Spas and Recession
Heartbreaking – yet not particularly surprising given the current economic climate. In fact, I am sure that we will be seeing more spas closing. Frankly, I am surprised that we haven’t seen more already. I think it speaks to the fact that these businesses likely did everything they could to try and weather the recession, but at some point they had to pull the plug.
Industry numbers show that many day spas are barely profitable, some only seeing 5% – 10% profit in a good year and much less than that during negative business climates. It is truly a labor of love for many.
- Day spas have the smallest profit margins of all spas and so are more vulnerable to a downturn in the economy than are hotel, resort or medical spas.
- Labor costs are the main culprit. Most spas find that they need to pay more than 50% of their revenue in labor costs.
- In my opinion one change that would take costs down is for the entire industry to adopt the European model where all staff are “dually licensed” – that means the therapist can do both massages and facials. The result is much more flexibility in scheduling, more career opportunities for staff, and ultimately lower costs for the spa.
- Summer is a slow season for spa-going so businesses struggling will have a hard time making it through. Usually business picks up in the fall.
- Another challenge facing day spas this year is that resort and hotel spas have become more aggressive in building their local clientele thus increasing competition.
- When a spa closes, other spas sometimes offer to accept outstanding gift certificates from the spa closing in an effort to help the industry through the transition and of course to hopefully gain a new client. When this happens, it is a great plus.
- Allowing outstanding gift certificates to be used to purchase product at the spa closing is one way to satisfy some of the customers.
- During a tough economy, consumers would be wise to be careful about purchasing series of treatments where you pay up front (six massages for $500) or gift certificates in large amounts ($1,000, etc.). Purchasing a smaller denomination gift certificate ($100 or so) which the recipient is likely to use soon is less risky.
- While spas are not “recession-proof” they have done better than many other businesses because one driver that increases demand is stress – and people are more stressed than ever.
- This is a good time to discourage additional spa openings. (Unless you are in one of the few areas where there is vibrant growth – Brazil for example.)
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