With an increasing number of lifestyle related diseases and a realisation that prevention is better than cure; the acceptance of spa and wellness industry in India is much higher than in the western world. Moreover, the need to look good is another major factor contributing to the sudden spurt. Currently over 2,300 spas are operational in the country, this shows the booming rate of growth of Indian wellness industry. According to an independent market research, the spa and wellness industry in India have a market size of Rs 11,000 crore. Going through market potential of spa industry, setting up a spa and wellness center is considered as a profitable business venture nowadays.
The initial planning
A typical Day Spa/ Urban Spa would need minimum area of 2,200 sq. ft. to be a viable business. The investment can range anything from Rs. 1,800 per sq.ft. to redo interiors to almost any amount. However, the important part in running a spa business or to any business is evaluation of rate of investment (ROI). One should make sure that the spa investment is paid back within the first 3 years, before refurbishment is required. India today has spas of more than 20,000 sq.ft but that is generally in connection with luxury resorts and hotels where the ROI is determined by other priorities than the spa’s ability to repay the investment.
The basic points that one should keep in mind while setting up a spa includes:
1. Be realistic when assessing the market potential. Too many spas have been established based on feelings, aspirations and idealistic inexperience.
2. Be very careful when investing; evaluate ROI for every Rupee spent on interiors, equipment, marketing and pre-operational expenses.
3. Make sure to have a USP which is hard to copy. Too many spas have started without it, just offering what everybody else offers. This only leads to price cutting for same services, resulting in losses for everyone.
4. Make sure to maintain the USP and that it is substantial – it is not enough simply to use a specific brand of spa products, the services, design, customer relations et cetera all have to be unique. One must ensure that the USP is delivered consistently.
5. Make sure to have a strong recruitment and training set-up – spa is a people business. It is also a personal relationship business, so someone who understands the business and company’s USP better, must always be around to ensure that the spa run the way it should be.
Speaking on the same point, Jesper Hougaard, chairman & managing director, Serena Spa Pvt Ltd, said, “I generally start by looking at the market potential, USP building and competition so I can establish the concept and estimate an operating budget – and then work it backwards to find out how much can be spent to achieve a decent ROI.”
After planning area, investment and ROI, the next big thing is the location of spa. For an urban consumer, a Day Spa must be easily accessible and offer parking facilities. No one will be willing to drive for one hour or more in city traffic and get stressed after a nice, relaxing spa experience. Therefore, the spas should be located close to the potential customers. Today, most of the hotels and resorts are developing their own spa. So, if the spa is part of a hotel or resort, it should be easily accessible and visible for all guests. Often spas are located in basements or other unusable spaces in hotels, but with the growing direct and indirect revenue potential of spa, spas are increasingly being located in more attractive areas.
Challenges to face
Although the spa and wellness business is profitable, there are some challenges. Spa and wellness is more about people interaction than machinery and hardware but in India there is no formal criterion for spa and wellness education, so the biggest challenge is to find, train and retain talent to operate the spa and service the customers.
When asked about the profit margin, Hougaard said, “A well planned and professionally operated spa should generate a GOP (gross operating profit) of around 40 percent (before cost of property).”
Knowing the breakeven point provides a clear picture of what is needed to generate in revenue to stay in business. Generally breakeven time for a spa business should be between 6 to 12 months, but if a spa does not break even in that time period, it probably never will. However, one must expect to spend heavily on initial marketing in order to create the required customer base and that might delay the break even a bit.
A lot of opportunistic spas are opening all over India since the legal requirements are few and the spa business is booming and customers are becoming more critical and demand proof of quality, either through accreditation, branding or affiliations. As we see, the spa sector has an expected annual compounded growth rate of 30 to 35 percent for the next three years; this clearly shows that the spa and wellness industry has a great future in India.