You can use tea tree oil but it has to be diluted..1-1%, I melted down a few table spoons of coconut oil and about 10 drops of tea tree oil for my dog's hot spots. She is fine. I clipped the hair around the spots, cleaned with witch hazel then applied the salve I made. She seemed so relieved.
Tea Tree Oil
My dog would get a hot spot(licking & biting on a spot) on her paws every summer. The Vet thought it was an allergy & gave us some ointment to apply. We also gave her Benadryl. Well after half a tube of ointment was applied over the course of a week we saw no results. She still had no fur & the skin was red & raw looking. We had been using Tea Tree Oil on ourselves for various cuts, scrapes & insect bites & I thought that it might help my dog. We could see that she was miserable & constantly at her paw. I applied 1 drop to her affected area & rubbed it in gently. At first she wanted to lick her paw, but I stopped her. It is not safe for humans to ingest the oil & I won't give my dog anything I can't eat myself. Well, in just a few minutes my dog fell asleep! Remarkable. When she woke up, she didn't even look at her paw. In a weeks time the skin was healed & I could see her fur starting to poke up through the skin. We continued to apply the oil once a day until the fur was again covering her paw.
From then on when we would see her at her paw or some other spot we applied the oil & told the Vet to stuff the $35.00 tube of ointment.