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Spa Business Strategies for Economic Downturn

By Julie Garrow, Managing Director of Intelligent Spas
Posted: November 26, 2008

Preliminary findings of Intelligent Spas’ current round of Spa Benchmark Surveys have identified the majority of spa owners and managers are forecasting positive growth in both revenue and spa visits for calendar years 2008 and 2009. This optimism indicates many spa managers believe the spa industry may be protected to some extent from the negative affects of the current economic climate, as spa consumers continue to demand relaxing spa and wellness services despite potential falls in their discretionary spending, coupled with evidence that rationalisation has already occurred in some spa markets.

In June 2008, Intelligent Spas reported 28 spa businesses in Australia had closed down and 10 businesses stopped offering spa treatments in the preceding 18 month period. This indicated some rationalisation within the market place even though the overall number of spas grew by 152% over the previous five years. Similarly Asia Pacific’s largest spa market, Thailand also experienced over 25 spa closures amongst overall strong growth.

This research shows spas are not immune to changes in supply and demand as market places evolve. Over the last five years, although the spa industry has experienced overall strong growth, some rationalisation occurred before the credit crisis began and further rationalisation is likely to occur as the global economy experiences further pressures. This is likely to reduce the timeframe for rationalisation in young spa markets such as Cambodia, which have yet to experience downturn, plus bring uncertainty to spa markets with multiple new developments in the pipeline.

Even though the short term outlook is uncertain, it is important to understand potential longer-term consequences of reactive decisions made during an economic downturn and review how spas may take advantage of market changes during economic downturn. For example: