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editor’s letter Budget spas


W


e’ve had budget airlines, budget hotels, and budget health clubs. Now


we’re predicting spas will be next. All indicators point to a coming


revolution when the spa market will follow other time-based leisure businesses into the disruptive phase associated with the emergence of a budget or low-cost model. The sector is ripe for change given


the situation which exists: high prices, low volumes, marginally profitable businesses and masses of pent up demand – all the signs are there. When budget operators launch,


with their pared-down offers, they grow fast, forcing existing operators to adapt their pricing and business models to tackle the new competition. So what happens when a market is attacked by


operators running budget businesses? Typically at the top of the market, the high-end


operations remain largely unscathed, while at the value end, existing low-cost businesses with loyal clients can compete relatively well. It tends to be the mid-market operators who feel the pressure and either sell their more marginal or loss-making sites to the budget operators so they can be relaunched as part of a new budget chain or pivot and rebrand as low-cost themselves. This second option can be a smart move, as it enables


them to leapfrog the budget entrants by creating an ‘instant’ budget business with little disruption to trading, while new businesses are faced with the slog of development. In this issue we pick up the theme of a great


conference session from this year’s Global Spa Summit, which was moderated by Pete Ellis from SpaFinder, Inc


spa business HANDBOOK T e global resource for spa professionals


The annual Spa Business Handbook brings together research and vital reference content. Visit the website: www.spahandbook.com or view it online at www.spahandbook.com/digital


SPA BUSINESS 3 2011 ©Cybertrek 2011


When budget operators launch, with their pared-down offers, they grow their businesses fast, forcing existing operators to adapt both their pricing and their business models to tackle the new competition


(see p22). The topic was franchising and many of the points raised in the discussions are pertinent. In the session, Massage Envy’s CG Funk explained


how her business has grown to employ 16,000 therapists and turn over us$652 a year (€464m, £406m). Given it’s taken the most popular treatment spas offer


and built a profitable business around it, Massage Envy may well turn out to be the first budget spa operator in disguise. However, more direct competition will follow, with franchising being an obvious way to scale. Online deal sites are already disrupting the sector


and educating people to expect cheaper prices, so the stretch required to accommodate the arrival of new businesses based on this pricing is not so great. And it’s not all bad news – budget businesses grow


markets, they don’t just cannibalise them – 22 per cent of Massage Envy’s clients had never had a massage before.


Liz Terry, Editor twitter: @elizterry spa-kit.net T e search engine for spa buyers


Find the suppliers you need to equip your spa quickly and easily. Over 57,000 buyers each month use the service, which includes sector- specifi c linked websites and a weekly ezine.


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