19 Jul 2018 Spa Business Handbook
 

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Spa Business Handbook - The Long View

North America Research

The Long View


The number of spas in the USA has risen to more than 20,100, visits are at a record high and other key metrics are up too. We take a closer look at the 2014 US Spa Industry Study to find out why the sector’s doing so well

Spas such as Red Door are attracting more consumers by offering express treatments
Almost two in three of unstaffed positions are for part-time workers sylv1rob1/shutterstock.com
On average, 20 per cent of USA spa bookings are now made online

It’s been 15 years since the International Spa Association (ISPA) commenced its spa industry study in the USA and over that time the sector has changed dramatically. The 2014 US Spa Industry Study, by PricewaterhouseCoopers (based on 2013 figures), shows that there are now more than 20,100 spas located across the country. That represents a near five-fold increase on the estimated 4,140 spa establishments operating in the USA since ISPA’s first study in 1999.

Back then, there were 1.5 spas for every 100,000 people living in the USA compared to 6.4 spas per 100,000 people at the end of 2013. Compared to 1999, the spa industry is substantially larger and more widely dispersed geographically. Day spas remain the dominant force, accounting for 79.1 per cent of the market, followed by resort/hotel spas (8.7 per cent) and medical spas (8.6 per cent), as shown in Diagram 1.

Thanks to the expanding number of facilities, the spa experience is now much more accessible to consumers than in 1999, when the sector was still the early stages of development. And despite its sharp downturn in 2008-2009, it’s rebounded nicely and has shown positive growth across the five key metrics (see Table 1).

MONEY MAKING
The latest revenue estimates provide the strongest indication yet that the USA spa industry now firmly back on a growth trajectory. In 2013, total sector revenue is estimated to have reached US$14.7bn (€12.9bn, £9.5bn) representing a 5.1 per cent increase on the 2012 out-turn. In cash terms, total revenues are now 20 per cent in excess of the position in 2009 (US$12.3bn; or €10.8bn, £8bn) and 11 per cent higher when account is taken of price inflation over that period.

In fact, the spa industry out-performed the wider USA economy in 2013. The 5.1 per cent increase in spa revenues, for example, was ahead of the overall 2013 growth in personal consumption on services (4 per cent in cash terms). The rise in spa revenue was due in approximately equal measure to increasing numbers of spa visits and a rise in the average revenue per visit. Revenue per visit was up by 2.5 per cent from US$87 (€76, £56) to US$89 (€78, £58) in 2013 and this is a figure that has grown from US$61 (€54, £40) since 1999 (see Diagram 2). The average revenue per visit ranged from US$79 (€69, £51) in day spas to US$138 (€121, £89) in resort/hotel spas.

Excluding the resort/hotel sector, 57 per cent of spas reported a 2013 profit percentage in excess of 10 per cent, a slight decrease compared with 2012 (61 per cent). At 13 per cent, the proportion reporting a net loss remained stable compared to 2012 (12 per cent).

Within the resort/hotel sector, the number of spas reporting a profit percentage in excess of 10 per cent was also stable, holding constant at 71 per cent. The proportion saying they experienced a net loss dipped to 5 per cent, down from 8 per cent in 2012.

ATTRACTING CUSTOMERS
The total number of visits to spa establishments is estimated to have risen from 160 million in 2012 to 164 million in 2013. This is the highest level of spa visits recorded since ISPA commenced tracking the industry in 1999 (when visitor numbers were an estimated 69 million).

As in previous years, spas have been taking positive steps to attract more consumers, including expanded treatment offerings (ie 71 per cent offer 30-minute treatments, up from 61 per cent in 2013); discounts and promotions (ie 55 per cent offer these to the spa’s social media audience, up from 51 per cent in 2013); and promoting their services by offering packages aimed at different demographic and other groups (ie 67 per cent of spas offer packages for couples, up from 64 per cent in 2013).

Spas have also sought to take advantage of the opportunities offered by internet availability and access. Almost all spas (96 per cent) now have a website to promote their services. An increasing proportion of spas are also offering consumers the option to book online; 57 per cent in 2014 up from 45 per cent in 2013. Among those offering the online booking option, the average percentage of bookings made online is 20 per cent, ranging from 22 per cent among day spas to 10 per cent for resort/hotels.

In a separate study called Social Media and the Spa-Goer, ISPA has highlighted how spa consumers in the USA are engaged and enthusiastic users of social media (see p100). It shows how sites such as Instagram, Pinterest and Facebook could provide spa operators with another platform to draw in even more customers in the future.

EXPANDING EMPLOYMENT
The total number of jobs in the USA spa industry is estimated to have increased from 343,600 in May 2013 to 349,900 in May 2014 (+1.8 per cent). Overall, the workforce now stands at its highest level since ISPA’s inaugural industry study.

As in 2013, rising staff levels were due to expansion of the part-time workforce, up by 8 per cent compared to an estimated fall of 2 per cent among full-time workers (see Table 1). As a result, in 2013 the part-time level exceeded the full-time level for the first time since employment levels were initially estimated by the industry study. It should, however, be noted that the part-time share of the spa workforce has been rising consistently over that period, from a baseline of 30 per cent in 2000.

Within that context, the part-time employment share would seem set to continue rising. The respondents reported that almost two in three of their unstaffed positions that they’re currently trying to fill are for part-time workers.

Yet when respondents were asked what they thought was the single biggest issue facing the spa industry, 16 per cent of them highlighted difficulties in finding skilled staff and a similar proportion (15 per cent) pointed to problems with recruitment and retention of employees. The emergence of such staff-related issues can be taken as an indicator of a tightening labour market, as companies seek to employ workers in response to rising demand from consumers.

INDUSTRY CONCERNS
Although employment issues were cited as a key obstacle for the spa industry, these came second to the impact of discounting and competition in the marketplace which were the most frequently aired concerns by spas (by 18 per cent of respondents each).

Worries over the state of the USA economy seems to be abating; that issue was cited by 13 per cent of respondents in the 2014 survey, down from 27 per cent in 2013. As in previous years, respondents also stressed the need to tackle consumer perceptions of spas as a luxury/pampering item; mentioned by 12 per cent compared to 10 per cent in the 2013 survey.

PREPARING FOR GROWTH
Despite the issues and concerns highlighted in the study, spas remain confident that revenues will increase in the next six months. More than four in five spas (81 per cent) said they were ‘confident’ or ‘very confident’ of an increase in revenues in the next six months.

Operators are also positioning themselves for further growth. When asked about their plans for 2014, almost all spas (95 per cent) pointed to steps they intend taking that can help to boost their prospects for 2014. Almost three in four spa businesses (73 per cent) said they would be adding new treatment offerings, followed by 56 per cent saying they intended creating a new spa menu, while new product lines were cited by 49 per cent. On the employment side, 40 per cent of businesses said they would be creating new jobs in 2014. A new spa or expansion of an existing spa was on the agenda for 30 per cent of the businesses surveyed.

Diagram 1:

Establishments by Type of Spa

Source: ISPA 2014 US Spa Industry Study
 



Diagram 1:
Table 1:

The Big Five Statistics: 2013 Out-Turn and Per Cent Change in 2013

Source: ISPA 2014 US Spa Industry Study
 



Table 1:
Diagram 2:

Average Spa Revenue per Visit (US$)

Source: ISPA 2014 US Spa Industry Study
 



Diagram 2:

About the research & ISPA
The 2014 ISPA US Spa Industry Study was based on 1,517 spa surveys and a database of over 16,00 spas. Buy the full report via expereinceispa.com. ISPA members can download it for free. For an analysis of the 2013 study see Spa Business, issue 4, 2013.

Based in the USA, ISPA represents operators and suppliers in over 70 countries encompassing all aspects of the spa experience (see p346).


Originally published in Spa Business Handbook 2015 issue 1

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