The Growth in the Spa Industry - Essay Example

?Spa Resorts Purpose The purpose of this paper is to measure the growth in the spa industry in terms of spa growth. The spa industry forms a very niche segment of the hospitality industry. The history of spa resorts is not as old as tourism, as it developed into a full-fledged industry in the mid-1980s. Naturally, operations and management issues related with this niche segment of hospitality industry are different. Once it was considered a luxury, now it has become a necessity due to changed life-style issues and the changing global perspective over leisure industry and customer needs. The growth of resort based or singular spa-only industry has its specific general development, management and operation related issues. While measuring the growth of the spa industry, another significant purpose of this paper is to analyze the related issues of the spa industry. Definition of Spa ISPA (2013) defines spa as destinations dedicated to complete well-being via a range of professional services that boost the rejuvenation of mind, body and soul. Depending upon a client’s aims and what the client is expecting from a spa experience, he/she will inquire to find out the differences in spas and their offerings. For example, for a spa getaway that includes lodging and other provisions, cruise ship, hotel/resort and destination spas can be opted out. For a simple wax or single service, a day spa could suit well (ISA, 2013). Although there is no specific design layout for developing spas, but the hotel firm Marriott, for example, has fixed spa parameters for their properties. 'The Spa Book' provides spa design parameters and functioning guidelines for their hotels and resorts, and is also helpful to developers and the design team as they develop spas for Marriott-labeled properties. Properties must fulfill these stipulated parameters to project 'spa', as an added facility (Monteson and Singer, 2004). Parts of Spas/Resort-based Spas Some basic parts of a spa include: a welcome desk division of men's and women's locker rooms and facilities, and possibly an issuance welcome desk and a lounge bridging between men's and women's facility areas, which generally are equipped with a steam room, sauna, whirlpool, cool-dip pool and lounge (some spas enlarge it with a juice bar and/ or small cafe where wine and beer can be optionally served dry treatment cabins for massage and facials wet treatment cabins for services like body wraps and scrubs hydrotherapy cabins for baths and hydro-massages attended fitness studio with exercise machines an alternate exercise studio for classes retail store Parlor for hair, nails and, possibly for make-up (Monteson and Singer, 2004). Spas are confused generally with medi-spas, which are rising in numbers and are in great demand for offering medical procedures, such as Botox, cosmetic surgery, and similar other medi-spas. Historically, the purpose of spas is to offer preventive medical treatments like hydrotherapy, and mostly mix water-based routines with destination spa activities (e.g., healthy lifestyle behavioral changes or improvements) (Tabacchi, 2010). General Development, Management and Operation Issues As spa industry is not as traditional as other segments of hospitality industry, its development issues arise because of the general impression that spa visitors are niche clients belonging to affluent classes only, who can afford luxuries. This tendency affected the growth of spa industry initially, as a distinct entity, different from hotel/resort spas. Management and operation issues of spa industry are not similar to the issues faced by tourism industry in general. General operations and management issues crop up in spas, as they are managed on the lines of traditional hotel and resort management strategies. Spa sales need different strategies for getting materialized, which are different from hotel and resort sale activities. There are time management issues, revenue management issues, and other related issues, emerging from various seasons’ sales, as some seasons are highly discounted while others could be premium-charged. Revenue management issues have emerged because due insight has not been given on how to make spa business lucrative. Literature Review Spa industry growth The initiative of adding spa to resorts was made in the mid-1980s by some dynamic thinking resort operators (Monteson and Singer, 2004). A different approach prevailed that time over the spa facility, as it was more valued as a luxury because of taking it as an amenity than an enterprise of income generation for resort entities. Most of these spas were situated in posh, independent resorts and spas were used as great marketing tactics to lure visitors to these resorts. The present scenario of the spa experience has changed totally from a luxurious service to an essential need of the guests at resorts and adding to the competitive edge in the leisure market. Dubow (2006) advocates this outlook by noting that in resort hotels, spas have become critical for attaining a robust bottom line (Madanoglu & Brezina, 2008). The strength of spa facilities increased at an average of 12 percent between 2002 and 2004 (International Spa Association, 2004). Bjorn Hanson, the chief of PricewaterhouseCoopers’ hospitality and leisure group, finds that the development of spas is happening vertically by searching new ways of luring customers for income generation, rather than opening more spas at new locations. Between 1997 and 1999 average spa income increased 28.3 percent yearly. As per the International Spa Association (ISPA) there were 1,662 resort/hotel spas by 2004, while Foster and Wohlberg, as cited by (Madanoglu & Brazina, 2008) forecast continuous growth in spa numbers in the near future. In 2003, about 27 percent of the 136 million spas were entertained through resort/hotel spas. Growth in the USA Spa Industry In the USA, leading properties such as Royal Resort and Country Club, the Scotts-Dale Princess, and Topnotch Resorts added spas to their hospitality business in the 1980s. During the 1990s the boom period started for resort-based spas, making them the most important segment of the US hospitality industry. There was a yearly average increase of 56 percent of resort based spas in 2000 in the USA. Spas generated revenue of nearly $l0.7bn in 2001 in the USA (Monteson and Singer, 2004). Marketing Perspective of Resort Spas Guests are more inspired by resort spas for their tranquil environment, away from the hustle and bustle of busy life. Generally, hotels engage high-end technology to fulfill guest expectations for better, effective and do-it-yourself solutions, like in-room business services and kiosk check-in. Foster and Mandelbaum (2005) react that spa treatments become instrumental by fulfilling the services deficiency through their personalized, human impact in hotels and resorts. Spas have become one of the important tools of income generation by hotels to entertain customers through their spa touch. Singer (2000) also enforces that guests are well tuned to be in sync with their mind/body link through touch and find time to enjoy the moment. Spas bring about balance and harmony in their lives; therefore, spa-related functions are seen as significant parts of complete health through “mind and body maintenance.” Regarding management of spa resorts or otherwise the management of hospitality industry in general, Chon et al., as cited by (Carpenter and Upchurch, 2008) developed a model that segregated writings from four hospitality journals into six management activities fields: administration, operations/property management, marketing, human resources, research and development, and finance. For the purpose of this essay, research and development and operations and management are critical function area, with the related topic issues. Functions and operations of resort facilities that include spas are specific to the needs of the spa visitors, contrary to the wider management operations of resorts/hotels only. Strategies of managing spa income Madanoglu and Brezina (2008) describe the advantages of spa operations in resorts by designing a spa income add-on method by using present industry and scholastic insights in the area of hospitality and resort management. Their findings reveal that a hypothetical resort with 300 rooms would garner a spa income for each occupied room of $40.08, which provides extra yearly income above $3,500,000. It derives that a well-managed spa may add nearly US$28 per vacant room. It also implies that spas are significant generators of extra income as they may add-on, at times, above 20 percent to room earning by saving enough space than resort/hotel rooms can save. Revenue management is critical to spa operations but it needs a revision of how most spas observe sales. Spa managers keep a tract of appointments and customer requirements. Rather they need to tightly align operations with time factor in the offered spa services (Kimes & Singh, 2009). Kimes and Singh (2009, p. 82) focus on the need of including revenue per available treatment-hour (RevPATH), which is a time related measure that includes the cost and length of the treatment as elements of earning computation. Some factors of present-day spa trends like discounting and managing treatment length further the seeds of earning management, but those are mostly enforced as tactics during specifically sluggish or busy times. Selected spas have maintained the necessary strategic method to gather those tactics into a comprehensive earning management strategy. A mechanism needs to be framed for enforcing a spa earning management strategy and establish a practical path for its execution. There is no doubt in saying that revenue management has not been given due importance in spa management unlike other segments of hospitality industry for addressing the theoretical and practical problems of this segment (Hanks, Noland, and Cross, as cited by (Kimes and Singh, 2009). Until now, very little attention has been given to the possibilities for earning management in spas (see Boyd and Bilegan 2003; McGill and van Ryzin 1999; Weatherford and Bodily 1992)). The spa business can use the same earning management strategies that are prevalent in hotel and resort operations, as the similarity level is quite high for the application of earning management principles for the mutual benefit of customers and the spa operator. Actually, a number of spas use different earning management–type practices, but the usage till now has been tactical (Kimes and Singh, 2009). In 2005, the spa industry generated $11 billion in earnings in Canada and the USA. The average yearly growth rate is 18 percent in North America. The spa visits in the United States only touched the mark above 130 million a year in 2006, with a yearly growth rate of 9 percent (International Spa Association [ISPA] 2006) (Kimes and Singh, 2009). Excluding hotel and resort spas, the spa industry otherwise is in development stage. It is fast growing but without following internationally stipulated parameters. The industry has not seen measures of financial performance or a chart of accounts until recently. In 2003, ISPA, in collaboration with the Association for Hospitality Financial and Technology Professionals, released the first edition of Uniform System of Financial Reporting for Spas, and ISPA compiles industry statistics (Kimes and Singh, 2009). Kimes and Singh (2009) offer a wider theory of earning management, allowing spa operators to avail the advantages of strategic earning management that are missing presently. A reasonable way to approximate success in the spa industry is a direct approach of studying the add-on of various income channels, managing expenditure, tracking the percentage of retail out of treatment income, and managing output or usage of treatment fields and therapists. Considering those income measurements, a framework for income management can be designed for spas. The process includes a review of the necessary assumptions for income management, the strategic balancers available to spa operators for income management, their application in traditional income- management environs, and by using some of the tactical tools, can be used for managing spas’ earnings (Kimes & Singh, 2009). U.S. Spas’ Financial Growth ISPA’s first tryst at collecting financial figures from the spa industry was done in 1996, as stated in (Horgan and Tabacchi, 1995)). Starting from 1996 till 2008, as per PriceWaterhouse Coopers (2001), the spa industry achieved wonderful growth. Annual business growth on an average for spas at that time was 16 percent, 25 percent yearly growth in spa visits, and a 24 percent yearly increase in number of spas. In comparison to today’s spa industry, the spa industry was a divided lot, with some big operators and no market monopolies (Tabacchi, 2010). Discussion Growth and development issues emerged in the resort based spas because the spa was a newly added division to the traditional hotel/resort only business. The trend in spas started in the mid-1980s. Earlier, people had different thinking on not spending big money on such luxuries, but spas have become a booming business activity due to life style changes. Resorts are more and more entering into this business for leading the market in competition and getting an edge over other players by offering varied range of spa services. Hotel/resort customers feel welcomed when they are offered and treated with specialized spa services. These niche guest attention areas add strength to the hotels/resorts bottom line. Post-2000, spa industry has seen high growth in offering a range of spa services and adding more services to strengthen its product-line. Growth in spa business has occurred not only in the number of new spas but in the income as well, as the increase in average spa income was 28.3 percent from 1997 to 1999. Spa industry is coming to its own with the development through spa-only operations, which was not the case till 2004 when a big number of visitors were offered spa services through hotels and resorts. Although spa industry was growing at a fast pace worldwide, but in the USA, it crossed the limit by recording 56 percent average increase in resort spas in 2000. Spa marketing also saw a sea-change difference in various hotel spas presentation of the spa services, which were highly technology-enriched. Only-spa offerings were unique through their personalized services, offering a distinct experience to the visitors relatively to hotel spas. Nevertheless, it added to the revenue stream of hotels by offering spa services along. Thus, only-spa ventures could better offer an experience of rejuvenation through mind and body relaxation. Although spa industry is new relatively but it has distinct set of operational functions, dissimilar to hotel and resort management. Various scholastic studies reveal how resort spas add per room income by $40.08, otherwise unrealizable on a vacant room. Resorts can earn additional huge income from allied spa activities to the visitors. One can understand why spas have year-on become essential segment of hotel/resort businesses. Specialized management practices are critical for generating revenue by not only managing appointments and customer needs but efficiently managing time element, very critical in spa operations. Revenue per available treatment-hour (RevPATH) approach can help in raising the spa management from revenue earning perspective. Cost and length of spa treatment needs to be well strategized rather than using as temporary seasonal tactics. Spa managers need to realize that their locations turn out to be profit-centers like any other tourism-related business. Spa managers need to develop a long-term strategy of financial management on the lines of big hotels and resorts, as based on income management principles (Kimes & Singh, 2009). The spa industry needs to devise better operation and management strategies, as referred by Kimes and Singh (2009) based on the theory of earning management. Spa business was growing at the rate of 18 percent in the USA in 2005, which gives an idea of the present growth status of the industry. Therefore, strategic management has become critical for better management of expenditure, for correctly tracking the retail sale out of treatment income, and managing output or usage of treatment fields and therapies. Varieties in Spa Literature review is primarily based on resort spas or spas as individual entities, which are getting more attention for offering specialized spa services. The destination spas are getting more popular other than resort based spas/spas. They are increasing in popularity, as they are totally into spa functions and create suitable environment for the projected destination spa. The destination spa is a total spa experience where one night stay is mandatory, at the least, which can increase to a two-three-night stay. It is different from day spa and is very expensive too because of providing a wholesome experience that needs huge investment relatively to a day spa. The purpose of destination spa is to bring about a change in lifestyle. The only aim of this kind of spa is to provide a healthier life platform to the guests. The destination spas serve healthy spa cuisine, offer insight on better lifestyle, offer fitness regimes that enforces self-respect while supporting take-home habits and highlight bodywork and pampering therapies to add-on wellness programs (Kimberly & Ragins, 2005). Connecting to Guests The need to balance the mind/body/spirit has increased the significance of finding time to relax. Research has revealed that spas have relatively a far greater impact on a person’s psychological/emotional/spiritual well-being than on his/her physiological health (Monteson & Singer, 2004). For example, one survey evaluated after-visit experiences of visitors, and found that only 43 percent (30 percent of men and 50 percent of women) of the participants stated that they would come back for another such experience. The percentage of second-time visitors increased when they answered positively to certain statements. Spas can increase the number of visitors by 'attaching' themselves to their guests that could either be the massage room or some other treatment room but it has to be the total experience that ensures their coming back for another similar experience (Monteson & Singer, 2004). As the trend of spas is on the increase, operators must take some precautions by offering more, assuming that 'more is better’, as ‘more’ can increase the degree of stress. The spa visitors come to get relaxation. Operators should not offer a long list of worldwide available spa treatments to puzzle guests and complicate their minds. The spa customers want a tailor-made experience that touches all the senses, involves them, enriches their lives and facilitates a timely escape from the worries of life, and take the 'new reality' home. Satisfied guests feel a kinship that brings guest loyalty and favorable word-of-mouth advertising of the spa (Monteson & Singer, 2004). Conclusion The spa industry is yet in its nascent stage. Spas need to follow globally set principles along with attaining new growth heights. With the release of Uniform System of Financial Reporting for Spas by ISPA (Kimes & Singh, 2009, p. 84), it is expected that financial performance of the industry would be measured statistically as well. Today, the trend has dynamically changed, as more and more people love to go to spas for their full mind-body treatment. It further highlights the importance of managing various development, operations, and management issues by spas. They need to grow at a regular pace by managing the industry’s key performance indicators strategically and for getting competitive advantage. Rather than following certain marketing tactics, spa managers need to formulate a comprehensive strategy for revenue generation, efficient operations, and growth of the spa industry as a distinct entity, standing robust on its own and not as a support and advantage to the resort and hotel industry. The USA and Canada scenario of spa industry growth is quite attractive, but the spa managers need to adhere to the globally agreed operations and revenue generation principles, as followed by their hospitality industry counterparts. The spa industry has grown from its nascent stage and it cannot let down its customers and the industry stakeholders by ignoring strategic management procedures. Efficiency in spa operations is very critical for customers’ satisfaction. Operations demand focus of the management on key operations activities for increased output and performance. References Carpenter, M.L., & Upchurch, R.S. (2008). 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