Spas & The Greed Factor
Sunday June 21, 2009
Have spas become too greedy? I was talking to a massage therapist the other day who said that the resort spa where he works is still busy, but the spa is dead. He thinks it's because the prices have reached absurd levels. "Resort spas educated people about getting massage and facials," he said, "But now they get them at home instead of when they're on vacation because it's so much cheaper." He thinks we've seen the end of the splashy new 60,000 square-foot spas, where prices are cranked up high to help pay for the fabulous facilities.
Judy Singer, a spa consultant, says people want what spas offer, but it has to be financially feasible. "Many spas have been their own worst enemy by getting caught up in the greed factor (very high treatment prices)," she writes in an article for www.hotelexecutive.com. "This has caused consumers to re-evaluate the genuine need and ability for them to visit the spa."
What do you think? Have spas become too greedy? Are you changing the ways you use spas?
Comments
Anitra, I can definitely identify with the massage therapist’s and Judy’s point. I don’t know that spa’s have become greedy so much as the one’s building the huge facilities are now blindsided by a poor economy.
One outcome though is that the smaller spas can take advantage here I think I work at adding to their client list with those who are unwilling to pay for all that square footage at the bigger spa and resorts. The economy is definitely bring about changes and I expect those changes will be continuing for some time.
Dear Anitra,
I agree that the pricing in spas has gotten way out of hand. Recent studies of the “Spa Goer” (I site the Day Spa Association’s study) indicate that price is the number one reason that people either don’t go tot the Spa or don’t go as often as they would like.
When the DSA first started doing these studies in the late Nineties price was only third on the list after “don’t understand what spas do” and “no spas in our area”. And when I started in the industry early Nineties, we thought we were pushing the envelope at $1 per minute (or $60-$65 for a one hour service).
I would like to agree that spas have gotten greedy, but that would imply that they make money, and industry data shows that very few make money.
Simply put Spas business models are based on huge variable costs that go up when the price is raised. Most importantly the commission based Provider pay coupled with the additional employer’s share of taxes and worker’s comp.
Therefore each time the price of a service goes up let’s say $10 the house (the spa itself) only keeps about $3 of that increase. Or as I like to say it; “We give our Clients $10 worth of pain for only a $3 bottom line gain”
As you can see this business model is flawed and self defeating and only when we fix they way we compensate Providers will we create stability within our industry, provide therapists with more security, and be able to stop “sticking it” to the consumer.
I am wholly empathetic to the consumer on this one, yet instead of calling it “Greed” I would call it stupidity on the part of Spas and the industry for creating such an untenable business model.
Or so it seems to me…
Skip Williams
Resources & Development
skip@resourcesanddevelopment.com
I think many of the resort vacation spots that add a spa never really expected it to make a profit. Kind of like it is an amenity to the vacationer’s whole experience. The expensive marble and granite look had to match the other part of the facility. That type of thought process if continues, will kill the big resort spa.
Delivery and cost of goods is way way up. When FedEx demands $66 for a small box to reach us from California or a week a way say – it costs big bucks thanks to big oil. Laundry costs are up too. Rent still goes up. Don’t assume we are making more profit. Margins are real real thin actually. (even the big spas will tell you this for sure)
Us little guys will gladly take up the slack! We are lean and local. So visit a local spa in your town and enjoy some “me” time. Celebrate something special in your life at the spa.
always good dialog Anitra! Jan
As a consumer, I fall into the trap of those willing to pay premium dollars for a unique resort or destination spa experience. I’ll admit that I like the splashy large spas with fabulous facilities, but I do feel very gouged by spas that are charging well above $150 for 60 minute services. Has that stopped me from patronizing these businesses? No.
On the other hand, I’m a spa blogger and contribute articles to a number of websites related to spas and the spa industry and I really can see it from both the consumer and the spa business angle. If the spa is empty while the resort is full, this is a telling sign that something isn’t right with the price points.
This may be a bit off topic, but perhaps it falls into the “greed” scenario: Charging more on weekends and at peak times is a difficult pill for me to swallow. I often don’t have the luxury of traveling during the week and I hate the idea of spending $10 to $20 more for the same treatment.
Great dialogue, everyone!
I’m still spending on treatments, but I’m going to a regular therapist with affordable prices instead of making it an “adventure” to check out a new place that might be overpriced — and the therapist not so great.
Re: higher prices on weekends, I think spas are within their rights on that one. They say it’s like the airlines — higher prices at times of higher demand. Maybe spas need to sell it as a weekday discount rather than a weekend premium.
Hi Anitra,
Happy to weigh in on this discussion. You’ve asked a good question. High prices – especially at resort and hotel spas is something I have been thinking quite a bit about lately – especially since I just did a tour of many of the luxury New York city spas where prices generally begin at around $350 – $450 for their basic massage service (most are 90 minutes or more).
I agree with many of the previous comments and think that Skip makes a good summary point that our spa business model is the challenge and in time, will need to change. With spas not making a lot of money, therapists not making a lot of money and the consumer paying what seems like a whole lot of money (especially at hotel/resort spas), I don’t think that “greedy” is the right word because that implies that someone is “wishing to possess more than what one needs or deserves” (dictionary definition). And I don’t think that is the case.
The evolution of our fast growing business got us to this point for a variety of reasons. The important thing now, I feel, is for all of us to think creatively about how this can be resolved for everyone’s benefit and for the long term.
Here are a couple of ideas that might be worth exploring:
1. Here in the US there are licenses for massage and a separate license for aesthetics. In Europe, “Beauty therapists” is a profession one studies for several years and at the end the therapists are able to do massages, facials, manicures/pedicures, etc. They work full time, receive benefits, and are treated as professionals. Their training is naturally longer – several years. (Canada, also, has a two year training program for therapists.) Because they do not need to do 6 massages a day, their burn out rate is much less – in fact they can be beauty therapists all of their lives. From a spa’s point of view the scheduling is much easier when employees are qualified to do all services. Money is saved all around because there isn’t a cost for a lot of people sitting around waiting for work, and yet there are people available when there is a last minute booking. Turnover is less which also saves money.
2. One difference between resort/hotel and day spa facilities are the amenities such as saunas, steams, jacuzzi/whirlpools, cold plunges, etc. I think that if spas began creating treatments which incorporated these facilities – used in the appropriate way for health benefits – that the charges for the consumer would be perceived as more reasonable. Here is an example:
Re-Energizing Massage: Begins with 10 minutes in the relaxation room enjoying a hydrating and refreshing blah blah blah summer fruit drink. The treatment begins with two 10 minute sauna sessions interspersed with a cool shower and followed by 10 minutes of cooling down with lower legs in the cold plunge. This is followed by a 60 minute massage with blah blah blah special oil and then two steam bath sessions to help the skin absorb the special oil. The steam sessions are interspersed with a cool shower, ended with a regular shower with blah blah blah soap and 10 minutes of cooling with lower legs in the cold plunge.
Not only would this series actually really refresh a person (delivering far more benefits than simply a massage), but it wouldn’t take any more staff other than someone in the hydro/thermal area helping all the clients do their steams/saunas/jacuzzi’s properly taking heart rates and answering questions about the true health benefits of these amenities.
3. Alternately, some resort/hotel spas have successfully created a business model where they charge for the use of hydro/thermal amenities.
4. Some spas are having success with adding a membership option which I think can add a sense of community to a spa – and also bring in additional revenue. Sometimes members receive a discount on treatments which is an elegant way to lower prices without lowering prices for everyone.
They say that one good thing about a recession is that it unlocks creativity…it is my hope that this underlying issue (lack of profitability)for our industry will allow for some experimentation and “out of the box” thinking which could improve things for many in the long run.
Look forward to hearing some ideas from others!
What if we viewed the growing spa industry not as another consumer market but as a reflection of an underlying need to take time out and to consider the deeper meaning of our lives? Whilst many see spa as a way of relaxing and de-stressing, more profoundly I believe it offers an opportunity to restore our human values.
I’d like to share two posts on my spa blog which address the issue of costs-and-values.
http://tinyurl.com/ksb79r
http://tinyurl.com/la6pnh
For more browse under ‘Trends in spa-retreat culture’ on my weblog.
Dear Spa Professionals and Industry,
Our industry is being transformed. If people think that spa is expensive try “health care” in the U.S. If people think “greed” describes the high touch low margin service spa industry then we really do have serious problems. Sure, some business models became unsustainable due to the enormous capital costs (think Las Vegas spas) that drove up retail prices and disconnected “spa” from health and attached it to “luxury”. This trend was a disservice to providers and our clients.
Personally, I am saddened to see this type of language “Spas & The Greed Factor” being used. It seems completely irresponsible considering the potential of spas as preventative and restorative health care providers and the number of these locations that are struggling to stay afloat in our current economy.
We do not need anymore discussions of blame – we need visionary ideas and efforts to create the future we all desire.
“Perhaps the only limits to the human mind are those we believe in.” Willis Harman
Sincerely,
Rhana Pytell
I’ve started going to a small oriental foot massage place called “Happy Feet.” It’s $20 for 60 minutes! About half of the hour is on your feet. The other 30 min they do your face, neck, shoulders, arms, hands and then stretch your back at the end!
I’ve been twice so far and it’s FANTASTIC! I’ve sent them so many customers I should get free massages. But similar treatment elsewhere is $60 and up.
Spas have been oblivious to pricing issues and economic downturns in their own community. Resorts have typically cultivated a mentality of anything goes since the guest is a captive. Now with clientele making a decision between bread and butter issues, versus a spa treatment, which isn’t really needed in order to survive. Many independent spas are finally seeing that pricing has gotten out of hand and they’re going to have to lower them. Even still, prices are still too high in many sectors and spas, especially day spas, need to be honest about how their specific community’s economic condition translates to the reality of to spa or not to spa. A strong director or manager at a resort spa needs to sit down with their financial people and try and work something out, perhaps with spa treatments as an up-sell at the point of reservation, or multiple bookings. Creativity is also needed. Perhaps there are too many spas, given the state of the economy and those that weren’t strong financially perhaps shouldn’t be in business. The industry has had challenges before and yes, only the strong will survive.
Terry Herman
Consultant
Susie Ellis makes an interesting point about the “beauty therapists” in other countries. I believe in the UK it’s a four-year program and includes internships, so they have much more knowledge and experience when they graduate than US therapists.
RE: facilities, I know they’re supposed to provide an “experience”, but I have a problem with all the chlorine and chemicals. I do steam, sauna and showers but stay out the of plunge pools and hot tubs.
Great insights from everyone. In business, the bottom line is profit. Way back when I was in college, during our Accounting and Entrepreneurship class, our professor posed a question on what is the purpose for wanting to engage in a business, some of us answered: to help create jobs for people, to educate people, to help in nation building, etc. All these answers are great and idealistic but at the back of our minds- who are we kidding? We are in actual business because of this six letter word- PROFIT! There is nothing wrong with profit of course, it’s what runs all industries. But it becomes evil when it is pursued with obsession and greed to acquire more at the expense of others- consumers and staff included. And when people are used, we know we are in trouble. Greed is a rather strong and subjective word. If a spa charges a premium price for its services, that price may be in the range for some and not for others. The important factor is to make the value of the service worth the price. Business drives the economy and the spa needs to adapt to the changing attitudes, values and spending patterns of the public. The challenge includes (amongst others) that there should be a compensation overhaul and that in reality there is no one-size-fits-all business model in the spa industry. Gone are the days where people valued ambiance over service. Consumers want and deserve the best of both worlds. Today’s economy is a wake up call to our industry that we need to reach a bigger market share and make our prices and services more consumer friendly without sacrificing quality. The tightening market is going to weed out those spas that are a poor value and those that are priced right will be the ones coming out of this economic downturn still operating.
Profit is the motivation that moves businesses to growth. The question is how much profit should one be making? What is enough? What is little or too much?
Peace,
Eunice
yunesa@yahoo.com
Author, The Spa, Massage and Wellness Resource Book and Career Guide
People have posted some great comments.. Is it greed or is it due to the rising costs? Can these larger spas stay in business by cutting their expenses and still pay their therapists decently? I own a small day spa, work as a therapist, and teach at an Aesthetics school. Our spa rent, fixed expenses, product supplies etc. continue to rise at 10% a year while our prices remain the same at basically a dollar a minute. We cater to the middle income group and have found that people want lower prices, but also want a high ambiance without having to pay a lot. They always ask for a special. The economy has definitely affected our business and many shoppers are doing price comparison before buying gift certificates. There are a few high end spas closing due to the new fast food day spas chains such as Massage Envy, Massage USA, & Elements charging $39 per hour. As employers, we have to buckle down and find other ways of increasing revenue while still giving outstanding customer service!
Ted Tavernier
Employer/Trainer
Hi, Anitra,
Great dialog that you’ve started – thanks! Greedy? I don’t know if this is the right characterization of the predictment resort spas find themselves in. Though I do agree with other industry professionals that the atmosphere and experience one partakes of at a top notch resort or destination spa cannot support itself with bargain spa prices.
I recently returned from Bahrain on a consulting assignment where I noticed that the “Moroccan Bath” treatment — basically a Hammam experience with cleanse and scrub with upgrades to a Moroccan clay or slimming service — one of the most popular treatments at a variety of spas I surveyed and priced less than a massage service. The former can be performed by a spa tech at a lower cost compared to the rate a massage therapist or beauty therapist would expect/demand.
Regarding spa memberships, this is part of the business model I am now recommending to many of my clients where the shoe fits — a membership entitling the member to receive 3 or 4 treatments of their choice at a relatively deep discount (15 -20%).
We need as an industry to think creatively. I look forward to all the innovations that will come about thanks to the recessionary downturn.
Greed? I don’t know, though agree with Skip and the rest that resort spa amenities do not pay for themselves at bargain spa service prices. Recently, I have begun to incorporate into the business plan of day spa facilities that I consult with a spa membership, entitling the recipient with a 15-20% discount with 4 spa services a month built into the membership.
Also, like Susie’s hypothetical treatment description that utilizes the wet area within the treatment protocol. On my recent visit to Bahrain I noticed that the most popular service was the “Moroccan Bath” – basically a Hammam service that features a body cleanse and scrub with upgrades available such as a Moroccan clay mud wrap, slimming wrap, etc. These treatments are priced at less than the cost of a massage and can be administered by a spa technician as opposed to a massage or beauty therapist.
Regarding the beauty therapist paradigm of Great Britain, this makes so much sense for us here in the States!! To have a therapist who can perform multiple treatments allows a spa owner to make the best of his/her staff investment and overhead. However, don’t know of any program in the States with a “Beauty Therapist” curriculum.
Deborah Smith