Lines are blurring - Segmentation abounding

Today in most resorts the inclusion of a spa is no longer a luxury, but rather a standard amenity, expected and ubiquitous. Significant cross pollinating among the day, medical, amenity, and destination spas has created a competitive and comprehensive spa environment that here-to-fore that has never been experienced. This dynamic has created the phenomenon of Spa Wars, where product differentiation is subtle and the competitive edge can be paper thin.

It is ironic that as the spa industry matures, distinctions between spa types are becoming blurred, resulting in subtle levels of segmentation and product differentiation that provide 'options' to the savvy spa goer and 'confusion' to the rest of us. Historically, hotel and resort spas have been classified as either 'destination' or 'amenity', meaning they were either the specific reason to travel to a remote location or they were and an added amenity (sometimes created as an after thought) for the an indulgent resort clientele.

In many cases consumers were forced to make a choice between the comprehensive programs of a destination resort and the multi-star, multi-diamond experience of an amenity resort. The decision process is becoming less and less 'either/or'. While destination spas are expanding upon their services and facilities, amenity spas are beefing up their programming and treatments, both in an attempt to address market expectations.

For both amenity and destination spas this is big business with significant, up-front cap-ex, often north of $500 per square foot. The result is a situation where amenity spas have become one of the main financial drivers of the resort environment, helping build occupancy, drive rate and enhance yield. And in response to the shift in prominence of the amenity spa, destination spas have enhanced the guest experience relying on personalized guest services, careful attention to thread counts and expanded wine lists. The dance continues as market expectations steadily ratchet up the ante. In resort environments where residential, fractional, and condo and timeshare inventories are part of the development luxury spas offer residential guests healthy-living opportunities. There is much common ground; however, within the context of both Destination and Amenity spas there are a number of issues that are germane to both segments. Our top five issues and trends for the spa industry in 2006 are summarized below.

1. Person-Power Shortage

The spa industry needs a few (more) good managers! Good therapists do not always make good managers conversely classically-trained managers focusing on the bottom line can sometimes miss the unique cultural nuances of a smoothly-run spa. Managers who concentrate only on the bottom and the spa's short-term successes often make decisions that tend to increase the level of cannibalization of personnel in the management ranks of spas. It is relatively common to see seasoned managers in a particular market with resumes that include the majority of the competition. Longer-term focus on operations is starting to become the norm. Increased emphasis on management's training and service delivery is what is keeping spas competitive.

2. Results, Results, Results

Results -oriented spa programs have raised the bar with respect to treatments and customer expectations. The influence of medical and holistic spa practices into mainstream spas have introduced everything from plastic surgery and non-surgical face lifts, to meditation, yoga, and essential oils as a way of smoothing wrinkles on the outside as well as on the inside. Price sensitivity is no longer an issue when results are in question. Fueled by the aging baby-boomers, the spa industry is rapidly moving from the beauty/pampering model to the complete wellness models. This trend requires that hotel and resort spas get on the 'wellness bus' but in return there is tremendous potential for packaging programming that requires extended stays, increasing retail sales, and expanding food and beverage menus and revenues. In this area medical tourism and destination medical spas are an option for guests to go for maximum results in a medical environment that can cater to their need. The jury is still out whether this is a spa operation as a clinic or a kinder, gentler clinic dressed as a spa. It's all about results.

3. Spa Creep

Spa Creep is all about enhancing the existing revenue streams at properties, especially in the area of retail sales and food and beverage. Because spas are becoming a way to achieve balance in one's life, treatments, services and even (food) menu items are about enjoyment and not deprivation. Spa items such as soaps, shampoos and essential oils are showing up in in-room amenity baskets. Retail outlets (in and out of the spa) are carrying items related to balanced living, quality time. Sometime introspective, sometimes instructional and sometimes frivolous.

Because spas are addressing life style issues it is important to remember that these issues sometimes require information. Savvy hotel managers are working closely with their spa managers and are utilizing their meeting facilities to provide conferences that address lifestyle issues, sometimes only alluded to in spa menus. These conferences or seminars range in topics from stopping smoking to spiritual parenting.

4. It's about what you don't see

There is now more focus on Back of the (spa) House is providing greater support for spa operations which includes sophisticated receiving and storage systems, control of pilferable, high-value item and employee lounges that provide a respite from client demands. Given the cost (and desirability) of many spa products (for guest treatments and retail sales) it is important to keep tight control of the inventory, which includes taking into account temperature and moisture requirements that maintain maximum shelf life.

Supporting employees is one degree of separation away from supporting the guests. It is very hard to have attentive high-touch service if the employees' environment is not evocative of the same. Spa owners are becoming aware that enhancing dollars per square feet is sales, sometimes results in focusing on how's those revenue producing square feet are supported by the overall operation. Skimping on the back of the house is a big no-no.

5. Product Standardization and Branding

Many chains are developing their own spa brands. Sometimes they start with and existing brand and modify it. Sometimes start with a name and concept and integrate it into their existing properties. Sometimes keep the product double branded. Whatever the development scenario, most established hotel brands are looking to standardizing their spa offerings, positioning them as and integral part of the overall brand development.

6. Make Mine Green

Eco spas continue to grow. Environmentally-friendly green destinations juxtapose ecological balance with personal balance. The back to nature movement is more than a marketing ploy, but rather a comprehensive way to provide a genuine experience with absolute integrity. Solar panels for heating and cooling, natural building materials, closed water systems (including gray water for irrigation and well water for cooking and drinking) and a self reliant energy system are ways to create a unique and nurturing environment. In this development environment, initial building costs are generally higher than normal for new construction as well as retro-fitted spa, however carefully crafted sales and marketing can create a return that addresses these costs and then some.

Success at any level in the future of the spa world is about listening to guests and employees, giving them what they need as well as what they want and then just a bit more.

By Peter Anderson, principal, Anderson and Associates.

Anderson and Associates is a consulting firm that focuses on the issues of spa development and wellness programming for full-service hotels and destination resorts. In this capacity, Mr. Anderson consults to a variety of clients for the inclusion of spa programs and wellness therapies. Mr. Anderson's firm conducts engagements in market and financial analysis by tracking and evaluating spa and wellness trends in the context of industry trends which include emerging healing modalities in the allopathic and alternative medical disciplines. Mr. Anderson holds a Masters of Professional Studies from Cornell University School of Hotel Administration and a Bachelors of Arts in PsychologicalBasis of Behavior from the University of Pennsylvania. Mr. Anderson can be contacted at 310-392-9368 or [email protected]

Reprinted with permission from Hotel Executive