Total revenues in US spas have surpassed the pre-recession peak according to the latest figures from ISPA’s 2012 US Spa Industry Study. Colin McIlheney reports
By Colin McIlheney | Published in Spa Business Handbook 2013 issue 1
Day spas represent almost 80 per cent of all spas in the US / pressmaster / shutterstock.com
The 2012 US Spa Industry Study by the International Spa Association (ISPA) is based on more than 800 spa operators spanning all different categories – from day, club and hotel/resort spas to medical, destination and mineral spring spa facilities.
It provides a profile of the US spa industry throughout 2011 and also into the first half of 2012 and focuses on the industry’s performance as it kept pace with an economy still in gradual emergence from the recession, and as spas adapted to an increasingly competitive marketplace where cost-conscious consumers are shopping around.
The report gauged the extent to which the industry has stabilised and experienced growth. This was measured by examining the change across five key indicators: revenues, spa visits, number of locations, floor space and staffing levels. To gain insight into recent and emerging trends, spa operators were asked about their experiences in the period of September 2011 to March 2012. Answers show that the gradual upward trajectory has continued from 2011.
Survey questions also identified the key challenges facing spas as they regain ground and the changes operators have made to ensure they stay competitive.
Steady and stable During 2011, the US spa industry continued to build on the moderate growth experienced in 2010 when business gradually picked up after the downturn and customer visits increased (see SB11/4 p38).
All five key performance factors for the spa industry either grew or held steady compared to their 2010 performance. Total spa revenue for 2011 rose to US$13.4bn (€10.2bn, £8.7bn) – a 4.5 per cent increase on 2010 and a figure which has now surpassed the pre-recession peak of US$12.8bn (€9.8bn, £8.3bn) achieved in 2008. This is an important milestone as the industry recovers.
The performance mirrors the overall recovery rate across the US economy. In 2011, total consumer spending on services in the nation grew by 3.7 per cent. While, for the second year in a row, average revenues per spa expanded, rising by 4.9 per cent in 2011 to US$673,000 (€514,000, £439,000). This increase in spa revenues is driven largely by a boost in visits, up by 4.1 per cent in 2012 to 156 million. Notably, hotel/resort spas had the highest average number of spa client visits per spa. But while visits were up, revenue per visit stayed virtually unchanged at US$86 (€66, £56), with a lift of 0.4 per cent compared to 2010. Nonetheless the notable increase in visits is a positive sign.
Across the US, the total number of spa locations now stands at 19,850, largely unchanged from 19,900 in 2010. After declines in both 2009 and 2010, this is welcome news. In those years, spa locations fell by 1,400. Day spas are still by far the largest category, representing 78.9 per cent of all spas in the US, followed by medical spas at 8.8 per cent, resort/hotel spas at 8.7 per cent, club spas at 2.9 per cent, destination spas at 0.4 per cent and mineral springs spas at 0.3 per cent.
Total employment held steady, with a 0.2 per cent increase between May 2011 and May 2012. Yet there’s been a marked shift towards full-time employees, up by 9.3 per cent; a further sign that the industry’s back on track.
Total square footage also held steady, with an expansion of less than 1 per cent.
2012 improvements The survey of spa operators from September 2011 to March 2012 revealed a continuation of the upward trend. The majority of spa operators reported a lift in demand compared to the same period one year ago. Almost six in 10 respondents said visits were up and 55 per cent reported increased client spending per visit, across all types of spas. Sixty per cent of operators saw a growth in revenues. Staffing levels stayed evenly balanced.
These are positive developments, showing an improvement on the 2011 survey results when a minority of 45 per cent reported a growing spend per visit.
Profit margins increasing Driven by increasing demand, profitability is on the upswing. Fifty-five per cent of spas reported a 2011 profit percentage topping 10 per cent, up from 49 per cent in 2010. Most also said that profitability had improved between September 2011 and March 2012 compared to 12 months previously. But almost one in five spas, reported a net loss in 2011, virtually unchanged from 2010 (18 per cent). Together, these results show an industry that has stabilised in terms of staffing and location numbers and is experiencing a modest but broadly-based recovery.
Stimulating demand Spas have been adopting a range of different strategies to stimulate demand and increase visits in an arena which is highly competitive, and where consumers are now more price conscious than they were before the recession.
Operators are keeping prices steady to maintain competitiveness against a backdrop of rising consumer prices. Average price per spa service – US$80 (€61, £52) – remained unchanged in 2011 compared with both 2010 and 2009. This is likely to reflect the moderate pace of consumer spending and the use of discounts and rewards to encourage visits and loyalty. However, holding prices steady also means that improving profitability is likely to remain challenging for many spas for now.
At the same time spas across the board are expanding their portfolio of services, offers and products, to provide more choice and flexibility to busy customers. Over 83 per cent reported making one or more changes over the past 12 months in response to recent economic conditions. Nearly one in four added additional wellness programmes such as individual wellness consultations, nutritional programmes and group wellness packages. In addition, 28 per cent introduced shorter treatments of 30 minutes or less to bring value and efficiency to time-pressed clients. Almost one in three operators expanded their treatment menu and 55 per cent added new retail products. On average spas have made 2.5 changes to their operations in the past year.
Ninety-six per cent of spas have a website and are stepping up the use of online social media, up from 82 per cent in 2011 to 88 per cent in 2012. Three in four spas offered one or more gift card promotions.
Gaining confidence As the industry continues to make further progress along the road to recovery, the spa operators we questioned noted there were a range of challenges that the industry is still facing. These challenges included: - The economy in the US and consumer spending; - Pricing, inflation and profitability. In a competitive environment, with consumers shopping around for the best deals, spas are seeking to maintain quality but without raising prices. Against a backdrop of rising costs, margins are being squeezed - Shortages of qualified staff and rising payroll costs - Perceptions and the need for consumer education. Spas continue to tackle a general public perception that they are places offering only luxury and pampering. There remains a need to educate consumers about the health benefits that can be offered by the spa experience and to position spas as places which promote wellbeing.
Overall, however, an overwhelming 78 per cent of all spa operators are confident or very confident that revenues will continue to increase in the next six months.
ISPA is recognised worldwide as one of the voices of the spa industry, representing providers in more than 70 countries. It has been publishing in-depth studies of the spa industry in the US since 2000. Topics covered in detail in the full ISPA 2012 US Spa Industry Study, prepared by PricewaterhouseCoopers, include: industry size and continued modest growth; an industry profile looking at size and geography by type of spa; facilities, including elements of indoor square footage; services and products offered; prices and the composition of revenue; and visitor and employee numbers.
The full report is available at experienceispa.com. ISPA members can download a copy and non-members can purchase the report via this site.
Colin McIlheney is the global research director at Pricewaterhouse-Coopers and in his 30-year career, he’s designed more than 200 worldwide surveys. He’s also the research advisor for ISPA and served as the lead manager for the 2012 US Spa Industry Study.
Almost one in three operators said they had expanded their treatment menus / sergey nivens / shutterstock.com
Total revenues in US spas have surpassed the pre-recession peak according to the latest figures from ISPA’s 2012 US Spa Industry Study. Colin McIlheney reports
By Colin McIlheney | Published in Spa Business Handbook 2013 issue 1
Day spas represent almost 80 per cent of all spas in the US / pressmaster / shutterstock.com
The 2012 US Spa Industry Study by the International Spa Association (ISPA) is based on more than 800 spa operators spanning all different categories – from day, club and hotel/resort spas to medical, destination and mineral spring spa facilities.
It provides a profile of the US spa industry throughout 2011 and also into the first half of 2012 and focuses on the industry’s performance as it kept pace with an economy still in gradual emergence from the recession, and as spas adapted to an increasingly competitive marketplace where cost-conscious consumers are shopping around.
The report gauged the extent to which the industry has stabilised and experienced growth. This was measured by examining the change across five key indicators: revenues, spa visits, number of locations, floor space and staffing levels. To gain insight into recent and emerging trends, spa operators were asked about their experiences in the period of September 2011 to March 2012. Answers show that the gradual upward trajectory has continued from 2011.
Survey questions also identified the key challenges facing spas as they regain ground and the changes operators have made to ensure they stay competitive.
Steady and stable During 2011, the US spa industry continued to build on the moderate growth experienced in 2010 when business gradually picked up after the downturn and customer visits increased (see SB11/4 p38).
All five key performance factors for the spa industry either grew or held steady compared to their 2010 performance. Total spa revenue for 2011 rose to US$13.4bn (€10.2bn, £8.7bn) – a 4.5 per cent increase on 2010 and a figure which has now surpassed the pre-recession peak of US$12.8bn (€9.8bn, £8.3bn) achieved in 2008. This is an important milestone as the industry recovers.
The performance mirrors the overall recovery rate across the US economy. In 2011, total consumer spending on services in the nation grew by 3.7 per cent. While, for the second year in a row, average revenues per spa expanded, rising by 4.9 per cent in 2011 to US$673,000 (€514,000, £439,000). This increase in spa revenues is driven largely by a boost in visits, up by 4.1 per cent in 2012 to 156 million. Notably, hotel/resort spas had the highest average number of spa client visits per spa. But while visits were up, revenue per visit stayed virtually unchanged at US$86 (€66, £56), with a lift of 0.4 per cent compared to 2010. Nonetheless the notable increase in visits is a positive sign.
Across the US, the total number of spa locations now stands at 19,850, largely unchanged from 19,900 in 2010. After declines in both 2009 and 2010, this is welcome news. In those years, spa locations fell by 1,400. Day spas are still by far the largest category, representing 78.9 per cent of all spas in the US, followed by medical spas at 8.8 per cent, resort/hotel spas at 8.7 per cent, club spas at 2.9 per cent, destination spas at 0.4 per cent and mineral springs spas at 0.3 per cent.
Total employment held steady, with a 0.2 per cent increase between May 2011 and May 2012. Yet there’s been a marked shift towards full-time employees, up by 9.3 per cent; a further sign that the industry’s back on track.
Total square footage also held steady, with an expansion of less than 1 per cent.
2012 improvements The survey of spa operators from September 2011 to March 2012 revealed a continuation of the upward trend. The majority of spa operators reported a lift in demand compared to the same period one year ago. Almost six in 10 respondents said visits were up and 55 per cent reported increased client spending per visit, across all types of spas. Sixty per cent of operators saw a growth in revenues. Staffing levels stayed evenly balanced.
These are positive developments, showing an improvement on the 2011 survey results when a minority of 45 per cent reported a growing spend per visit.
Profit margins increasing Driven by increasing demand, profitability is on the upswing. Fifty-five per cent of spas reported a 2011 profit percentage topping 10 per cent, up from 49 per cent in 2010. Most also said that profitability had improved between September 2011 and March 2012 compared to 12 months previously. But almost one in five spas, reported a net loss in 2011, virtually unchanged from 2010 (18 per cent). Together, these results show an industry that has stabilised in terms of staffing and location numbers and is experiencing a modest but broadly-based recovery.
Stimulating demand Spas have been adopting a range of different strategies to stimulate demand and increase visits in an arena which is highly competitive, and where consumers are now more price conscious than they were before the recession.
Operators are keeping prices steady to maintain competitiveness against a backdrop of rising consumer prices. Average price per spa service – US$80 (€61, £52) – remained unchanged in 2011 compared with both 2010 and 2009. This is likely to reflect the moderate pace of consumer spending and the use of discounts and rewards to encourage visits and loyalty. However, holding prices steady also means that improving profitability is likely to remain challenging for many spas for now.
At the same time spas across the board are expanding their portfolio of services, offers and products, to provide more choice and flexibility to busy customers. Over 83 per cent reported making one or more changes over the past 12 months in response to recent economic conditions. Nearly one in four added additional wellness programmes such as individual wellness consultations, nutritional programmes and group wellness packages. In addition, 28 per cent introduced shorter treatments of 30 minutes or less to bring value and efficiency to time-pressed clients. Almost one in three operators expanded their treatment menu and 55 per cent added new retail products. On average spas have made 2.5 changes to their operations in the past year.
Ninety-six per cent of spas have a website and are stepping up the use of online social media, up from 82 per cent in 2011 to 88 per cent in 2012. Three in four spas offered one or more gift card promotions.
Gaining confidence As the industry continues to make further progress along the road to recovery, the spa operators we questioned noted there were a range of challenges that the industry is still facing. These challenges included: - The economy in the US and consumer spending; - Pricing, inflation and profitability. In a competitive environment, with consumers shopping around for the best deals, spas are seeking to maintain quality but without raising prices. Against a backdrop of rising costs, margins are being squeezed - Shortages of qualified staff and rising payroll costs - Perceptions and the need for consumer education. Spas continue to tackle a general public perception that they are places offering only luxury and pampering. There remains a need to educate consumers about the health benefits that can be offered by the spa experience and to position spas as places which promote wellbeing.
Overall, however, an overwhelming 78 per cent of all spa operators are confident or very confident that revenues will continue to increase in the next six months.
ISPA is recognised worldwide as one of the voices of the spa industry, representing providers in more than 70 countries. It has been publishing in-depth studies of the spa industry in the US since 2000. Topics covered in detail in the full ISPA 2012 US Spa Industry Study, prepared by PricewaterhouseCoopers, include: industry size and continued modest growth; an industry profile looking at size and geography by type of spa; facilities, including elements of indoor square footage; services and products offered; prices and the composition of revenue; and visitor and employee numbers.
The full report is available at experienceispa.com. ISPA members can download a copy and non-members can purchase the report via this site.
Colin McIlheney is the global research director at Pricewaterhouse-Coopers and in his 30-year career, he’s designed more than 200 worldwide surveys. He’s also the research advisor for ISPA and served as the lead manager for the 2012 US Spa Industry Study.
Almost one in three operators said they had expanded their treatment menus / sergey nivens / shutterstock.com
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