Each year, the International Spa Association (ISPA) conducts a spa industry study. This year’s newly released study reports on the state of the spa industry based on the “Big 5”: Revenue, Spa Visits, Locations, Employees and Spa Square Footage. Not surprisingly, for the first time since this survey began in 2000, all five of these factors declined from the previous year for the 2009 survey. Perhaps more interesting than the 4.3% decline in revenue was the 10.2% decline in spa visits overall and the 7.3% decline in average visits per establishment in 2009 compared to the previous year.
As we found in Coyle’s study earlier this year, the spa decision has become far more about necessity than luxury. In order to justify the purchase, consumers must believe they are getting a good value as well as contributing to their well-being. ISPA’s study states the same. Helping spa consumers cope with higher stress levels stemming from the recession and executing marketing and discounting strategies to prompt traffic, has helped the industry weather the storm.
So what did spas do? According to ISPA’s study, 67% of spas implemented promotions in response to the downturn. Some of the top promotion methods utilized were referral incentives, first-time client incentives and loyalty programs. And a somewhat startling 54% utilized last-minute deals via social media.
I was surprised and pleased to hear that such a high percentage of spas utilized social media as a method of yield management. Unfortunately, as we all know, if the deal is not right, driving traffic in the door does not necessarily result in a profitable business. The numbers provided in the study clearly demonstrate this point: excluding hotel and resort spas, 27% of spas reported a net income loss and another 22% reported a profit percentage between 0% and 5%.
The good news is that, according to the ISPA research, spa business appears to be on an upswing this year. And it also indicates that we now have savvier spa directors and owners who understand the mindset of today’s spa consumer. Perhaps these new approaches to yield management will become more prevalent and make spas even more profitable than before the economic downturn.