Spa Industry Tones Up

ByABC News
July 15, 2002, 5:22 PM

July 18 -- These days, when many travelers check into a hotel, they can choose to battle jet lag by working out in the health club or, as is becoming increasingly popular, unwind in the spa.

For years, spas were seen as havens for the rich, places where privileged muscles could be soothed and pampered, and skin rejuvenated.

Today, however, thanks in part to the economic boom of the 1990s and the growing trend among Americans to indulge themselves, spas have become increasingly popular and profitable.

According to a study from the International Spa Association and PricewaterhouseCoopers, the spa industry had revenue of $5 billion in 1999, the last year for which data exists, and the number of spa locations doubled from 1994 to 1999, with an annual growth average of 19 percent.

In 1999, there were approximately 90.7 million spa visits in the United States.

The profit margins are also high. According to Cristina Ampil, PricewaterhouseCoopers' hospitality and leisure analyst, the average profit margin for all four types of spas club spas, day spas, resort and hotel spas and "other" spas is 17.3 percent, with the highest profits coming from day spas.

But unlike those other temples to physical well-being, health clubs, spas remain stand-alone operations. While the industry is growing quickly, it continues to be largely fragmented, and a major chain spa has not emerged as a front-runner.

Bubbling With Opportunity

The appeal of a chain spa is that it would reach a mass-market audience, and treatments could be offered at lower prices, which would appeal to both investors and potential clients.

Many spa analysts are eyeing malls as a potential growth area because of their high traffic and square footage.

The major obstacles standing in the way of a creation of a chain spa are financing, lack of management expertise, overly rapid expansion and fear of diluting quality for quantity, according to industry experts.

"Everybody is trying to position themselves as a chain spa, and there's a lot of buzz going on that the time to do it is now," says Gayle Brady, vice president of ISPA. "The problem is that growth has come quicker than expected."

The best way to describe the growth of the spa industry is to compare it to an awkward teenager just hitting puberty; the industry has grown too fast too quickly and doesn't quite know what to do with itself.