17 Jul 2018 Spa Business Handbook
 

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Spa Business Handbook - Forging Ahead

North America Research

Forging Ahead


ISPA’s 2016 US Spa Industry Study shows a healthy growth in revenue, spa visits and profit. Research author Colin McIlheney outlines the findings

Colin McIlheney, PricewaterhouseCoopers
Interest from demographic groups including men, teens and millennials were cited as helping to fuel growth in the spa industry photo: shutterstock/nd3000
There were 179 million spa visits in the US in 2015, and revenue grew by 5 per cent photo: shutterstock/By Syda Productions
Almost three in five spas said they had increased staffing levels in the past six months photo: shutterstock/wavebreakmedia

The US spa industry showed continuing growth, profitability and confidence during 2015 and into 2016, according to the 17th annual International SPA Association (ISPA) US Spa Industry Study, conducted by PwC.

The industry’s buoyant performance in 2015 was reflected in a 5 per cent growth in total revenue, along with a 2.1 per cent increase in spa visits compared with 2014. Total revenues passed the US$16bn mark. More than three in four spas reported a profit percentage of 10 per cent or more, while the location count topped 21,000 for the first time since the pre-recession peak in 2008. A majority of spa operators reported plans to take their businesses forward in 2016.

Drawing on the findings from a large-scale nationwide survey of spa operators conducted in spring 2016, the Industry Study provides a picture of the spa industry in 2015. Spas were asked to provide detailed data on their performance in 2015, encompassing five key business indicators. The ‘Big Five’ consists of the number of spa visits by clients, client spending per visit, revenues, staffing and profitability.

Forging ahead
In 2015, the US economy continued to expand. The growth in the level of economic activity nationwide averaged 2.4 per cent in 2015, unchanged from the 2014 rate, with a corresponding rise in personal consumption expenditure, up by 4.7 per cent in cash terms.
The story was similar within the spa industry. Total revenue grew by 5.0 per cent – up from US$15.5bn in 2014 to US$16.3bn in 2015 – driven by a rising number of spa visits (+2.1 per cent), combined with increased revenue per visit (+2.9 per cent) and expansion in the number of spa locations (+1.8 per cent). Visits reached a record 179 million.

New spa openings exceeded closures by a margin of 360 in 2015, bringing the total number of locations up to 21,020 from 20,660 in 2014. This marks the first year that spa locations have topped 21,000 since the pre-recession peak of 21,300 in 2008. Clientele are spending more per visit too; revenue growth outpaced the rise in visits, with the average spend per appointment increasing from US$88 in 2014 to US$91 in 2015.

Total employment remained broadly stable, at 359,300 in May 2016, compared with 360,000 in May 2015. However, a closer look at the data reveals robust growth in the number of full-time employees (+5.3 per cent) in contrast to a fall in part-time workers (-4.1 per cent). As of May 2016, the number of full-time workers (162,000) was slightly higher than for part-time employees (157,800).This is a reversal of the trend in recent years where the number of part-time staff was rising at a faster pace than the full-time workforce. Time will tell whether this development is temporary, but the increase in full-time positions suggests it could be a response to recent growth in demand. To accommodate, spas are boosting their employee hours.

Independent contractor positions fell over the period from May 2015 to May 2016, from 44,600 to 41,700 (-6.5 per cent). The reduction in the share of employment filled by contractors reflects an ongoing trend dating from 2010.

Profitable performance
Profitability remained buoyant in the spa industry across the board. Within the resort/hotel sector, more than three in four spas (76 per cent) reported a spa profit percentage in excess of 10 per cent for 2015, representing an improvement on the 2014 position, when 67 per cent reported a profit percentage over 10 per cent. The proportion saying they experienced a net loss was 5 per cent, broadly unchanged from 2014 (6 per cent).

Excluding the resort/hotel sector, 76 per cent of spas reported a profit percentage of 10 per cent or more in 2015, slightly above the 2014 out-turn (73 per cent). The proportion reporting a net loss dropped to 5 per cent in 2015, from 7 per cent in 2014.

Recent trends: from strength to strength
While the previous 12 months form the primary focus of the study, this annual review also covers more recent trends and experiences, with spa operators asked about their performance during the September 2015 to March 2016 period. The proportion of spa operators reporting increasing revenues and visits was at its highest level since the question was first posed to survey respondents in the 2010 Industry Study. Such a consistent positive response across all spa sectors nationwide indicates that growth in the industry remains on a steady upward path.
Three in four spas (75 per cent) noted an increase in revenue. A similar proportion saw an increase in visits (76 per cent), while 60 per cent said client spending was on a rising trend compared to the same period in the previous year.

Almost three in five spas said that they had increased staffing levels in the past six months compared to the same period in the previous year.

Looking ahead: enhancing the experience
With the signs so encouraging, spas were looking forward with confidence and making plans to improve and enhance the visitor experience in ways that reflect emerging industry trends.
The overwhelming majority of spas were confident that revenues would continue to increase in 2016. Almost nine in 10 spas were ‘confident’ or ‘very confident’ about the next six months.
When asked about their plans for 2016, 81 per cent said they would be adding or creating new treatment offerings. Complementing those plans, 61 per cent of spas said they would be introducing new product lines, and 58 per cent planned to create a new spa menu.

Spas also planned on taking measures to ensure they had the capacity to take their business forward in 2016, with 66 per cent saying they intended to add or create new employee training opportunities. More than one in two spas (55 per cent) said they planned to create new job opportunities in 2016. A new spa or expansion of an existing spa was mentioned by 45 per cent of spas.

On the marketing front, 38 per cent of spas intended to create new branding. More than one in three planned to enhance or forge new community partnerships to reach more potential clients.

Survey respondents were also asked to give their views on what they thought the next big new trends to shape the spa industry over the next year or so would be. The most frequently identified developments related to wellness, health and fitness, accounting for 38 per cent of survey responses, with corporate wellness also presenting opportunities within the resort and hotel sectors.

Complementing the focus on wellbeing, 18 per cent of spas cited the move towards organic and natural products and treatments. Other trends included technological advances in skincare (cited by 9 per cent of respondents), convenient on-demand spa services (cited by 6 per cent), healthy ageing (cited by 4 per cent) and interest from demographic groups such as men, teens and millennials (cited by 4 per cent).

Table 1:

2015 US Spa Industry Study – The Big Five Statistics

Source: ISPA 2016 US Spa Industry Study
 


Graph 1:

Demand indicators: Experience in past six months (September 2015 to March 2016) compared to one year previously

*Source: ISPA 2016 US Spa Industry Study
 


Findings in detail

ISPA is a professional organisation representing providers in more than 70 countries and encompassing all aspects of the spa experience, from facilities through to instructors, professional practitioners and product suppliers. Its role is to advance the industry by providing educational and networking opportunities, promoting spas and fostering professionalism and growth.

To gain more in-depth industry understanding, ISPA commissioned the first US Study in 2000, followed by updates in 2002, 2004, 2006, 2007, 2010, 2011, 2012, 2013, 2014 and 2015. Shorter tracking studies documented 2003, 2005, 2008 and 2009 performance. Topics included in the full 2016 study include:

• Industry size: forging ahead.

• Spa facilities and services: indoor space, core spa services, the retail component and programmes and treatment offerings.

• Spa industry profile: size and geography by type of spa.

• Compensation: salaries paid to estheticians, massage therapists and nail technicians; unstaffed positions, compensation structures, factors affecting compensation levels, compensation structures in respect of paid time off, paid education/training or paid sick leave and unstaffed positions for service providers.

The full report is available at experienceispa.com, free for ISPA members and available for purchase for non-members.


About the author:

 

Colin McIlheney
 

Colin McIlheney is the global research director at PricewaterhouseCoopers, and in his 32-year career, he’s designed more than 200 international surveys. He’s also the research advisor for ISPA, and was the lead manager on the 2016 US Spa Industry Study.

Email: ispa@ispastaff.com

Tel: +1 888 651 4772



Originally published in Spa Business Handbook 2017 issue 1

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