The Top Five Beauty Treatments in Spas

Exotic spa treatments may attract media attention but people always buy the basic services. Beauty treatments are an important part of the hotel spa business. Hotels not only face stiff competition from surrounding spas but also must deal with the significant innovation which is taking place in the category - especially in top-end spas. It can be difficult to differentiate the top-end day spas particularly 'city spas' from top hotel spas. New spa therapies are offered not just by day spas, but also by new entrants such as medspas, doctors' clinics, and even hospitals. The still relatively young hotel spa industry needs to be aware of this innovation, so as not to lose out to rivals. It is time to examine the top treatments in beauty and their importance to spas.

As spas, along with all personal care businesses, are entering the uncharted territory of recession, it is timely to look at the bottom line - at the therapies that actually generate sales. Traditionally, massage and beauty services are the bread and butter of hotel spas. But now more beauty businesses - especially upper-end day and city spas are competing for that beauty and wellness spending.

Diagonal Reports is now researching the beauty and wellness business - such as hotel spas and different types of day spas and beauty salons in the USA, UK and China. It warns that spa channel data must be treated with caution in different countries and businesses. As is often stated, the total spa market is very fragmented, and it is not always possible to separate out hotel spas. Spa performance varies widely, that is, by company, by location, by consumer segment served (e.g. for hotel spas, stay guest or walk ins), and by size of spa.

To illustrate the range of sizes in hotel category, some hotel spas can range from 100 M2 with revenues of under one million US dollars, to units with many, many multiples of those figures. For example in France the average health spa generates 15 times more revenue than a body care salon, and 21 times more than a beauty salon.

A further complication arises when comparing data from different businesses is the lack of standardized categories for what can be very extensive menu of services (some self- identify as offering almost 200 beauty and wellness therapies), combined with many classifications and counting methods in use.

Typically hotel spas offer an extensive range of therapies. This can include massage and body care, beauty treatments (aesthetics, cosmetic enhancement), and even fitness and sport. But though hotel spas can offer many therapies a few basics account for most business. As one US spa expert reminded Diagonal Reports, 'Media-hyped, exotic sounding services can attract a lot of media attention, but in the end people buy the basics.'

And what are basics? Hotel spas generate most revenues from massage, along with body care treatments. But because massage is also sold as part of a package, that is, massage combined with a wrap and a facial, it can be difficult for spas to differentiate body beauty from the massage category. Examples of popular body beauty treatments would include exfoliation wraps and moisturising oils.

The top categories combined, massage and body care, can account for over 80% of revenues in the hotel spas sampled by Diagonal Reports in the UK, the USA, and China. In China where massage is the leading spa therapy, hotels spas further differentiate themselves by specialising in different styles of massage e.g. Aromatherapy, European, Balinese, Thai, Tibetan, etc. The high level of income from massage illustrates the fact that hotel spas are used primarily for pampering and relaxing rather than pure beauty.

As rule of thumb, beauty is the second most important revenue source for hotel spas, that is after massage and body care. Beauty treatments can account for up to 50% of revenues. The beauty category, sometimes called aesthetics, can include some or all of the following face care, skin rejuvenation, hair removal (depilation), hair care, and nail care treatments.

The very fragmented nature of the hotel spa market, particularly when comparing different countries, makes it difficult to issue conclusive statements about the range of beauty therapies offered and the popularity of different therapies. It is therefore worthwhile to look at beauty demands in the longer established beauty salon/spa channel, in particular the upper end segment. They are not only competitors to hotel spas, but most resemble them. The upper end salons/spas have accumulated extensive experience, and thus are able to identify the leading services, and to benefit from changes in consumer demand.

The top five therapies in beauty salons/spas: (rankings approximate)

The above table lists the top therapies used in beauty salons/spas in the approximate order of importance. The therapies identified and their rankings are from the UK, France and Germany. These three have been selected because the data available is comprehensive, national, reliable, and is broadly comparable across the three European countries.

Patterns of demand are remarkably similar across all countries researched by Diagonal Reports. That is, a few therapies account for most demand in the beauty services market. They are facial care, hair removal and nails. The top three combined account for, approximately, 80% or more of business. This figure holds despite whatever particular metrics are applied, such as revenues generated or consumer demand. In contrast, most other therapies struggle to reach a mere 5% of revenues. (Note: the actual breakout of demand/revenues varies by type of spa business, rather obviously only spas that offer tanning services generate any revenues from that category)

The most competitive beauty categories are hair removal and nails. They may be high volume, but they are increasingly low margin. Some industry experts fear that on-going price wars, although they may stimulate consumer numbers, could discount these categories into oblivion, and push marginal salons below profitability. As one example of how prices can fall, in some new French chains the price of the top removal treatments are two to three time lower than in the 'average' beauty salon.

The extreme competition for beauty categories such as hair removal and nails, along with tanning and even holistic massage is due to the entry not just of budget salons but also of at-home or mobile service providers.

Extreme competition forces many beauty salons/spas, particularly the upmarket segment, to focus on other beauty categories, in particular skin care and body shaping. Further, the very upper end of the market is investing in innovative, high tech, and medicalised beauty. Selected examples of high tech would include in skin care dermal injectables, dermabrasion, 'medical grade peels,' non-surgical face-lifts, electric/energy therapies; in body shaping liposuction and cellulite treatments; and in hair removal laser treatments.

Innovative beauty therapies present a golden opportunity for hotel spas. Hotel spas, compared to most beauty salons, have the resources - eg the significant management skills and financial wherewithal to enable them to offer these services.

The migration from traditional to high-tech therapies requires a level of investment in equipment, in staffing and in regulatory compliance that is an effective market barrier for any low cost competitors. The investment is worthwhile because unlike traditional beauty that has been stagnant in many countries in recent years demand for high-tech innovative beauty is growing, often in double digit figures.

However, many spas are reluctant to invest in this new beauty market given the continuing uncertainty about the regulatory future. As one example, in France, there are attempts to limit new hair removal methods to licensed medical professionals and to restrict beauty businesses to waxes and tweezers.

In addition, even spas that want to expand beauty treatments face strong competition for qualified staff. Across China, France, the USA and UK, experts all identified shortage of staff. As one US spa expert explained, 'Labor is a huge challenge. Everyone is competing for the same labor pool. So demand for wages goes up. Everybody that graduates from the training schools gets hired, top of the class to bottom. So maybe you are hiring people without the quality of skills you require, So you must invest in your own training, which is another cost.'

Research director of Diagonal Reports, Jacqueline Clarke has designed and developed the company’s professional beauty market research programme. She directs the Global Salon Panel (GSP) series which analyses and synthesises intelligence on the beauty and well-being markets. Ms. Clarke knows the global market and identifies and tracks key sector trends globally. Ms. Clarke's global expertise covers the largest beautycare/wellness markets worldwide, including the US, Latin America, Europe and Asia. She has worked with some of the largest beauty companies in the US and Europe. Ms. Clarke can be contacted at +353-4695-49027 or [email protected]

By Jacqueline Clarke, Research Director, Diagonal Reports

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