Kids & Teens at Spas...Supply or Demand?
by Susie Ellis
SpaFinder Insider

This article, "Spas Go All Out To Give Kids the Treatment" by Andrea Petersen and Miriam Foster was in the Wall Street Journal yesterday. It's about the trend of more kids and teens going to spas for treatments. I have two comments. Both relate to this paragraph:

"Spas say they are responding to increasing demand among parents, especially from moms who themselves enjoy spa pampering and want to share the experience with their daughters. Spas also clearly see an opportunity with the kiddie market: Hooking kids on pricey pedicures and facials when they are young can lead to decades of repeat business. Tapping these new markets is particular crucial these days, as the spa industry is seeing revenue slip: Revenue in the U.S. spa industry fell to $9.4 billion in 2006, from $9.7 billion in 2005, according to the International SPA Association, an industry trade group."

1. Often, it seems, the WSJ has a bit of a "spas are adding x-y-z to their program because they need to increase revenue" drum beat. So many of their articles have this premise. I remember one article a while back about spas adding ice cream to their menus (Canyon Ranch for example). The inference was that this was done to attract more business. I am sure that Canyon Ranch did NOT add mini-sundaes to their menu to bring in more business....rather, they are modeling how a small portion of a healthy dessert (their "hot fudge" is fruitbased and delicious) can be incorporated into a life enhancement program.

This article about kids and teens at spas has a similar bent. The authors theorize that this is a trend pushed by spas to bring in more money. I disagree and so would almost anyone else in our industry. The increase in this trend is clearly due to demand - from teens, kids and their parents. I know this because the number one consumer email question we have gotten here at SpaFinder this past year is "Where can I go where my 12-, 13-, 14-year-old, etc. can also get spa treatments?" It doesn't really surprise me because this younger generation has grown up seeing their parents go to spas (unlike baby boomers whose parents were not spa-goers). Also it really is a good solution for busy moms (and increasingly dads too) to spend time with young kids.

2. My second comment has to do with the unfortunate perception that spa industry revenue is slipping. This is generally a result of last year's ISPA report which compared some revenue numbers from 2005 to 2006. I have written about this before in my blog so won't belabor the point again here, except to say that it is important for everyone to remember that 80 percent of the spas in that ISPA survey were day spas and that the slippage mentioned does not apply to resort spas, hotel spas, medical spas, or almost any other category of spas. And if ISPA's definition of what counts as a day spa were to include all the many new business models and facilities which have opened and cater to people who are having massages and facials and other spa-services, the day spa sector would be showing revenue growth as well.

We are a young industry. We should expect that it will take more time for writers to understand the various nuances of the spa industry. And we need to work together to help them. I do however see progress!! Most reporters I talk with these days know the difference between destination spas and resort/hotel spas. That is a huge step forward!

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Spa Industry Brain Dump
by Susie Ellis

I had someone in my office yesterday who is a big-time investor (billions of dollars in a fund). He wants to learn about the spa industry as quickly as possible. Someone told him he should begin by getting in touch with me - I am flattered.

Sitting here among my bookcases which house my very extensive library of spa books and magazines from the past 30 years, and my file cabinets which contain copies of spa industry research from around the world that I have archived for as long as there has been spa industry research, I thought to myself....where to begin?

It appears as if he wants to be brought up-to-speed on our industry within about two weeks. Yikes. Tall order.

Since we had only about 30 minutes of time together, I figured the best thing I could do was point out some good resources and let him take it from there. I guess these investor-types are quick studies (hopefully).

Fortunately at that very moment I had three resources on my desk which I thought would be the best place to begin. SpaFinder's Global Spa Directory, often referred to as the "the Bible of Spas" (not my words, but others) which is always a good overview, and the following new publications:

1. The hot-off-the-press SRI report on the The Global Spa Economy 2007.

2. A new book, Understanding the Global Spa Industry, edited by Marc Cohen & Gerry Bodeker.

Lucky guy....I wish those resources had been available when I began my career a few decades ago.

While the SRI report might be a tad pricey for an individual ($1495), it is a solid investment for companies or anyone who will be entering the spa arena. It's certainly a smart move for someone deciding where to put significant investment money.

The second resource is affordable (although not cheap) but wow....what a valuable read. This 450+ page global spa industry book is actually a spa management text with 25 chapters. Each chapter was written by a different spa industry expert which is why I think it is so interesting. You don't just get one person's viewpoint, you get 25 different frames of reference. That's important because in my opinion our industry is too new and too global to settle for one author's account.

Now just for full disclosure, the reason the book was on my desk (it doesn't come out until July) is because I authored one chapter (the one on spa trends) and this was an advance copy. Lest you think I am "selling" the book on my blog, I should add that none of the authors got paid to write our chapter and none of us (except maybe Marc and Gerry) will make any money from sales. Like so many things in a young industry....it was a labor of love. My guess is that it will turn out to be just that for Marc and Gerry as well since, let's face it, outside of our industry it won't likely make the New York Times Best Seller List.

What I like most about the book is that the authors do not agree on everything. In fact, it's obvious that different people see things differently. That is reality for the current global spa industry and that is where investors can seize opportunity.

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Global Spa Summit 2008: Spa Industry's Key Questions Answered
by Susie Ellis

Want to know the #1 problem facing the global spa industry today? We know the answer - thanks to an instant audience response system technology which was used at the Global Spa Summit last month here in New York.

Here is a visual example of a keypad which was given to each delegate at the beginning of the Summit. It was used multiple times throughout the Summit to poll delegates. After seeing a question on the front screen, delegates punched in their votes and then the aggregated answers were displayed. More than 200 top spa industry professionals from 29 different countries around the world were in attendance at the Summit. Their answers are worth noting. Here is an example:

"What do you consider to be the #1 problem facing the global spa industry today?"

The answers appeared a few seconds later and we were even able to compare them with the answers given the previous year at the 2007 Summit. That makes for an interesting side-by-side comparison. Conclusions:

1. The industry's labor shortage was the number #1 problem last year and is the #1 problem again this year. And it appears to be getting worse.

2. The issue of benchmarking and need for best practices which were major concerns in 2007 are still concerns - however their severity seems to have lessened.

3. Sustainability and environmental issues continue to round out the top three.

4. A major change from last year to this year is a significantly greater concern about low margins in the industry.

Viewing collective answers to some very important questions was a good way to start the Summit. I will share other Q & A later to give you a real "pulse" of the industry.

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Global Spa Summit 2008: Spa Economy hits $255 Billion
by Susie Ellis, SpaFinder

Whew…Global Spa Summit 2008 just wrapped and what an amazing event. I learned so much and had such fun. It was wonderful to see so many of my colleagues – there were 230 participants representing 29 different countries from around the world. Highlights included:

• Presentation of the First Ever Global Spa Economy Report
• Keynote address by Ian Schrager (inspirational)

• Regional Briefings from five panels: The Spa Industry in Asia, Europe, North America, Latin America and the newer markets of Russia and South Africa
• A delegation of spa management students from Cornell, The Lausanne Hotel School and UCIrvine.
• Keynote address by Dr. Richard Carmona (he received a standing ovation)
• 
• And some interesting breakout sessions such as “The Soulful Spa,” “Deal Makers Give Advice,” and “Investor Insights.”

There was also a bit of controversy which I will share with you as well. For now, have a look at the Summit agenda to give you a sense of the rich content of this event.
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A Helpful Explanation of the 2007 ISPA Spa Industry Study in Regards to "Male Visits on Average" and the "Number of Men going to Spas"
by Susie Ellis

Received this email from Debra Locker at ISPA today. She helped clarify the question I had in my recent blog about what "male visits on average" meant in the recently released ISPA study and how that compares to the percentage of men going to spas. She wrote such a good explanation - with a helpful example - that I thought it would be best for me to share her response with you rather than try and put it into my own words.

In my mind....the additional thing I have now learned from looking at these two different numbers is that men do not use a spa as often as women. (which intuitively makes sense) And there is probably some way to figure out what that ratio is...however I will leave that up to the researchers to figure out!

Thanks Debra.
Susie

Here is the communication:


Hello Susie – we hope you are enjoying a lovely holiday season!

Thanks for your comprehensive coverage of ISPA’s 2007 Spa Industry Study on your blog. We wanted to clarify one of the questions you raised from your posting on Nov. 23 regarding the number of male patrons and visits.

“Male visits on average” is not the same as the number of male spa-goers. ISPA measures both visits and number of male vs. female spa-goers as two different ways to look at genders and their behaviors.

-The ISPA 2007 Spa Industry Study asks industry professionals the percentage of visits received in their spa by male guests. The percentage of male visits reported in the ISPA 2007 Spa Industry Study do not equal people, though equals the number of visits male guests make to a spa.

-The ISPA 2006 Spa-goer Study, which is a survey of consumers, reported that 31% of U.S. spa-goers and 29% of Canadian spa-goers were male. These figures represent the actual number of people and not visits.

For a practical example, your husband Pete may visit a spa 10 times in a year and my husband Ron may visit twice. They’d have a combined 12 visits, but we would only count them as two males. Their combined visits (12) would be measured as a percentage in the ISPA 2007 Spa Industry Study and the actual number of men (2) would be counted in the ISPA 2006 Spa-goer Study.

I hope that helps clarify your question about the percentage of male spa-goers and their visits. Please don’t hesitate to contact me with additional questions.

Once again, thank you for your coverage of the 2007 Industry Study, as well as the recent ISPA Conference & Expo, on your blog. Best, Debra

Debra Locker Public Relations Director International SPA Association 2365 Harrodsburg Road, Suite A325 Lexington, KY 40504 P 1.859.226.4374 F 1.859.226.4445 debra.locker@ispastaff.com and http://www.experienceispa.com/
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My Analysis of some of the Recent 2007 ISPA Spa Industry Study: Learning about Day Spas, Resort/Hotel Spas, Medical Spas, etc.
by Susie Ellis

The one good thing about coming down with a cold on Thanksgiving is that you don’t eat as much and you get to catch up on your sleep – and some reading.

For me, that meant reading through the entire new “2007 Spa Industry Study – A profile of the spa industry in the United States & Canada” which I purchased at ISPA in Florida a few weeks ago.

First, let me say that I think there is a lot of good and valuable information in this 100 page report, and I think anyone in the spa business would find it worthwhile to purchase it. It is sure to spark at least one good idea worth the price of the research which is $250 for ISPA members. Although the non-member price isn’t on their website today, my guess is it will be $800 which is what they have charged for other studies. This makes it pretty much of a given that someone will join ISPA (cost around $600) and purchase the study at the same time.

I am going to share with you some of the notes I took going through the study as well as my comments about some of the numbers. At the end of this list I will give you some of my conclusions. I look forward to hearing from others about what they learned and how they interpreted the data in light of their industry knowledge.

80% of spas in this study are day spas.
This is key to keep in mind when reading through this study. Day spas represent such a high percentage of spas overall that while there is lots of great data here, we have to be careful not to infer that the aggregated results speak for the resort/hotel or medical spa industry. On the other hand in many sections data is broken out by spa type, making that information especially useful.

Total spa revenue for the year is down, demand is down (fewer people are going to spas), yet profits are up.
Interesting. Again, I have to remind myself that I need to consider this as a day spa phenomenon. One explanation given is that the new spas which are opening have the lower revenues and lower attendance. Also, that price increases at spas have allowed for greater profits. Qualitative studies verifying this might be helpful. Note to people thinking about opening a new day spa…..not a good time to do so.

We, as an industry, need to attract more people to spas.
Indeed, that is something all of us should rally around. Increasing consumer demand is vital. I would also add that in addition to attracting new people into the spa world, another important and valuable service would be to encourage people who are already going to spas to frequent them more often. Moving people from the periphery into the core (a la Hartman model) would be a huge help as would getting people who go to resort spas to go to day spas (and vice versa). Another option to consider for the future would be to broaden the definition of spa.

Profit margins for spas are averaging 17.4%.
That’s quite an increase since the last profit percentages from ISPA. It is good news and shows that spas are now better managed, more efficient, and more profitable. A glance at the profit figures for other segments once again shows how slanted the data is toward day spas:
Club spa profits 17%
Day spa profits 16%
Medical spa profits 28%
Resort spa profits 24%

Prices have risen substantially at spas and up until now consumers have been paying them.
I agree that this is something I have been seeing also – and frankly I have been surprised that price elasticity has lasted this long. I have noticed greater price elasticity in resort/hotel spas than in day spas. However, as mentioned in the study, raising prices further will likely lower demand.

Growth rates in the number of spas from 1999 – 2006 have averaged about 22% and were 9% in 2005 and 13% in 2006.
I seem to remember that in one of the pre 2005 years the growth rate was over 50%. That would have certainly helped lift the average to the 22% figure. Nevertheless, it still shows steady growth in the number of spas for quite a lengthy period of time.

In the last 7 ½ years the number of spas has tripled.
As we here at SpaFinder are often quoted as saying, there are now more spas in the U.S. than there are Starbucks worldwide. The ISPA numbers do remind us that there are many spas – especially day spas.

Male patrons account for 21% of visits on average.
I have some questions about this figure. I believe the last ISPA study showed that 29% of spa goers are men and our internal figures show that number at 30%. Is “male visits on average” the same as number of men spa goers in this study? It is a bit confusing to me. I can’t imagine that we have decreased in the number of men going to spas. Our figures show (and many resort/hotel colleagues have confirmed) that the figures are almost 60/40 women to men at resort/hotel spas in the U.S. Perhaps this male patron figure is mostly a day spa number.

The average revenue for a spa is $624,000 with the median being $250,000.
This is a good time to remember the difference between average and median (the middle of a distribution) from math class. We can see that the large difference in this study is a result of hotel/resort spas having much higher revenues than day spas thus bringing the average up while the mean stays low due to the huge number of day spas in the study. Interestingly, our recent SpaFinder Day Spa Report also showed that day spas either have small revenue (more than 50% of spas have revenue of less than $250,000 per year) or have revenue over $1 million. Very few were in the middle section.

New spas being built are smaller. In 2007 the average spa built was 3,800 square feet and the median was 2,100 square feet. Newer spas are not putting in as many hydrotherapy features.
This all makes good sense. If we are going to have so many spas, we might as well have them be smallish so that there is enough demand to go around. Also, as many of us have known for a long time, those hydrotherapy rooms are expensive and not such an easy sell.

About 2-3% of spas go out of business each year. 14% are no longer defining themselves as spas.
These are good numbers to know and, I believe, are new in that no one has asked this question in a study before. The 14% number is of particular interest to me. If these places are no longer considered spas by ISPA’s definition, I wonder what they are now. Entirely different businesses? Are they now hair salons? Nail salons? Specialty facilities which give only massage or only facials (which do not count in ISPA’s definition of spa)?

On average a spa carries 2.4 skin care lines. 65% of spas do not private label a skin care brand. 85% of day spas do not have their products available on their internet site.
These numbers do not surprise me and I believe show some areas where more money could be made.

There is a spa labor shortage with the most openings being for massage therapists (24,000) followed by aestheticians and nail technicians. There are 6,600 spa directors and manager positions open industry-wide.
We learned at the Global Spa Summit in May that the labor shortage in the spa industry is not just a U.S. phenomenon but something many countries are experiencing. These latest research numbers help substantiate just exactly how much of a shortage we have here in the U.S. In addition, the study also showed that resort/hotel spas have the greatest challenge when it comes to staff retention and that the most difficult positions to fill are those of nail technicians.

Canada’s spa industry is in a healthier position with the demand outpacing supply.
I am thinking that with the recent strengthening of the Canadian dollar to the U.S. dollar, this might be a great time to be a Canadian in the spa industry!

ISPA members are comprised of only 35% day spas and 54% resort/hotel spas.
This is a very important figure which likely explains why so many people who attend ISPA or are members of ISPA may think that the results of this study either are not an accurate picture of the story they are seeing, or that they are doing a great job in comparison. Fortunately, a close read of the entire report will help sort this all out however it is very important to read the entire study.

Here are my conclusions:
1. Increasing industry demand is important.
2. Discouraging more people from opening new day spas is probably a good idea.
3. Widening the definition of spa my serve our industry better instead of narrowing the definition.
4. While I like aggregating all of the spa industry figures together to get an industry revenue figure, the aggregation doesn’t work so well for other figures. Caution folks that the top line numbers slant toward day spas.
5. Be careful when using the term “maturity.” It’s a business cycle term that comes right before “decline” and “death.” While there may be truth to talking about the day spa segment maturing, it is not a word I would use in the same sentence as resort/hotel spas or medical spas – or for that matter the spa industry as a whole.
6. Supporting quality research is a good idea. Numbers do help us understand the story. Buy the ISPA study.

Creative Ideas to Re Energizer a Day Spa: Budget Massages, Express Massages, Yoga & Spa, Medical & Spa, etc.
by Susie Ellis

OK...one last blog about the recent research data and then on to more fun things...like meeting Chrisina Ong last night at a cocktail party at Donna Karan's....but first:

Let's take one last look at the S curve with emergent, growth, maturity, and decline phases for the spa industry. (Check previous blogs if you want to see the graphs.) Here is the key point - our spa industry as a whole is definitely not in a mature phase where there is a leveling off of the entire industry. In fact we are seeing a great deal of growth in many of the segments especially in the medical spa, spa lifestyle real estate, and in the resort/hotel sectors.

I do think that when you look at traditional stand-alone day spas we are beginning to see flattening and it is becoming harder for them to make profits. The huge increase in the numbers of day spas has saturated some markets and now many traditional day spas are facing large numbers of competitors. These competitors include other day spas, resort, and hotel spas which are open to day guests (almost all of them), medical spas, and some new players like the highly discounted "no-frills" establishments, fitness clubs adding better spas, etc.

Critical point.....day spas that are facing this reality need to think about ways to begin a new S curve to breathe new life into their businesses. Here are some possibilities:

1. Narrow your focus and specialize in something that has growth opportunity and less competition.
2. Expand your offerings to include a segment which is in the growth phase.
3. Partner with someone (inside or outside of the spa industry) who is in the growth phase.
4. Turn the business over by selling it or even giving it away to someone who has the resources, energy, and vision to grow it again in new ways.

Here are some ideas of industry aspects that are more likely to be in a growth phase, which if incorporated properly, might help jump-start a flattening day spa:

• Express Services


• Budget Massages


• Budget Facial Treatments


• Mobile Spa


• Baby Spa


• All Men


• Party Spas


• Ayurvedic Focus


• Tween Focus


• Mobile Services


• Fitness Services (Yoga, Core, Pilates, etc.)


• Luxury Level


• Squeaky Clean Facility


• Medical Spas (the greatest opportunity might be here)


• etc.

Think of businesses outside of the spa industry that have made some changes which started a new S curve and thus re-energized their businesses:

Dunkin' Donuts began emphasizing lattes instead of their donuts.

Airlines that were threatened by the new low-cost airlines slashed their prices and then got creative to keep their customers.

McDonalds added playgrounds.

Movie theaters began letting you order tickets online.

Travel agents threatened with competition from online discounters began improving their service and changed their fee model.

I am sure you can think of other examples...in fact let us know by clicking on "Comments" and sharing them with us. This is a good time for us to help each other out with business ideas as it helps our entire industry to have strong healthy profitable businesses out there.

The destination spa, day spa, resort spa, medical spa and spa lifestyle real estate categories. Where they fall on the S-Curve.
by Susie Ellis

OK, let’s talk about where we think the spa industry falls along the S-Curve. (see previous post for a graph) To start with, let’s look at some of the different spa segments individually. Remember this is somewhat subjective and as pointed out by Rob Millard, it becomes clearer in retrospect. Here is how I see it today from my vantage point:

Spa Lifestyle Real Estate -- Emergent Phase
Medical Spas -- Growth Phase
Resort Spas -- Growth Phase
Day Spas -- Growth/Maturity Phase
Destination Spas -- Maturity/Decline Phase

Tomorrow I will share with you some of the reasons why I think these phases apply and most importantly talk about how maturity can spawn a new S-Curve which brings with it new opportunities at an even higher and possibly even more profitable level!

Is the U.S. Spa Industry Emerging, Growing, Maturing or Declining? Let's Look at Day Spas, Resort Spas, Medical Spas, and more.
By Susie Ellis

The S-Curve was one concept I learned in graduate business school that has been a helpful tool since I was a student. There are lots of ways S-Curves have been explained and I think it is fun to spend a bit of time reading about them. I apply the S-Curve model to products, businesses, industries, even relationships.

The S-Curve model is particularly relevant as we discuss the spa industry today. Here is a graph from an article by Rob Millard that explains the four stages quite well: emergence, growth, maturity and decline.


If possible, take a moment to read the entire article. Tomorrow we can discuss where we think the spa industry falls on the S-curve. (Hint, it might be a good idea to segment our industry as day spas, resort spas, medical spas, spa lifestyle real estate, etc. may have different S-Curves.)
Let me know what you think - click on "Comments."

The Spa Industry is More than just Revenues from Spas as Defined by the International Spa Association (ISPA)
by
Susie Ellis

Box office revenues are not the entire movie industry.
Cruise ship revenues are not the entire cruise industry.
Spa revenues are not the entire spa industry.

I am at the Telluride Film Festival this weekend. In addition to visiting my twin sister, Katrine, who is working on a condominium project here in town, I am joining her for some of the Telluride Film Festival activities.

My mind is never too far away from my work in the spa world…and so it might not be such a surprise that I am continuing my thoughts regarding spa industry research figures. My experience here at the film festival gives me a chance to look at a different industry in which it is clear that while the entire movie industry might be viewed as a pie, box office receipts are only a piece of that pie.

Furthermore, the pie as well as the piece which is called box office receipts, has been redefined over the years. Doing a bit of internet research this morning (before attending my next film), I learned that while the movie industry used to look only at box office revenue, they later began adding revenue figures from new markets such as VHS and DVD rental and sell through, acknowledging that the entire home video, cable and pay per view aspects have all become part of the movie industry’s revenue figures.

Perhaps it is time for our spa industry to relook at what revenue figures we want to report as well as how we should present the entire spa industry “pie.” Do we really want to give the impression that our spa industry is flat (or declining) because revenue from spas as defined by ISPA was 9.4 billion in 2006 versus 9.7 billion in 2005 and that there were 16% fewer spa visits in 2006 versus 2005? Or is it time for us to recognize that while fewer people might be going to traditional spas the way ISPA defines them, there are more people having spa services because they are going to discount massage and aesthetic establishments, having spa services in their homes, purchasing spa products and supplies from sources other than spas, etc. Also, I think it would be beneficial if we began looking at our spa industry more broadly – beyond just the spa revenue figures – and include spa construction, capital improvements, equipment and supplies, marketing, real estate, real estate premiums, etc. It would likely paint a more robust picture.

Defining Spa Differently Causes Fluctuations in Revenue Numbers: ISPA Studies Show Re-Weighted Figures.

By Susie Ellis

As noted from my previous blog, the first issue I would like to address, which will help all of us understand data in our spa industry more clearly, is the need for everyone to be aware of the parameters and the definition of terms in any particular study. This is important so that information can be understood in its correct context. For example, in ISPA’s recent press release of several weeks ago which included preliminary numbers from their 2007 Spa Industry Study, it is imperative for us to understand their definition of spa and what they count as spa revenue. Understandably, their data will reflect their definitions.

As a result of studying ISPA’s data for many years now and talking with some of their leaders recently, it is my understanding that their definition of spa changed in 2005 – a year after they released their 2004 Spa Industry Study. This is why ISPA went back and “re-weighted” the results from their 2004 Spa Industry report.

Remember, their 2004 Spa Industry Study showed spa industry revenues at $11.2 billion for the year 2003. When they decided on a narrower definition of spa in 2005 and actually executed a census (counting every establishment rather than taking a sample), they announced re-weighted updates on all of their numbers. This lowered the revenue figure considerably – by about $ 4.2 billion or 60%. In other words, what was initially reported as an $11.2 billion revenue figure for spas in 2003 was later changed to $7 billion for 2003. It would have helped (and would still help) to understand the first definition of spa and their revised, second definition which altered these results so dramatically. It is this narrower definition of spa which was used in the 2007 report, reflecting the notion that revenue figures are much more conservative than they once were.

Although this adjustment was announced briefly at one of their conferences and there is a one sentence footnote on the U.S. Spa Industry Figures stats sheet released on November 6, 2006 (and I believe it might have been provided with renewal of membership – though I did not notice it), I do think that it would have helped for this to be communicated more clearly and more often. Additionally, since their 2004 Spa Industry Study is still being sold on their website (and from what I understand it does not include the re-weighted numbers), it is understandable that this has caused some confusion in the marketplace.

The bottom line is that ISPA’s definition of what counts as a spa is narrower now than it used to be and narrower than how other people might define what counts as a spa. As a result we can expect some differences in industry statistics from various sources.

Tomorrow…let’s talk about the difference between spa revenue and spa industry figures.

*And just a reminder: these discussions are important and accuracy is important. Please chime in if you have additional information which will help us all understand our industry more clearly. Hit the "comment" button below.

Evaluating Spa Research and Deciding What Data Speaks for Our Industry

By Susie Ellis

This is an important topic, one that I have decided to tackle in small bits rather than in one large blog post. As many people know, ISPA had their media event in New York about three weeks ago and gave some preliminary results from their two upcoming research reports – one regarding the domestic spa industry and the other their first global study. Some of the information given out at the media event (which I attended), along with some of the information posted on their website and mentioned in their recent press releases, stirred up questions and concerns – especially in regards to the issue of the decrease, or flattening, of total spa revenues when comparing 2006 with 2005.

I have gotten emails from industry colleagues with questions and have also read a few other blogs where the issue has, and still is, being discussed. Initially I had written a blog to explain my viewpoint and share additional spa research data from other sources including Spa Finder, but after posting, for just one day, I decided to take it down and speak with some of the people at ISPA first. I wanted to be certain that I had good understanding of the background of the situation. Therefore I emailed Jim Root, Chairman of ISPA and Stephanie Ashley, who is in charge of ISPA’s research to ask each of them if I might be able to speak with them by phone. Both were gracious and said yes. We then had our phone call on Tuesday which involved a few other ISPA staff members as well as Nikita Sarkar, Spa Finder’s research director. Together we addressed concerns and discrepancies - and I think all of us came away with greater understanding.

Beginning tomorrow I will address these issues one by one. I think I’ll start with the issue of what is counted as spa revenue.

Looking forward to having your input as well so please click on “comment” at the end of any of these blog posts to add your perspectives as well.

New York Spa Media Event: ISPA Presents their Latest Research - Caution Advised
By Susie Ellis

The International Spa Association (ISPA) presented some of their new research data during their annual New York press event last week. Highlights were included from their soon-to-be-released 2007 Spa Industry Study as well as some data from their inaugural research on Global Spa Consumers.

As always, I am grateful for the research that ISPA does. I believe that ISPA has made a significant contribution in many ways to the growth of the spa industry over the years. Their annual conference has always been a “must attend” for many in the industry and their early research numbers gave some shape to an industry that was still very young. Spa Finder is happy to be an ISPA member.

That being said, I do have some concerns with the recent spa industry data they presented last week, in particular, their conclusion that US spa revenues showed a negative growth rate of -3.4% from 2005 to 2006 (or a flattening if the margin of error is factored in). I mention this because as an industry, I feel we need to be concerned about a negative growth rate report from a resource that says they are the voice of the spa industry. The ripple affect through the consumer, investment, and spa communities could be quite negative for all of us.

My guess is that the numbers are more of a reflection of what is happening in the day spa segment and not so much about the rest of the robust industry. I look forward to the full report in November.

Earlier this week Peter and I were in the “audience” during a presentation given by two Cornell University students who are getting their Masters of Management in Hospitality (MMH). They had chosen the topic of revenue management in the spa industry and used the two of us as resources. The students' primary and secondary research showed that:

1) Very few spas are using revenue management as a tool
2) Doing so would likely increase their bottom line

We were impressed with their insights. Revenue management seems perfect for the spa industry.

But what exactly is it? I checked some definitions and liked this one from PROS:

“Revenue management is the application of science to maximize revenues and profits. Aspects can include forecasting demand, optimizing the allocation of inventory, providing dynamic packaging, and offering dynamic pricing.”

One of the most familiar examples is airlines raising ticket prices during the holidays, lowering them during the week, offering cheaper rates for advance bookings than for last-minute bookings, etc.

In the spa industry, revenue management will likely translate into lower prices for treatments during slower times (mornings and early in the week) and higher rates at peak periods (Saturdays). And that will just be the beginning, as product, hotel room, special service prices, etc. could also be adjusted to rise and fall according to demand. Value-add, packaging, and dynamic pricing will also be part of the mix.

Am I happy about this? Well, yes, if I like my massages on Monday morning.