The 2018 ISPA U.S. Spa Industry Study

Wednesday, 26 September 2018

The 2018 ISPA U.S. Spa Industry Study

by Colin McIlheney

The spa industry in the U.S. continues to be in buoyant form. The 2018 U.S. Spa Industry Study conducted by PwC highlights further strong growth in the sector. Every one of the ‘Big 5’ statistics has hit an all-time high, with revenue passing $17 billion for the first time. However, even with a record number of people currently employed in the industry, there are still over 35,000 service provider positions and more than 2,500 spa director manager positions vacant across the country. The study re-enforces the view that this is the “biggest issue of the day.”

Record Growth

The performance of the U.S. economy is the key backdrop for assessing the upward trajectory of the spa industry. With annualized growth of 2.2 percent in the economy as a whole, the growth in revenue for the spa industry of 4.3 percent is a very positive sign. Total revenue now stands at $17.5 billion; this number has climbed for eight successive years, and total industry revenues are now 43 percent higher than at the 2009 downturn ($12.3 billion). In the context of other leisure segments, health and racquet club revenues are at $27.1 billion, the cruise line industry is at $21.6 billion and the amusement and theme park industry is on a par with the spa industry. As the economy marches on with much higher growth figures in the second quarter of 2018, there is confidence across many spas that they will see that reflected in their own numbers—the spa industry being a good bellwether for overall spending patterns.

There are now more spas in the U.S. than at any time in history: an estimated 21,770 spa establishments, overtaking the previous record (21,300) registered just before the financial crisis in 2008.

In 2017, there were an estimated 1,080 new spa openings, adding 5.1 percent to the number of spas in operation.  The new spa openings were partly offset by an estimated 580 spa closures over the course of 2017.The net effect was the addition of approximately 500 spa locations during 2017 (2.4 percent). This showcases the growth of the industry as a whole

Average revenues per spa location rose to $803,000 in 2017, an increase of 1.9 percent on the 2016 average of $788,000. With average revenues now passing the benchmark $800,000 level, the 2017 out-turn represents a further steady advance for the industry.

More than half a million people are visiting U.S. spas every day. This equates to some 187 million visits in 2017. This combination of revenues and visits translates into a figure of revenue per visit of $93.70, which is up again.

The report provides an often-unseen illuminating insight into the importance of gift cards for the industry. The data suggests that 83 percent of spas offer gift cards; the revenue generated is $1.55 billion (9 percent of overall revenue) and equates to revenue of $86,200 per spa.

Workforce Woes

One of the most compelling numbers in the study is the total number of individuals employed in the U.S. spa industry. This now stands at 372,100, which is the highest figure ever recorded. The balance of full and part time roles is basically now at a balance of 50-50, and the number of contractors continues to decline.

The economic context is again crucial. Unemployment levels in the U.S. are at near-record lows, yet the number of vacancies in the spa industry is rising. There are 35,480 service provider roles open and 2,540 spa directors and managers required. There are many initiatives being undertaken to address this deficit—but it is clear that this shortfall may well be beginning to impact the capacity of the industry to meet ever-increasing demand from customers.

The lack of qualified talent is far and away the single most important issue in the industry, cited in some form or other by 40 percent of respondents.  Particular shortages are reported of massage therapists, but also notable spikes in shortages of nail technicians and people with management skills.  Smaller spas, rural operators and those with seasonal demand find recruitment especially challenging.

The Final Pieces

Aside from the battle for talent, two issues were identified in the regulation space by respondents. The first issue is the difference between states in licensing regulations. The second is the impact of regulations on benefits. For example, it was stated that contract and part-time staff not being regarded as full-time employees with health benefits is a barrier to hiring and keeping good people.

Looking ahead, spas across the board are aiming to expand the range of choices available to their clients. Three in five spas said they would be adding or creating new treatment offerings while almost one in two said they would be introducing new product lines. The creation of a new spa menu is planned by 28 percent of spas.

Spas are also focused on strengthening their business through internally focused measures. A large majority of spas (59 percent) said they plan to introduce new or revised standard operating procedures. Almost one in four said they will introduce new spa management software.

Staffing and employee development also loom large in spas’ plans for 2018, with 54 percent saying they intend to introduce new employee training opportunities, while one in three spas stated their intention to create new jobs. All of this plays into the need for more work on the employee experience as evidenced by the 2018 ISPA Spa Workforce Survey.

Client-facing and marketing issues are also on the agenda, with 43 percent of spas planning new community partnerships, 41 percent saying they will be introducing new promotions targeting the male audience and 18 percent of spas indicating an intention to introduce new spa branding.

The survey is a snapshot of a key U.S. industry at a moment in time—where the key metrics are all on the rise, profitability is strong and the main barrier to even faster growth is simply a lack of qualified, experienced people. All eyes are on the initiatives being undertaken to solve this key piece of the jigsaw puzzle.

Colin McIlheney is global research director at PricewaterhouseCoopers (PwC), who conducts the U.S. Spa Industry Study each year on behalf of the ISPA Foundation.

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