Until the proverbial economic sky began to fall in the 4Q08, Wall Street and the U.S. Government’s portrayal of the overall economy wasn’t necessarily factual. It was more like fibbing and fudging and playing with the numbers. For sure there is plenty of guilt to go around, including Congress, Wall Street and Main Street. However, I actually began to see declines in a number of non-discretionary sectors as far back as mid-2007, and although I’m no financial wiz, I’m certainly in-tune with certain markets that included shopping at high-end stores and pricey gourmet food markets, but I especially noticed something going on in the spa industry and specifically the day spa portion. Whether it’s right or wrong, the multi-billion dollar spa industry doesn’t always receive its fair amount of recognition in financial reporting, until, of course, when that recognition turns belligerently negative and the object of ridicule and disdain by those who are clueless about a spa experience beyond what they presumably read in the media.
Never mind the recent negative press, whose rabid, sanctimonious, hypocritical and self-righteous indignation was made known to the general disenfranchised and much-maligned and abused taxpaying public by the likes of the so-called objective media and our hard-working highly esteemed (and favorability-polling numbered) members of Congress, including our newly elected president, who wasted no time going after some businesses who received hefty bailouts and then seemingly went on spending frenzies to posh locations that included spas. Never mind that these incentive reward’s events were previously negotiated and contracted as long as one year in advance, a timeframe when the world was oblivious to the economy spiraling downward. Never mind that the same Washington D.C. types didn’t skip a beat when it came to carrying through on their taxpayer funded luxury retreats (although the Republicans used mostly lobbyist donations to defray costs, which doesn’t obviate the point) in 1Q09. Suddenly, it became de rigueur to trash, ridicule and judge those who went to spas. How absolutely insane, gasp, gasp, that anyone would even need to get a massage! Pure hedonism, but not on my dime clamors Mr. and Ms. U.S. Taxpayer.
Yes, we’ve had our sensibilities jolted. Maybe that’s a good thing. But, it has taken some in the industry to grasp that even if prices are reduced, and although their business may have “it”, many may not find it viable to “come”. This is true of spa visits in general, but is especially acute in the day spa arena. Consider the following, which were prevalent in late 2006 going into 2007, long before the floor dropped in 4Q08, and which aren’t necessarily due to current economic conditions, but which do in fact impact operationally and profitably on a spa business being able to sustain itself under any economic condition or circumstance:
• The over-saturation in the marketplace of day spas and the individual businesses not being able to sustain operationally due to competition and the inability to grow the business to a point of repeated profitability.
• More similar businesses in a geographic area also translates to more purchasing options for consumers.
• Diminished employment for the day spa consumer, and less spendable income on a non-essential, such as a visit to the day spa, or any spa for that matter (travel is no longer a table item to consider). The formula used for calculating the U.S. unemployment rate omits many contributing factors that further skew the actual unemployment rate (e.g. those who are chronically unemployed and/or underemployed, those who unemployment benefits have been exhausted, etc.).
• Bread and butter issues confronting the spa consumer, creating a decrease in monies spent, or frequency of visits, and/or a total elimination of visit to the day spa.
• Diminished buying power for the spa consumer as their personal expenses increases due to subtle inflationary actions (e.g. increased fuel costs at the pump directly impacting the cost of goods elsewhere, or increased medical/health insurance costs, credit and mortgage debacles, etc.).
• The overall lack of confidence in consumer spending supported by current erratic fluctuations in the U.S. and global stock markets, which are directly and indirectly impacted by geo-political unrest.
• The devaluation of the U.S. dollar.
All of these factors eventually impact all segments of the economy, including the day spa sector of the spa industry. A treatment at a day spa is weighed more heavily by the consumer’s conundrum as a “..do I spend x-amount of money on a treatment, or do I spend x-amount of money on my living expenses..”. The situation may not be this dire to some day spa consumers, but I’m sure a number of day spa consumers are in fact experiencing this type of personal economic dilemma, given the consequences of their spending experiences. When economic issues confront the consumer, the first they usually do is pull back on the spending of non-essentials, and like it or not, going to the day spa for a treatment isn’t one of their “essentials”.
These economic factors do play into the overall decline and/or negativity of consumer confidence in spending, which also include the day spa. Given the economic challenges many are confronted with today of spending money on a massage or facial, or their bread and butter issues, the consumer will invariably turn to the latter and not the former. A person may not be able to live without bread and butter, but they definitely can live without a visit to the spa.
By Terry Herman
Terry Herman is a recognized expert in the spa industry, and regularly covers issues that include business, management, operations, customer care, treatments, products, and trends. In addition to writing and reviewing, she is also a management consultant and motivational speaker. You can email her at email@example.com.
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