Spa Business Trends in Asia

SPA BUSINESS TRENDS IN ASIA
and their impact on the global spa industry
Samantha Foster
Destination Spa Management Ltd
6th March, 2014.
AGENDA
Asia &
Asian Spa
Industry
Emerging
Business
Trends
Impact on
Global
Spa
Industry
ASIAN SPA INDUSTRY
OVERVIEW
ASIA FAST FACTS
ASIA IS BIG
•  51 countries
•  8.7% earth’s surface;
•  29.4% earth’s land mass
•  60+% earth’s population
•  4.3b excl. Russia
•  quadrupled in C.20
•  6 of the 10 most
populous countries
•  7 incl. Russia
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ASIA FAST FACTS
ASIA IS DIVERSE
North
Central
• 
Asia is not homogenous
• 
culturally, 5 very diverse regions:
• 
>50 official languages
East
West
South
South East
Asia - United Nations sub-regions
•  thousands of unofficial languages
• 
>70 official currencies
• 
>17 official religions
• 
divergent histories of colonisation,
imperialism and forms of government
• 
home to the world’s oldest healing
cultures, e.g.: Indian, Chinese,
Tibetan
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ASIA FAST FACTS
ASIA IS THE WORLD’S FASTEST GROWING ECONOMIC REGION
Source: Capgemini Analysis, Economist Intelligence Unit, 2013
ASIA FAST FACTS
the Asian economies to look out for…
Source: Capgemini Analysis, Economist Intelligence Unit, 2013
ASIA’S KEY MARKETS FOR SPA
a generalisation…
Investing
China
India
Middle East
Malaysia
Singapore
Supplying
Thailand
Indonesia
Philippines
Sri Lanka
Nepal, Bhutan
Consuming
Russia
Japan
Middle East
Hong Kong
Taiwan
Thailand
Other S.E. Asia
Korea
ASIAN SPA GROWTH KEY DRIVERS
•  Economic Development
•  Rapidly growing mid-upper
and upper class (HNWI)
•  Globalisation
•  Urbanisation
•  Health Concerns
•  Stress
•  Chronic Disease
•  Environmental Degradation
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OTHER INFLUENCES
•  Hinduism (South, South-East)
•  Buddhism
•  Taoism (East)
•  Confucianism (East)
•  Communism (North, East)
•  Islam (West, South, South-East)
•  Colonisation
Dhanvantari, god of Ayurveda
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OTHER INFLUENCES
Hinduism
Buddhism
Taoism
Yoga – union with
god
Vedas scriptures:
foundation of
Ayurveda: "life
knowledge”
holistic philosophy:
physical, mental,
social and spiritual
harmony
sorrow is caused by
desire & attachment
spiritual practices to
transcend: meditation
discourages ambition
acceptance of one’s
situation: belief in fate
gentle
compassionate
service, but very
passive workforce
Qi (‘chi’) – life force
yin-yang, 5 elements
constantly changing
health = balance
8 components,
including
detoxification
TCM: herbs, diet, qi
gong, tai chi, tui na,
etc.
Feng Shui, Chinese
astrology
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OTHER INFLUENCES
Confucianism
Islam
Communism
Colonisation
aim: social harmony:
relationships over law
use indirect channels
– mediators: potential
for corruption,
nepotism
loyalty: to leader
before family &
friends
strict hierarchy:
unquestioning
obedience. benevolent
leadership
specific duties &
procedures, extensive
ritual
hammam
“to get rich is
glorious” (Deng
Xiaoping)
very ambitious:
success gets respect
judged by appearance:
visible status important
Tao belief in cycles:
good times won’t last
cash economy
distrust ‘outsiders’
good language
skills
good service
culture
dilution of or fusion
with traditional
culture
bureaucratic
not very proactive
workforce
Unani medicine
aromatherapy
conservative
society
design: separation
of male & female
stigma for spa:
challenges for
staffing
difficulty with
licensing
poor service ethic:
jobs were given
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KEY MARKET CHINA
•  Est. ~50% of all Asia-Pacific spa openings.
•  Day spas franchising fast (e.g. ~30 outlets p.a.)
•  Bath houses and hot springs enjoying resurgence.
•  Hotel & resort spas: over 90% domestic business
•  Destination spa: high interest but low understanding
•  Spa real estate: 2nd home for high net worth individuals
•  Investors have long term view: payback 15-20 yrs
•  Move very fast to get things done
•  International brands struggle
–  Consumer is very different to western markets
–  Intellectual Property is extremely difficult to protect
•  Chinese people now highly concerned about their health:
–  Expenditure on healthcare averages 1/5 of total income.
–  92% are worried about current or future health concerns.
Source: SpaChina Magazine
KEY MARKET CHINA
• 
High income: 45 – 65 years old (ave. 50 yrs)
• 
“Pursue the most expensive; not necessarily the best”
• 
Aging appearance and age-related disorders are the
primary concern
• 
Strong interest in Chinese traditional therapies.
“live under pressure
from society and
family”
“Rich Chinese
spare no effort in
their pursuit of antiaging at any cost.”
• 
Mid-upper income: 28 - 58 years old
• 
97% are in poor health condition, mainly due to pressure,
fast food lifestyle and lack of exercise.
• 
Stress and stress-related disorders are primary concern.
–  Men want better physical and sexual performance.
“97% are in poor
health condition”
–  86% of women are striving for flawless beauty.
• 
Follow international trends. Eager to try what is new.
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Source: SpaChina Magazine
KEY MARKET INDIA
•  Spa industry growing 15-18% p.a.
•  >2,300 spas + ~700 in next 2 – 5 years.
•  Valued at INR 700b (US$11.2b) in 2012; forecast
INR 1 trillion by 2015
•  Target market: fast-growing mid-upper class
•  Strong roots in Ayurveda
•  Day spas franchising, mainly local brands
•  Medi-spa: world leader in ‘Facebook Facelifts’
•  Hotel & resort spas: typically outsourced to
international brand initially, then inhouse
•  Destination spas: many budget yoga & meditation
retreats. Few international 5-star standard, but
several in development
•  Spa real estate: just starting to emerge
•  Very slow moving to get things done
•  5-star quality can a struggle
Source: Global Spa & Wellness Summit, 2013.
KEY MARKET U.A.E.
•  Spas accepted in UAE, but taboo in stricter
Islamic societies, e.g. Saudi Arabia.
•  Target: GCC nationals and expats
•  Major health problems: overweight and obesity
(70+%), diabetes (30+%)
•  Day spas: women’s only concepts dominate
•  Medi-spa: cosmetic surgery very popular
•  Hotel spas: large pipeline for development due
to events (e.g. Expo 2020)
•  Extensive hydrothermal facilities expected
•  Destination spa: high interest, but yet to be
developed: unrealistic expectations for
payback.
•  Spa real estate: as yet unexplored
NEW & EMERGING
BUSINESS TRENDS
DAY SPA
•  Mainly local brands
•  Rapid growth in franchises
•  Membership – pre-paid
packages, is key to cash flow
•  ‘Kitty Party’ type events are
strong revenue generators
•  Mostly small, low budget
operations
•  Quality can be an issue
•  …however larger spas being
built for integrated wellness,
e.g.:…
• 
• 
• 
• 
• 
• 
• 
• 
• 
• 
cosmetic surgery & ward
day medi-spa
day spa & thermal areas
fitness club
lifestyle medicine clinic
holistic dentistry
holistic medical
hair & beauty
spa cuisine cafe
lifestyle retail
Level 1 of 7
Urban Wellness Centre, Russia!
HOTEL & RESORT SPA
• 
Growth driven by expanding hotel supply
• 
Guest base supplemented with outside
membership
• 
Often outsourced for an initial term; then
brought inhouse
• 
Declining market for international 3rd party
operators
• 
Local hotel brands emerging, with good
understanding of local market
• 
Increasing move towards Wellness
services to differentiate, and try to
increase spend and length of stay
• 
Struggling to make these profitable
• 
Wellness events and retreats
MEDI-SPA
• 
Most Asian countries vying for a share of
medical tourism
• 
Hotel and resort spas supporting with
pre- and post-surgery packages
• 
Anti-aging is key medi-spa driver…
• 
Starting to move from pure Cosmetic to
internal Rejuvenation
• 
Medi-spa as part of mixed use hospital
developments
• 
Integrated Wellness Centres opening,
but hard to stay ‘integrated’
–  doctors reject holistic concepts,
–  holistic practitioner reject medical
• 
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private tertiary hospital
189 specialist medical suites
luxury hotel and spa
conference centre
integrated wellness clinic
institute of nutrition
lifestyle retail zone
Integrated Healthcare & Hospitality Complex, Singapore!
full service hospital
rehab centre (residential)
wellness centre (residential)
day guest / membership
hotel
convention centre
retail development
Integrated Medical Complex, UAE!
DESTINATION SPA
•  Many 2-3 star level yoga / meditation /
detox retreats
•  Few full destination spas, but very
strong interest in development
•  Driven by global need for Wellness
•  Modeling after famous brands like
Chiva-Som
•  Emphasis on traditional therapies
•  Concept & business model not well
understood in many emerging markets
•  Longest payback of all model types
•  Often combined with real estate
Destination Spa & Residences, India!
SPA REAL ESTATE
• 
High end: targeted to HNWI
• 
Developers see Wellness as a long term
trend: underpinned by demographics and
modern lifestyles
• 
Wellness centre adds value to residents
• 
Attracts premium pricing for houses
• 
Sale of the houses pays for the
construction of the Wellness Centre
• 
Model is new: profitability not proven, as
many of the houses are 2nd homes with
low occupancy
Affiniti, Medini, Malaysia
• 
• 
• 
• 
>2,000 residences
destination spa
day use wellness centre
wholefoods café
Integrated Wellness Community, Malaysia!
• 
• 
• 
• 
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commercial village
residential community
serviced apartments
destination spa
day use wellness centre
wholefoods café
farmer’s market & retail
Integrated Wellness Community, S.E.Asia!
Destination Spa, Residences & Country Club, China!
Residences
Destination Spa
Day Spa
Corporate Wellness Retreat
Resort & Residential Complex, China!
IMPACT
ON THE GLOBAL INDUSTRY
ROLE OF ASIA
• 
Was:
–  destination for outbound Europeans
–  source of inspiration for treatments
Supplier
Consum
er
• 
Will be:
–  greater source of inbound tourism
–  greater source of investment
• 
Huge new market with money to spend
• 
Need to understand their wants & needs
• 
Design operations accordingly
DESIGN & CONSTRUCTION
• 
Appearance is everything: will
spend on the visible items, may
cut corners elsewhere
• 
Prefer natural materials, rich
colours and textures. Don’t like
clinical.
• 
Expect large FOH areas: space
equals luxury
• 
Often form over function
• 
Regulations are considered
‘guidelines’
TREATMENTS & PRODUCTS
•  Admire western ‘science’ for diagnostics,
medical and holistic therapies
•  European prestige brands still
aspirational, but…
•  Growing movement to organic and
natural products
•  Must have ‘instant results’
•  Fads eagerly adopted, e.g.: snail facials
•  Korea is the gold standard for cosmetic
procedures & cosmeceutical products
•  Traditional Asian therapies must be
performed authentically
SERVICE
• 
Very high expectations of service quality
• 
Warm, humble, respectful
• 
Expect top end service rituals
• 
High end guests can be very demanding,
and behave in a way that Europeans may
consider rude
• 
Need to consider effects on other guests,
and how to address this
• 
Language is a big barrier
• 
Consider hiring same nationality staff
STAFFING
• 
Used to high staff-to-guest ratio: 3 – 5 staff
to 1 guest
• 
generally lower payroll costs, but increasing
rapidly
• 
attraction and retention of staff is a major
operational challenge
• 
social stigma in some countries
• 
job-hopping is the norm
• 
operators reluctant to invest in training
• 
mostly full-time; few part-time or private
contractors
• 
most training on-the-job
• 
<20% formal qualifications, but increasing
as some countries regulate
OPERATIONAL CHALLENGES
•  generally…
•  excellent execution, limited innovation
•  passive, not pro-active – everything
must be instructed
•  rank / status is important
•  reluctance to assume responsibility
•  don’t like to say ‘no’
•  problems are hidden: no one speaks up
•  maintain ‘face’ : no negative emotions
•  time is flexible (guests and staff)
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SUMMARY
•  Asia is an increasing force in spa
•  Offers great opportunities
•  It is rediscovering national pride: not blindly following the West
•  Need to understand the Asian consumer (or staff, or investor)
•  What works in the West may not work in Asia
•  Every country / region is different
Thank You!
Samantha Foster
[email protected]
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