool, sauna and steam, memberships, retail and in-room treatments.
- Size and demand. A six-room spa with strong leisure demand can afford an incentive-heavy deal; a two-room spa in a business hotel cannot.
- Who employs the team. If the operator employs the therapists, its margin must cover payroll risk. In a 2018 HVS study of 51 US hotel spas, most expense ratios fell between 75 and 85 per cent of spa revenue, with labour the largest item (HVS, 2018).
- Term and exit. Shorter terms with termination rights are worth more to the owner and cost more in fee.
Which model fits which hotel?
A management fee suits hotels where the spa is part of the brand promise, revenue is meaningful, and the owner wants the upside and the monthly numbers. Our outsourced spa management page describes how we run a spa as a hotel department, with bookings on Trybe and a live partner dashboard for the hotel.
A revenue share suits hotels with a decent spa and uncertain demand, where the owner would rather take a predictable percentage than carry payroll through quiet months, and is comfortable giving the operator the commercial decisions.
A lease or concession suits owners who see the spa as space to let: small spas, hotels where wellness is not central to the brand, or owners who want no operational involvement, and accept less control and a longer commitment in return.
A hybrid suits most negotiations in the middle, so both sides share the upside and the downside.
One check first: if a brand runs your hotel under a management agreement, the owner usually needs an express right in that agreement to bring in a third-party spa operator; luxury operators often keep approval rights, sometimes at their sole discretion; and outsourced spa revenue is typically excluded from the figures the brand's fees and performance tests are calculated on, so agree the adjustments up front. That analysis is written for US agreements, but the same clauses are worth checking in any brand contract (Goodwin Procter, 2025).
How much does the hotel keep under each model? A worked example
Illustrative example, not a quote. Every figure is hypothetical and the percentages are chosen to make the arithmetic clear, not to represent COCON's fees or any market rate.
A London hotel spa with six treatment rooms and a pool takes £900,000 a year. Operating costs (payroll, products, laundry, software, marketing and an allocated share of utilities) are £720,000, an 80 per cent expense ratio within the range HVS found in US hotel spas. Departmental profit before any operator fee is £180,000.
| Management fee | Revenue share | Lease | |
|---|---|---|---|
| Hypothetical terms | 5% of revenue + 10% of profit after base fee | Hotel receives 12% of revenue | Fixed rent of £90,000 a year |
| Hotel's income from spa | £180,000 − £45,000 − £13,500 = £121,500 | £108,000 | £90,000 |
| Operator's income | £58,500 | £900,000 − £108,000 − £720,000 = £72,000 | £900,000 − £90,000 − £720,000 = £90,000 |
| Revenue falls 20%, costs fall only to £650,000 | Profit £70,000; fee £39,400; hotel keeps £30,600 | Hotel receives £86,400; operator loses £16,400 | Hotel receives £90,000; operator loses £20,000 |
In a good year the management fee gives the hotel the most. In a bad year the lease protects the hotel and the operator takes the loss. And the revenue-share percentage has to be modest, because a spa's costs are mostly people: at 25 per cent to the hotel, the operator here would lose £45,000 a year, and a deal that loses money for one side rarely produces a good spa.
What about the people and the law?
Whichever model you choose, the therapists are the spa. What follows is general information, not legal advice; take advice on your own facts.
Changing operator in the UK may trigger TUPE: where a service moves from in-house to a contractor, between contractors, or back in-house, and there is an organised grouping of employees doing that work, those employees generally transfer with their terms and conditions and continuity of employment intact (GOV.UK; Acas). A therapist's rights also depend on whether they are an employee, a worker or self-employed, and courts and tribunals make the final decision (GOV.UK).
In the Netherlands, the tax authority resumed enforcing the Wet DBA rules on false self-employment in 2025. For 2026 the "soft landing" is extended only in part: no default penalties, but additional assessments remain possible back to 1 January 2025 (Taxence, December 2025). Employing therapists, whether the hotel or the operator does it, sidesteps that question for those roles. Our workforce and staffing page explains how we staff spa teams in London and Amsterdam.
Frequently asked questions
What is the difference between a spa management fee and a revenue share? Under a management fee the hotel keeps revenue and costs and pays the operator to run the spa; under a revenue share the operator runs the spa at its own cost and pays the hotel a percentage of sales.
Which model gives the hotel the most control? A management fee, because the spa remains a hotel department and the hotel approves budget, menu and pricing.
Is a lease the safest option for an owner? It gives the most predictable income and the least operational risk, but you give up the upside and most of the control, and leases are harder to end.
Does TUPE apply when a hotel outsources its spa? Often, yes: moving a service to a contractor, or between contractors, can be a service provision change under TUPE, so take legal advice early and plan the handover with the team.
How long should a spa operator contract be? Third-party hotel operators typically sign 5 to 10 year initial terms; in our view a spa contract of 3 to 5 years with clear exit rights and review points is a reasonable starting point.
Not sure which model fits your spa?
Send us three numbers: rooms, treatment rooms and monthly spa revenue. We will tell you which model we would suggest and why, even if you do not hire us. Request a free spa review, or read how we work in London and Amsterdam.
Sources
- HVS, A New Approach to Hotel Management Fees, April 2024
- HVS, Weighing Up the Options: Franchise, Management Agreement, or Third-Party Operator?, May 2025
- HVS, Evolution of Hotel Management Agreements and Rise of Alternative Agreements, September 2020
- HVS, Performance Report: Spa Department 2018 (51 US hotel spas, 2017 to Q3 2018), November 2018
- CBRE Hotels Research (Mandelbaum and Grigg), The Role of Hotel Spa Departments (297 US hotels, 2023 and 2024 data), Hotel News Resource, August 2025
- DLA Piper, Hotel Management Agreements: Fees around the world, United Kingdom and Netherlands entries
- Goodwin Procter (McQuinn), Hotel Amenities: Outsourcing Management to Third Parties (US), Legal 500, September 2025
- Trent Munday, Spa Business Model Series: #2 Spa Management Company, LinkedIn, 26 December 2018
- GOV.UK, Business transfers, takeovers and TUPE and Employment status
- Acas, TUPE: advice for employers and employees
- Taxence, Gedeeltelijke verlenging zachte landing handhaving schijnzelfstandigheid, December 2025
