In 2018, China’s consumer sectors saw the arrival of a flood of younger customers, yet the economic slowdown has resulted in more sensible and cautious consumption patterns. In the spa industry in 2019, there is a need for product and service reforms. By Fifi Kao
2018 has been s a turbulent year for the economy and for the consumer markets. The year has seen China’s worst business cycle turndown in more than a decade, an increasingly fierce trade war between the United States and China, big changes to tax policy, a prevailing consumption downgrading, and tough battles between business tycoons for new retail modes. Such a complicated situation and so many variables have had a big influence on China’s economic and consumer trends, as well as the spa industry.
In the world of China’s economy, there is the widely-referenced “curse of 8”. When the year’s number includes the number “8”, it is said, there will be a serious economic crisis. In 1998, China’s industrial economy was heavily affected by the financial crisis in Southeast Asia, and a large number of private enterprises closed down. In 2008, a global financial crisis broke out following the U.S. subprime mortgage crisis and dealt a heavy blow to China’s economy. Now in 2018, due to various internal and external factors, China’s economy once again has arrived at a crucial moment: capital raised in the primary market is down 80%; the tax rate of private placement has reached 35%; the A-share market has been staying at the lower end of the range; the real estate market continued to weaken, and a lot of P2P platforms defaulted on bonds and closed down.
The severe economic downturn, with soaring costs, unprecedented supervision and the Sino-U.S. trade war, has placed large numbers of middle and small-sized enterprises at the brink of death. Besides, the once-crazy venture capital investment market has softened and many film companies, start-ups depending on capital investment, and particularly internet companies are facing hard times.
Some spa hotel and resort-related companies have had to suspend new projects due to financial tightening or have gained quite different market feedback from previous expectations. According to a SpaChina survey, 47% of the main spa consumer group – 1970s and 80s generation people – have reduced their visits to luxury spas in 2018, with expenditure down by a third compared with that of previous years, from an annual RMB 30,000-80,000 to today’s RMB 10,000-60,000.
In the midst of a sudden consumption downgrading after many years’ of upgrades, enterprises are uncomfortably encountering slower guest growth and a change in consumer groups. Everyone could obviously feel the fierce competition in the spa industry during the latter half of 2018. So how can spas buck the trend and revitalize their return on investment more quickly, wisely combining short-term profit with long-term strategic development, and expanding business and markets in innovative ways?
In our last issue, we explained some of the new changes and trends in China’s spa industry: spa consumption groups are clearly classified into 1970s, 1980s, and 1990s, each of which have their specific requirements and preferences concerning wellness, fitness, spa and beauty; the boundary between spa line and retail line products is beginning to blur; a combination of online and offline sales is the wish of all product providers; and the spa industry is in need of IT technical improvements and industrial upgrading that meet China’s actual requirements. In this issue, we will further share with you SpaChina’s survey results and analyze the future trends in China’s spa industry.
Usage of facial and body equipment increases 22%
The SpaChina survey shows that labor costs in China’s spa industry in 2018 have increased 69% over 2017. On average, every spa has 7.8 full-time staff including spa manager and receptionist. However, despite the fact that labor costs are the biggest cost for spa operators, many customers still think that equipment is much more expensive than hands. So they can accept an equipment treatment with much higher price. The survey also indicates that the top three popular equipment functions are: deep cleansing, anti-aging & lifting, and weight loss & body shaping.
From the perspective of treatment delivery, equipment enhance the treatment effects and give customers a better experience when combined with manual massages. With regard to labor, since almost every spa has problems in recruiting, training and retaining staff, the introduction of equipment treatments has partially ease the personnel problem. In the aspect of income, the price of a 45-60 minutes’ equipment treatment is 15%-20% higher than a manual treatment of the same duration.
Spa services go together with private training and personal fitness programs
In the past, spa lovers didn’t love exercise and gym goers didn’t like spa. Meanwhile, because of the different levels of consumption, these two categories always had their own consumer groups. However, since 2018, an overlap has emerged. In particular, more and more spa consumers begin to fall in love with fitness as well. In developed cities, people at different ages now see fitness as a fashionable lifestyle under the influence of internet stars and we-media and selfie trends. The demand for yoga, Pilates, dance, body shaping and fitness sessions in China’s first-tier cities has increased 52% compared with 2017.
In the meantime, there is more co-operation between private trainers or sports program & trainer providers and hotel fitness centers & spas. The former send trainers and programs to spas, making a bigger overlap of fitness people and spa people. The consumption level differential between spa treatments and private training programs are also largely reduced.
Spa consultants and suppliers offer one-stop solutions
The spa consultants and suppliers of the future will need to offer one-stop comprehensive services from concept to design, hardware to products, treatments design to personnel training and prophase management. They need to continually integrate various resources reasonably during the process, or even provide human resources, operational and management solutions.
Facilities are chargeable; and the number of water treatments increases
There are now a wide variety of facilities and wet facilities in the spa, way beyond bathing pools and sauna. The halotherapy capsule, oxygen capsule, negative oxygen ion capsule are replacing traditional free-of-charge sauna and steam and generating much revenue for the spas. Besides, many rehabilitative programs are also very popular, including deep relaxing practices such as floating and watsu, or bathing in imitated carbonate spring pools which can stimulate blood circulation and help with detoxing. Water facilities have been transformed from traditional free bathing to comprehensive programs of wellness, healing and recovery. The options are increasing and the profit models are more diversified.
New programs and experience are updated regularly
Spa treatments, equipment and products need to be “new” enough to win customers’ hearts and make them feel that they are something they can’t find elsewhere or there is something new that they haven’t experienced before. “New” is forever the best way to draw attention since people’s curiosity is infinite. Research shows that menu updates at least every 6 to 8 months with new treatments can draw customers’ attention.
With fiercer market competition, hotel spas should no longer wait patiently for guests to appear. On the contrary, they must try to attract customers via different channels and form their characteristic operation modes. Promotions and member discounts are necessary to increase customer’s consumption. If service levels and facilities permit, the best way is always to tailor spa programs for individuals.
After customers come to the spa, the service that is the most important of all is how to make customers wish to revisit. For therapists, smiles, self-confidence, professional knowledge and skills are essential. For spas, a good environment, caring services, an efficient management system and professional aftersales are what customers seek. Therefore, operators need to pay attention to details and give staff professional training and instruction in order to increase the revenue.