Demand for Pampering Drives the Day Spa Industry

According to Hannelore Leavy, founder and executive director of the Day Spa Association (DSA), based in West New York, N.J., the term “day spa” was created and first used by Catherine Atzen, who opened the Catherine Atzen Day Spa in New York City in 1985. Atzen's business combined the concepts of a destination spa, professional skin care and escape from life's stresses into a single, convenient activity. The Catherine Atzen Day Spa offers services ranging from facials and massages to skin and body treatments, manicures, pedicures, waxing, and hair services. Spa Manager Maria Arias says both locals and out-of-towners comprise the spa's clientele. Most are more than 30 years old, and between 30 to 35 percent of them are men—a higher level than the national average of 20 to 25 percent for the spa industry, according to DSA. The spa does approximately $1 million in annual sales, Arias says.

DSA research indicates that there are currently between 350 and 400 stand-alone U.S. day spas. However, if the definition of a spa is expanded to include beauty/skin care salons that are converting to day spas, the numbers soar in a hurry. DSA estimates that 4,000, or one-third of the 11,000 skin care salons in the United States, have become day spas. And DSA projects that growth will reach 7,000 or 8,000 salon/day spas over the next four to five years.

Resorts are also getting into the day spa market as hotels open their spa facilities to day visitors. DSA's research indicates that a majority of the resorts/hotels being built or refurbished are adding spas.

The Claremont Resort and Spa, which opened its doors in 1915, began giving hotel guests access to its spa 12 years ago. Day guests were invited in approximately seven years ago, according to Nancy Cauthorn, the spa's director. The Claremont plans to augment its package of spa services beginning in spring 200 by offering environmental outdoor experiences for guests, such as hiking and kayaking, Cauthorn says. Due to increasing demand for its services, the Claremont Spa is undergoing a major expansion and remodel that is scheduled to be completed this winter. The new spa, which will be 15,000 square feet, with an additional 2,000 square feet for salon services and retail, will accommodate 52 treatments per hour, up from 20 treatments per hour, Cauthorn says.

Acunzo offers a rough extrapolation that very large spas of 5,000 square feet and more average between $7 million and $8 million a year in sales. While Cauthorn will not give specific revenue numbers, she says that the Claremont Spa is experiencing a 12 percent annual increase in business.

As some resort spas become day spas, some day spas are taking aim at becoming destination spas. Ten Thousand Waves, which opened in Santa Fe in 1981, is considering adding a restaurant and additional lodging accommodations, according to Spa Manager Phil Hindmarch, who says that between 60 and 70 percent of his clients are tourists. Ten Thousand Waves is patterned after Japanese health spas that focus on relaxation and comfort. The spa offers hot tubs, saunas, cold plunges, a variety of massages, facials and a range of body treatments. With sales of $5.5 million for its last fiscal year, the spa is experiencing 6.7 percent annual growth, Hindmarch says.

The key to increasing day spa profitability is retail sales, says Acunzo. At the typical day spa, services comprise 80 percent of sales, while retail makes up the remaining 20 percent, he says. Because spa services are labor/cost intensive, he adds, it is essential for day spas to have retail sales of 20 percent or higher to be profitable.

“If a spa does it right,” says DSA's Levy, “retail is where most of its income comes from.” Twenty-five to 30 percent of sales at Catherine Atzen are retail, Arias says. At Ten Thousand Waves, retail represents 10 to 15 percent of sales, according to Hindmarch. And Cauthorn says that retail is in the range of 25 to 50 percent of sales at the Claremont Spa.

Different spa services are associated with different levels of retail sales, says Acunzo. He estimates that for every $1 spent on skin care/facial services at a spa, 40 cents is spent on related retail products; for every $1 spent on manicures, 10 cents is sold in retail; and for every $1 spent on massage/body care services, 5 cents is sold in retail.

While gift certificates drive the Claremont's spa business, accounting for 60 percent of actual sales, those sales result in no more than 40 percent of services rendered, because not all gift certificates are redeemed. Cauthorn adds that online sales of gift certificates are growing at between 15 and 35 percent a month. All three spas carry some natural products, with Ten Thousand Waves almost exclusively selling natural and organic products.

Who goes to the spa? According to DSA, 95 percent of day spa goers are women and 65 percent of them have incomes of less than $65,000 a year. Over the past 10 years, the age range of day spa clients has broadened from people in their late 30s to early 50s to those in their early 20s through mid-60s. Acunzo says that more 25- to 34-year-old women are going to day spas now because they've grown up seeing their mothers do it. And DSA projects that anti-aging treatments for aging baby boomers will influence day spa marketing in the next decade.

In the future, Acunzo predicts, the Internet will play an increasing role in booking appointments. “Within three years, if your appointment book is not online, you will not be competitive,” he says. Over the next five to 15 years, Acunzo foresees the creation of spa brands and the emergence of national spa chains that will bring stock offerings to market and attract a growing volume of investors.