Luxury spa treatments suffer as economic downturn hits US spas

June 16, 2010 - PRLog -- The recession hit spas hard. Spas describe 2009 as a disaster. Revenues were down 15% on the previous year. Such a drop shocked spas which had become accustomed to continuous expansion. A decade of double digit growth had led to oversupply of spas (saturation noted by Diagonal Reports in 2006) which made the problem worse. In addition, costs had spiraled out of control during the boom. Initially, spas delayed their response to falling revenues and did not react – by reducing prices - until late 2009.

A spa marries beauty and wellness therapies so, unsurprisingly, “beauty maintenance” and “quality of life” services account for most spa business in the US. The top three spa categories are facials, hair removal and massage. Combined these account for almost 85% of revenues in spas. The best performing spas have always maintained that it is the basic services which generate the most money. As one manager noted, “Media-hyped, exotic sounding services may attract attention, but in the end people buy the basics: massages, and facials” The recession has only highlighted their importance.

Changes in people's lifestyles (such as prolonged computer use) and their desire to improve their wellbeing have driven demand for massages which now account for half of all spa business. It augurs well for the future of spas that these massage therapies attract the widest range of consumer segments in terms of age and gender. Facial skincare is also one of the most recession resistant spa treatments. Consumers are willing to continue spending and even to pay premium prices for quality professional services to maintain the face, which is their most visible body part.

An usual situation has emerged as regards brand share in the spa market. Long established companies in the personal care market failed to develop suitable lines for spas. The gap in the product market was filled by mainly new start-ups. Spas served as the launchpad for the development of an entirely new category of beauty care products. “Science” and “organic” brands – strange bedfellows- have taken over this market, accounting for nearly all sales and have squeezed out “beauty” brands in the process. “Beauty” brands are the traditional beauty products made by cosmetics companies. “Science” describes products marketed as having effective outcomes and proven results backed by trials. “Organics” are green or natural product lines. This shift towards cosmeceuticals (pharma) and botanicals (plant) was first identified by Diagonal Reports in 2005

Looking ahead, spas hope to maintain sales for the near future as current consumer behaviour remains  unpredictable and erratic. In 2008 demand collapsed for expensive services in any category (even massage and facials) and the spa reaction was to eliminate all of the high priced luxury offerings. As one manager noted, “Even high end clients are conserving their wealth and spending it differently.” Spas worry that the economic downturn could be shaping a new type of consumer behaviour, one that will outlive the economic recession that prompted it. There is concern that the budget-minded consumer is here to stay and the free spending levels of 2007 and before will not return any time soon.  No significant upturn is expected in spa spending until 2011 or 2012

In the meantime, spas are concentrating on the opportunities. After the explosive growth, the shakeout was overdue, spas have moved into a more mature phase of their market development. They can no longer be seen as a license to print money but businesses which must control costs and offer services which clients want. Spas - once synonymous with luxury and pampering - are no longer the preserve of a small and elite consumer segment. Spa usage has been democratised as the technical revolution in spas has brought wellbeing services (especially massages) to the masses. The consumer switch from luxury to maintenance treatments benefits a certain (leaner) type of spa operators. Compact services are now in demand and spas which offer  “smaller price and smaller time packages” to their clients are now expanding in the US.

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Diagonal Reports tracks the beauty and wellness market worldwide. It is the leading specialist in the professional global beauty and skincare market.