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The spa business is surging as people across the world take to the waters
Dr. Reinhard Bergel
Stimulated by our increased interest in health and fitness, the associated need to escape from work-related stress or, simply, a wish to engage in a bit of self-indulgence, spa-going is now one of the most sophisticated and exciting ways of vacationing in the 21st century. It is also a highly personal experience, for whether you are looking to be pampered on an exotic island, are seeking to learn the latest stress-management techniques, or want simply to enjoy a relaxing massage, the overall experience will differ from establishment to establishment. Deciding on the treatment that is right for you is almost a science in itself and it is important to do your research (or to seek advice) before embarking on your ayurvedic adventure or heading for your sirodhara sanctuary.
Although spas are more popular than ever, the tradition itself is ancient; archaeological finds in Asia suggest that bathing in mineral water goes back to the Bronze Age, about 5,000 years ago. But the tradition of spas and spa treatments as we know it today has its origins in Roman times and many of the most renowned spa towns date from then. For instance, Baden-Baden in Germany was known as Aquae Aureliae, Aix-les-Bains in France as Aquae Allobrogum and Bath in the UK as Aquae Sulis. The word 'spa' actually comes from the Latin 'salud per aqua' meaning 'health from water'. It is also the name of a small village near Liège in southern Belgium, near the German border, where the Romans discovered that its hot mineral springs relieved soldiers' aches and pains after long marches and battles.
Even though some of the world's most famous spas are located in Europe — in Spain, Italy, France, Germany, Switzerland and Austria — other parts of the world have a strong tradition of spa-going, although it is not necessarily recognized as such. There are, for example, the hammam, or steam bath, of the Middle East; the Finnish sauna; the Russian bath and the Japanese bathhouse. The Native Americans also had spa rituals before the Europeans arrived. They even showed Ponce de Leon (the 16th-century Spanish explorer and governor of Puerto Rico who discovered Florida) where he could find his 'fountain of youth'.
In all these cultures, physicians prescribe spa therapies to help cure and heal certain ailments.
In Europe, depending on the springs' mineral content, physicians used to prescribe the kur, or cure, to their patients to relieve such ailments as rheumatism, arthritis, infertility, eye soreness and skin irritations. Using spa therapies as part of medical treatment became a whole science, and for centuries was taught in all major medical schools in Europe.
Even today, in most European spa towns, the taking of the waters is restricted, unless you've had a consultation with, and a prescription from, the local kur physician. As well as taking the waters, or basking in radon-active caves, these physicians might also prescribe treatments, such as herbal wraps, dry and wet heat treatments and massages. Recommended stays for the kur were usually two to three weeks and, until quite recently, government health insurance covered not only the medical examinations and treatments, but also lodging and meals.
The former Soviet Union, for example, had 3,500 spas and 5,000 reconditioning centers, which were all administered and run by the State. In the former Czechoslovakia, there are 52 mineral water health spas and more than 1,900 mineral springs; each year about 220,000 citizens are granted free spa treatment for three weeks, paid for by the national health insurance programs.
The most famous spas are Karlsbad (Kalovy Vary) in the present Czech Republic and Piestany in Slovakia.
European kur towns have a community kur center which acts as the official medical spa facility, open to the local population and to all visitors staying at surrounding hotels (many of which have their own cure department and doctors). Guests flock to the spa center for a day to take the cure. In addition to the medical treatments prescribed by the spa physician, visitors can use the sauna, steam room, swimming pool, cosmetic salon, beauty salon and masseur. This European traditional practice was the first and only day spa program until the American day spa began to take shape.
Though spas are now big business in the US, Americans are still novices when it comes to spa-going, the spa concept only having reached the US when the European immigrants arrived in the early 20th century. Indeed, the typical US spa-going experience differs greatly to the European one. To an American, a spa is a place you go to strain your muscles on weight machines, do an aerobic dance routine, boil yourself in a whirlpool, hake yourself in a sauna, shower the sweat off and leave; to a European, a spa is a retreat for the weary, a place where you are treated to a mud bath, are pampered in a body wrap, or stimulated with a massage. It's also a rehabilitation center for victims of injuries and a source of guidance on diet, exercise and therapy for losing weight and looking young.
American spa towns started to spring up 100 years or so ago, and were sponsored by local governments, states and national parks. Unfortunately, most of them went out of business when the American Medical Association (AMA) started branding the spa cure as hogwash. But a spa revival is now on the way, as is evidenced by the fact that the State of New York recently invested $2 million to restore the old bathhouses in Saratoga, once one of the major spa towns of the northeast. Moreover, revenue for the US spa industry surged 152% between 1997 and 1999, from $2.1 billion to $5.3 billion, according to the 2000 International Spa Association (ISPA) industry study. The industry is now estimated to be worth about $6 billion. Accordingly, the number of spa establishments in the US has also burgeoned, growing at an annual rate of 21% in the five years to 2000 — which means that the number of establishments more than doubles every four years.
Between 1997 and 1999, revenues per establishment increased on average by 65% — from $550,000 to $930,000. The ISPA study also showed that in 1999 the average profit margin per location (that is, net profit after expenses and before tax) was 14.8%. However, because running a spa is so labor-intensive, profit only constitutes 15% of total revenue. Of this, compensation, including payroll taxes, accounts for 48% of the total according to ISPA calculations. This means, therefore, that a 15—20% profit is considered to be a sign of a successful spa operation.
The 2001 member survey of ISPA also highlights the buoyant nature of the spa and wellness industry. Conducted among its 1,900 members located in 53 countries, nearly half of the 49% who responded said their average sales volume during 2000 was between $1 million and $5 million. And 17% said their sales volume was between $5 million and $10 million, a 21% increase over the previous year.
All of which points to pretty healthy returns for investors: it would seem that the spa business is not only good for one's well being but also for one's pocket. The day spa, a purely American invention in definition and concept, is the successor to the bathhouses of the metropolitan areas and is now the dominating force in the US market, as the latest figures from ISPA demonstrate. The survey, carried out in 2000 showed that, of the 5,700 US spa establishments, an overwhelming 72.4% were day spas, with the remainder split between the resort/hotel spa, 13.5%; destination spa, 5.3%; club spa, 4.1%; mineral spa, 1.4%; medical spa, 2.8%; and cruise ship spa, 0.3%. And the trend is not only confined to the US. The latest predictions suggest that the day spa is becoming the market leader throughout the world.
The popularity of the resort and hotel spa has also increased, but at a slower rate. The spa has become a 'must-have' facility at all top places in the same way as the swimming pool was in the 1960s, the tennis court in the 1970s, and the golf course and health club in the 1980s. This trend is particularly marked in Asia/Pacific where the number of hotels with a spa has increased 158% since 1999. Statistics from the Asia/Pacific branch of JSPA for 2001 show that the spa business is exploding across the region as a whole. This has led to a commensurate demand for consulting, building and planning services, from Hong Kong to Tasmania, Bangkok to Beijing, India to Malaysia. Singapore, for example, had two spas in 1994; it now has 23. According to a survey conducted last year by global consultancy firm PricewaterhouseCoopers, the total number of spa facilities is predicted to double every four years for the region as a whole. The survey also showed that in 2000, 93% of spas in Asia/Pacific were profitable.
And although recent figures for Europe are not yet available (a survey is currently being undertaken by the European branch of ISPA), Alfred Hackl, founding member of JSPA Europe, remarks: 'There are as yet no statistics on Europe but the trends are much the same as in the US.' Hackl is also general manager of what is probably the world's largest spa resort, Rogner-Bad Blumau in Styria, Austria, which caters for up to 1,000 guests each day.
The baby boomer generation continues to be the most influential segment in the spa industry, and this group is demanding education and new experiences. The popularity of alternative medicine reflects this trend. For example, hydrotherapy, aromatherapy, body wraps, and 'eastern' treatments, such as ayurvedic medicine, yoga and feng shui, are growing in appeal. On this point Hackl also says the Masai walking shoes (designed to promote a healthy posture and to help tone the body) are becoming popular. And while massages and facials were frowned on 15 or 20 years ago they are now the most popular spa treatments.
Given that there are many different types of spa experience from which one can choose, and with the industry becoming increasingly competitive, what should would-be investors look for when establishing or investing in a spa? As with all businesses one of the first steps to success is to identify the core audience. The 31—54 age group makes up more than 60% of the spa market, while the 18—30 age group is on the rise. Not surprisingly, women are the most frequent spa-goers but, according to the 2001 ISPA member survey, men now make up a little over 28% of spa clients — at the Posthotel Achenkirch, in Austria, for example one in three health farm customers is male. Increasingly, spa establishments are catering for the male market with some introducing treatments that are geared towards men and many offering separate lockers, wet rooms and/or treatment areas. Others are training their therapists in the psychology of the male guest and how to 'sell' the idea of cosmetic treatments without making them sound too feminine. Despite these developments, however, the male market still remains relatively untapped.
Offering new services and understanding key demographics will help to ensure that spa establishments, especially day spas, improve retention and increase profitability. Take a health club, for example. If it is selling a lifestyle rather than a fitness program, then a day spa can enhance the experience. When a spa is part of a club, the establishment gains from economies of scale in management, marketing, human resources and use and maintenance of physical plant.
If you are establishing a spa from scratch, the final investment will depend on the 'feel' you wish to create. The set-up cost will vary depending on, for example, the type and size of establishment, target market, choice of equipment and decor. It could be a mid-market, upscale or a luxury spa.
The challenge for the entrepreneur is to tap into this market: to do this requires a firm understanding of the ways in which the ingredients of the spa experience are being redefined. The biggest changes are in terms of the location and design of the establishments, the variety of treatments available, the design of fitness and health programs and, in the case of the destination and resort spa, the quality of the cuisine.
Whether you are a spa-owner or a mere lover of the experience, wholeheartedly embracing the spa philosophy is the main ingredient in ensuring a successful spa operation. Establishing a viable business proposition is essential both for the client and investor, and the key to achieving this is to focus on serving customers, to provide the means by which they can refuel and rejuvenate their minds, souls and bodies, to ensure they savor fully the spa experience.
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