Touch and Go: Struggles in B.C.’s Spa Industry

BCB-Hospitality-5.jpg

The treatments read like items from a foodie’s pantry: the chocolate soak, the maple-sugar scrub, the coconut-mango massage. “Body workers” pass guests cooling cucumber water as they enter relaxation lounges stocked with herbal teas, gossip mags and fireside designer sofas. The modern spa is no longer the domain of the stern esthetician in the backroom of a hair salon; it’s a destination unto itself. The sort of cushy, decadent stuff that frazzled mothers, stagette organizers and corporate-retreat planners count on for a bit of good clean fun – and a buff and polish too.

So when did spa become a dirty word? Jenn Houtby-Ferguson knows exactly when everything changed: “March 11, 2009.”

Houtby-Ferguson, sales and marketing director at Tigh-Na-Mara Seaside Spa Resort and Conference Centre in Parksville, had arrived home to hear an 11-o’clock news story about government officials living the high life at a luxury resort on the island. The message of the newscast was pretty clear: in dire economic times like these, was this an appropriate use of taxpayers’ dollars? “I thought, please don’t be about Tigh-Na-Mara,” she says.

The resort had been riding a record wave of bookings in January: rooms were at capacity and the spa was filled. It looked like it was going to successfully weather the downturn that had left other businesses reeling.

As it turned out, the resort in question was Brentwood Bay, though it needn’t have mattered. A follow-up story in Victoria’s Times Colonist the next day was pretty damning: “As jobless numbers mount and stock markets plummet, Canada’s top agriculture bureaucrats have retired to the luxury Brentwood Bay Lodge and Spa to discuss business over lobster at taxpayers’ expense.” Rack rates listed for the hotel – which top out at nearly $500 a night – contributed to the image of politicians lounging in fluffy bathrobes, talking “business” as massage therapists worked out their kinks.
 
The fallout was immediate: government groups pulled out of future bookings with Tigh-Na-Mara. “We hadn’t done anything wrong, but we were penalized because we had the word ‘resort’ in our name,” says Houtby-Ferguson, who explains that 25 per cent of Tigh-Na-Mara’s revenue comes from visitors to its spa. Indeed, half the spa patrons are overnight guests at the resort, so when resort bookings drop, the spa suffers. To capture the government market, Houtby-Ferguson explains, hotels follow Treasury Board guidelines, right down to meal plans that are specific to government-set per diems. But “in tough economic times,” she found out, the idea of taxpayers subsidizing retreats at Brentwood Bay and Tigh-Na-Mara may not be looked upon favourably by the struggling masses.

And that’s the point. In the U.S., it’s been coined the AIG effect: corporations may still be booking the meetings, the retreats and the conferences in hotels, but they can’t be seen to be enjoying it. Nothing fancy – and certainly no Belgian chocolate pedicure or Dead Sea seaweed wrap on their invoices. “You can’t say ‘spa’ anymore,” said Jan Freitag, vice-president of STR Global, a hotel industry research firm, at the New York Spa Alliance meeting in May of this year.
[pagebreak]

While destination resorts may be a tad excessive for civil servants and executives justifying expense accounts to angry shareholders, the whole luxury industry has suffered by association. Regardless of whether they have to justify expenses to voters or shareholders, people feel guilty about spending money on perceived luxuries during a recession.

Most spas share a common modus operandi: peaceful retreats where clients can expect a “spa menu” of manicures, pedicures, massages and various face and body treatments. The industry is made up of three to four main types of spas. Day spas, such as Vancouver’s Miraj Hammam Spa or Beverly’s the Spa on 4th, are stand-alone businesses where clients are in for their hour or three and head home again at the end of their treatment. Resort spas such as Tigh-Na-Mara tend to be destinations, removed from civilization, where clients spend the weekend in and out of the pool, dining on low-cal “spa cuisine” and ducking into treatment rooms for doses of massage and seaweed wraps. Hotel spas, such as the one at Victoria’s Magnolia Hotel & Spa, are typically on site and geared toward hotel guests who want to add a bonus massage or an emergency manicure to their weekend – it’s there for when the guests need it, as opposed to being the focus of the hotel itself. The fourth type of spa is the new-on-the-scene medical (or medi) spa: businesses that focus on non-invasive cosmetic procedures such as Botox (less about feeling like a million bucks than looking it).

The industry has been a success story until now. According to hospitality consultants Pannell Kerr Forster Consulting Inc., the Canadian spa industry grew 329 per cent between 1996 and 2006, with more than 2,300 spas located across the country as of March 2006 (including 1,739 day spas and 434 spas in hotels and resorts, the new default amenity for any new property). Nineteen per cent of those spas are here in B.C. Despite narrow profit margins compared to other hospitality services – roughly five to 20 per cent on spa services, where a hotel room might garner as much as a 70 per cent markup – the industry contributed more than $1 billion to the Canadian economy in 2005, or about $160 million to B.C. alone.

But that bright picture has started to fade in recent months. One of the key challenges for B.C.’s industry is the mix of spas: there’s a lower proportion of day spas here than in other regions of Canada  – 64 per cent versus 75 per cent in the rest of the country – with resort and hotel spas making up 28 per cent of the total tally, versus 19 per cent in the rest of Canada. (The remaining eight per cent fall under the medical spa category – go Botox! – and spas found within health clubs.) Hotel and resort spas are more dependent on the tourist trade, which represents 24 per cent of total visits to B.C. spas. And as Statistics Canada reported this past June, U.S. tourism – accounting for 75 per cent of spas’ foreign clientele – is experiencing its longest decline since 9/11.

Add those bleak tourism numbers to the corporations and government groups worried about the appearance of booking spa time, and to the individual spa goers pinching pennies as they suffer through cutbacks and rollbacks, and things indeed look grim. And yet many local operators remain optimistic.
“We’re working harder than ever to make sure we have the market, that’s for sure,” says Wendy Lisogar-Cocchia, president and co-owner of Vancouver’s Absolute Spa Group, which has 11 spas across the Lower Mainland and employs more than 200 people in its spa and retail businesses (the company manufactures two proprietary body-care products and distributes seven others to both its own stores and its competitors). While its largest spas are associated with hotels, including the flagship Spa at the Century – part of the Century Plaza Hotel and Spa, owned by Lisogar-Cocchia’s family – Absolute also has five spa outlets at Vancouver’s airport.

Lisogar-Cocchia says the key to survival has been doing whatever it takes to get someone in the front door. “I think about what the reason is that somebody wouldn’t be able to book,” she says, “and say, ‘Let me fix that for you and take care of it for you.’” To that end, Absolute will soon be hiring luxury coaches to travel from hotel to hotel to pick up conference attendees and their spouses, and bring them from downtown Vancouver to the Absolute spa in West Vancouver at Park Royal. (Lisogar-Cocchia will be marketing it as a “getaway” from the city.) She’s also working under the assumption that clients clocking overtime hours with smaller staffs are pressed for time, so she now offers double-duty treatments: a pedicure running simultaneously with a facial. In and out in an hour or so – a major shift from the notion of luxuriating in the spa for an afternoon.

Time has also been a central factor in the business shift at Tigh-Na-Mara. “With groups in particular, I’m getting bookings inside of two weeks, which is unheard of,” says Houtby-Ferguson, who indicates that three to six months’ advance notice used to be the norm.

“On the leisure side, individuals are waiting to see, Are my investments OK? Do I still have a job? And what’s the best deal I can get?” says Houtby-Ferguson. “They’re holding out for as long as they’re comfortable before they can fill their plans. It’s very difficult for us to plan and staff.”

Anecdotal evidence from the members of Leading Spas of Canada, an industry association based in Sooke, B.C., points to other major shifts in the business. Sales of body products purchased at spa boutiques are down (where profit margins are much higher than other spa offerings, at 30 to 40 per cent). The “signature treatment” – a standard service such as a pedicure with a little something extra, like a lavender-scented massage – has fallen away in favour of core treatments, such as a straightforward massage from a registered massage therapist (which can be claimed, in many company health plans, as a legitimate medical expense).

In more flush times, the proverbial pie was big enough for all spas to coexist very nicely. But with the drop-off in U.S. tourism, competition between spas – which formerly stuck to their own territories – has become fierce. “The destinations that are impacted – Victoria, Vancouver, Whistler, Sun Peaks – all of those relied heavily on the U.S., and when they’re not getting that traveller, they’re going after our market,” says Houtby-Ferguson. “We’re certainly feeling that. Sun Peaks is putting out great rates, and it’s the off-season for them. They’re killing us.”

Chasing the elusive client has led Leading Spas to develop the recently launched Spa-Bay, based on eBay-style auctions. Member spas post weekend getaways and gift certificates to the Spa Bay site, allowing anyone to bid on low-priced vacations – with bidding for $100 gift certificates starting as low as $15 – keeping numbers up at the spas themselves. In another marketing effort, an Oasis-brand fruit juice promotion sees participating spas give discounts to customers who come to the spa with their specially marked fruit juice caps.

It all adds up to challenging times, but, like many of their clients, it’s up to spa owners to take a deep centring breath and push on through. And in the end, there is at least one upside to leaner times. Where once a rash of new spa openings left employers vulnerable to losing their trained staff, “the labour market is in a different position than it was a year ago,” says Julie Banister of Haven Spa at the Sidney Pier Hotel & Spa on Vancouver Island. “The employee understands it’s not as easy to go out and get another job.”