Gss.spa.economy.report.2008

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  • 1. THE GLOBAL SPA ECONOMY 2007 May 2008
  • 2. THE GLOBAL SPA ECONOMY 2007The Global Spa Summit gratefully acknowledges the support of our sponsors who made the research for the Global Spa Economy possible. Raison d’Etre
  • 3. About Global Spa SummitThe Global Spa Summit is an international organization that brings together leaders andvisionaries to positively impact and shape the future of the global spa and wellnessindustry. Founded in 2006, the organization hosts an annual Global Spa Summit wheretop industry executives gather to exchange ideas and advance industry goals. For moreinformation on the Global Spa Summit, please visit: www.globalspasummit.org.About SRI InternationalFounded in 1946 as Stanford Research Institute, SRI International is an independent, non-profit organization that performs a broad spectrum of problem-solving consulting andresearch and development services for business and government clients around the world.More information on SRI is available at: www.sri.com.CopyrightThe Global Spa Economy 2007 report is the property of the Global Spa Summit LLC. Noneof its content – in part or in whole – may be copied or reproduced without the expresswritten permission from the Global Spa Summit. Quotation of, citation from, and referenceto any of the data, findings, and research methodology from the report must be creditedto “Global Spa Summit, Global Spa Economy 2007, prepared by SRI International, May2008.” To obtain permission for copying and reproduction, or to purchase a copy of thereport, please contact the Global Spa Summit by email: research@globalspasummit.orgor through www.globalspasummit.org.
  • 4. The Global Spa Economy 2007 Table of Contents EXECUTIVE SUMMARY ........................................................................................................ 1 I. OVERVIEW ..................................................................................................................... 4 II. ANALYTICAL FRAMEWORK .......................................................................................... 7 A. DEFINING THE SPA ECONOMY .......................................................................................................... 7 B. QUANTIFYING THE SIZE OF THE SPA ECONOMY............................................................................. 13 III. THE 2007 SPA ECONOMY ........................................................................................... 14 A. CORE SPA INDUSTRIES..................................................................................................................... 16 B. SPA-ENABLED INDUSTRIES ............................................................................................................... 35 C. ASSOCIATED SPA LIFESTYLE INDUSTRIES ........................................................................................... 38 D. ECONOMIC IMPACT OF THE SPA INDUSTRY..................................................................................... 40 IV. HOW TO USE THE FINDINGS TO MOVE THE SPA INDUSTRY FORWARD .................... 42 V. SPA ECONOMY RESEARCH AND ESTIMATION METHODOLOGY ............................... 45 A. DATA COLLECTION.......................................................................................................................... 45 B. ESTIMATION METHODOLOGIES ....................................................................................................... 47 VI. REFERENCES ................................................................................................................ 58 VII. ABOUT THE RESEARCH TEAM ..................................................................................... 62 The Global Spa Economy 2007 report was prepared by SRI International in agreement with the Global Spa Summit. The study was led by Ophelia Yeung, Director of Economics Program, and Katherine Johnston, Senior Economist, with contributions from: Nancy Chan, Economic and Technology Policy Analyst; Li Gwatkin, Senior Consultant; Fergus Murphy, Senior Economist; and Jennifer Ozawa, Senior Economist at SRI International; as well as over 50 spa industry executives around the world.Copyright Global Spa Summit 2008 SRI International
  • 5. The Global Spa Economy 2007 Executive Summary The Global Spa Economy 2007 is a landmark first step in developing a framework to quantify the global spa industry. The objectives of this study are:  To put forward a comprehensive framework to understand and quantify the scale and impact of the global spa economy.  To develop high-level, global estimates that enable industry leaders, investors, and policymakers to make informed business and policy decisions.  To stimulate dialogue among all industry stakeholders regarding the definition, measurement, and positioning of the global spa industry going forward. The study has taken a decidedly inclusive approach in defining the term “spa” by considering its different interpretations by global businesses and consumers. For the purpose of estimating the global spa economy, this study defines spas as establishments that promote wellness through the provision of therapeutic and other professional services aimed at renewing the body, mind, and spirit. To estimate the size of the global spa economy, SRI employed an industry cluster framework that is widely used by industry and government leaders around the world for high-level strategic planning and organizing stakeholder groups for action. When viewed through this framework, the spa economy – consisting of core industries, enabled industries, and associated industries – is much larger that it may initially appear. The analytical framework is illustrated below. The Spa Industry Cluster Spa Facility Operations Beauty & Beauty Spa Capital Spa-Related Products Industry Investment Hospitality Spa & Tourism Fitness & Fitness Education Products Industry Spa Consulting Beauty & Wellness Spa Media, Medicine Industry Associations Spa-Related & Events Real Estate Healthy Foods & Spa-Branded Nutrition Industry Products Core Industries Enabled Industries Associated IndustriesCopyright Global Spa Summit 2008 1 SRI International
  • 6. The Global Spa Economy 2007 SRI estimates that the total size of the global spa economy in 2007 was $254.7 billion. This estimate includes $60.3 billion in core spa industries and an additional $194.4 billion in spa-enabled industries, as shown in the table below. Size of the Global Spa Industry, 2007 (US$ billions) Core Spa Industries $60.31 Spa Facility Operations $46.81 Spa Capital Investments $12.99 Spa Education $0.31 Spa Consulting $0.07 Spa Media, Associations, & Events $0.13 Spa-Branded Products n.a. Spa-Enabled Industries $194.35 Spa-Related Hospitality & Tourism $106.05 Spa-Related Real Estate $88.30 Total Spa Economy $254.66 Spa facility operations represent $46.8 billion in revenues, or 78% of the “core” industry. The spa industry has been experiencing rapid growth in many regions around the world, and this growth is reflected in a significant level of capital investment, estimated at over $12.9 billion in 2007. The other “core” sectors – including education; consulting; and media, associations, and events – are relatively small by comparison, but still represent important pieces of the industry. Together, these sectors earned an estimated $0.51 billion in revenues in 2007. A significant amount of activities in the tourism and real estate sectors are influenced by the burgeoning spa, health, and wellness trend. SRI estimates that $106.0 billion in global tourism and hospitality revenues were “enabled” by the spa industry in 2007. Additionally, an estimated $88.3 billion in global real estate construction revenues were “enabled” by the spa lifestyle concept in 2007. The spa industry sits solidly within a broader set of lifestyle, health, and wellness- driven industries. The four “spa lifestyle associated industries” – those industries directly interconnected with the spa industry – represent a global market that exceeded $1 trillion in 2007. Global Spa Lifestyle Associated Industries, 2007 Global Market Size (US$ billions) Beauty and beauty products industry $500.2 Fitness and fitness products industry $241.3 Beauty and wellness medicine industry $195.8 Healthy foods and nutrition industry $162.4 Total $1,099.7Copyright Global Spa Summit 2008 2 SRI International
  • 7. The Global Spa Economy 2007 The size of the spa economy and its economic impacts represent an important message that should be communicated for purposes of:  Advocating to government leaders that the spa industry is an important and strategic sector to be supported;  Joining industry stakeholders together to provide a stronger voice and more collaborative action;  Reaching out to consumers by allowing for flexibility in the interpretation of “spa” and inclusion of cultural and traditional contexts;  Informing investors of the opportunities that exist in the diverse and growing spa industry; and  Attracting qualified professionals to the spa industry. The SRI team has arrived at the estimates presented in this report based on a combination of primary and secondary research and economic modeling techniques, including: a global survey that collected approximately 1,000 responses; intensive research and data collection from national, international, and industry sources; and interviews with high level executives in the spa industry. Together, these lines of research were used to craft a tailored economic estimation model that attempts to quantify an industry where enormous information and data gaps exist. In essence, this study provides a snapshot of the global spa economy in 2007 for 210 economies around the world.Copyright Global Spa Summit 2008 3 SRI International
  • 8. The Global Spa Economy 2007 I. Overview Why study the Global Spa Economy? SRI International was commissioned by the Global Spa Summit to quantify the size of the global spa economy. The objectives of this study are as follows:  To put forward a comprehensive framework to understand and quantify the scale and impact of the global spa economy.  To develop high-level, worldwide estimates that enable industry leaders, company executives, investors, and policymakers to make informed business and policy decisions based on a comprehensive, global understanding of the spa industry.  To stimulate dialogue among all industry stakeholders regarding the definition, measurement, and positioning of the global spa industry going forward. Until now, no study has attempted to measure the size of the global spa industry, due to a variety of factors, including: the diversity of the spa industry and markets across countries and regions, the difficulty of defining a “spa,” the lack of country-level information, and the difficulty of comparing data across countries. For the same reasons, even attempts to count the number of spas or estimate the size of the spa market at the country or regional level have been limited. Few industries have organized at the global level to “measure themselves” and present the worldwide economic impact of their industry. In fact, this study may be one of the first attempts of its kind. In this regard, the global spa industry has a unique opportunity to be a “pioneer” through this endeavor. What this study is This study is designed to be a landmark first step in developing a framework to quantify the global spa industry and its related economy in 210 countries. The SRI team has arrived at the estimates presented in this report based on a combination of primary and secondary research and economic modeling techniques, including: a global survey that collected approximately 1,000 responses; intensive research and data collection from national, international, and industry sources; and interviews with over 50 high-level executives in the spa industry. Together, these lines of research are used to craft a tailored economic estimation model that attempts to quantify an industry where enormous information and data gaps exist. In essence, this study provides a snapshot of the global spa economy in 2007 for 210 countries, even given the absence of data for 95% of these countries.Copyright Global Spa Summit 2008 4 SRI International
  • 9. The Global Spa Economy 2007 To conduct this study, SRI has employed an industry cluster framework that has been widely used for more than 20 years by industry and government stakeholders around the world. The cluster methodology is widely recognized as a useful tool for high-level strategic planning, advocacy, and investment resource planning. Such an approach allows industries to organize resources, structure their collaboration, speak as one voice to policymakers and consumers, and conduct advocacy and public relations efforts more effectively and efficiently. What this study is not This study is not structured as a global spa census; it does not attempt to count the number of spas or add up their revenues across the globe. Such an approach would be both time and cost prohibitive for any organization. In fact, the SRI team is unaware of any industry that has conducted its own census at the global level – precisely for this reason. A number of high-quality national and regional spa industry studies have been conducted by various consulting groups and associations. However, each study applies different filters to quantify and “count” spas, and therefore such data is not comparable across countries and regions. Furthermore, these studies have been conducted for no more than 20 countries around the world, leaving a big gap in the current state of knowledge regarding the global spa industry, particularly for fast growing countries in Asia, Latin America, and the Middle East. To insist on a census approach would thus be paralyzing and unproductive. This study is designed as an important leap forward to provide a degree of quantification, inclusive of the 20 or so countries where some spa industry data has been collected, as well as the 190 countries in which national-level spa industry data is nonexistent. What we include as spas An inherent goal of this study is to promote the value of flexibility in defining the term “spa” and to understand its different interpretations by businesses and consumers around the world. It is with this end in mind that we put forth the following criteria for including spas in this study: For the purpose of estimating the global spa economy, this study defines spas as establishments that promote wellness through the provision of therapeutic and other professional services aimed at renewing the body, mind, and spirit. Most consumers and industry executives would agree that at its core – no matter its size, form, or business model – a spa is an establishment that focuses on the promotionCopyright Global Spa Summit 2008 5 SRI International
  • 10. The Global Spa Economy 2007 of wellness. The concept of wellness, the healing traditions drawn upon, and the therapeutic techniques applied differ dramatically from one country to the next. Working within this framework, this study does not apply specific filters – such as requiring therapeutic treatments to be water-based, or requiring an establishment to be of a certain size or offer a certain combination of services – to define what is and what is not part of the spa industry. A major value of this approach is that it allows local, cultural, and historical wellness and healing contexts to be captured in quantifying the size and impact of the spa economy. Specifically, this study estimates the economic impact of establishments that consider themselves as “spas” and market themselves as such – as well as establishments that consumers would likely consider to be a “spa,” particularly in relation to unique cultures and traditions – regardless of strict definitions used by the industry in other contexts. What this study tells us  When viewed through the industry cluster framework, the spa industry is much larger than it may initially appear.  Given the spa industry‟s size, economic impact, and growth potential, there is a colossal need for the industry and governments to collect and maintain standardized information on the industry.  We believe that a more, rather than less, inclusive approach to defining “spa” best captures the current and future potential of the industry as it is viewed by consumers and entrepreneurs. This broader approach provides a useful umbrella under which spas will have the flexibility to apply appropriate filters in order to differentiate themselves for the purposes of marketing to particular consumer niches.Copyright Global Spa Summit 2008 6 SRI International
  • 11. The Global Spa Economy 2007 II. Analytical Framework Estimating the size of the global spa economy requires two parallel, but interrelated, sets of inquiry, each presenting its own unique set of challenges: 1. How does one define a spa? What does the spa industry encompass? 2. How does one quantify the size of the spa industry and the economic activities related to it? The challenge of defining the spa industry itself compounds an already difficult task of measuring the economic impact of an industry that is relatively young, and for which existing data around the world is scarce. Nevertheless, the research team conducting this study has been able to gather and produce data that results in a fair approximation of the global spa industry‟s economic impact. Over time, the data and estimation methods used for this study can be refined for greater accuracy. A. Defining The Spa Economy 1. What Is A Spa? If you ask ten consumers in ten countries – say, Germany, Italy, Russia, China, Japan, Thailand, United States, Mexico, Morocco, and United Arab Emirates – what they would consider to be a spa, you are likely to get ten different answers. The inherent challenge of measuring the size and impact of the spa industry is the difficulty of defining what constitutes a “spa.” This dilemma is not unique to the spa industry.  In the tourism sector, for example, a very liberal and inclusive industry definition would include not only spending by foreign visitors, but also all transportation, retail, dining, recreation, and entertainment activities, whether these expenditures are incurred by “real” tourists or by local residents. A more restrictive definition might count only spending by foreign visitors or domestic residents taking a trip of a certain distance or duration. Within the tourism community, there is no agreed upon definition of what counts as a tourism “trip” for the purposes of measuring tourism expenditures – does a trip have to exceed 50 miles or 60 kilometers away from home to be counted, or does it have to involve an overnight stay? Tourism statistics are produced by governments, nonprofits, international organizations, and private research firms around the world, and each organization approaches these definitional questions in a slightly different way.Copyright Global Spa Summit 2008 7 SRI International
  • 12. The Global Spa Economy 2007  Information technology is another industry that poses definitional challenges. For some studies, the IT industry encompasses all activities that might be considered “high-tech” – it might include computer equipment and peripherals, semiconductors, electronics, computer programming and design, IT consulting, telecommunications equipment and services, and much more. On the other hand, some studies may exclude the manufacturing of “hardware” such as computers, electronics, and telecommunications devices – as these activities are becoming increasingly “commoditized” and “low-tech” – and instead focus only on the higher value- added services side of IT (such as programming, design, consulting, etc.). The definition of the IT industry changes constantly, depending on the geographic region being studied, the organization conducting the study, and the purpose and objectives of the study. For the spa industry, the definitional challenge is especially complex because the term “spa” can incorporate many elements and is open to interpretation by spa operators, consumers, and policymakers alike. While “spa” may be viewed as a relatively young industry in its modern, Western archetype, its association with wellness and healing links the industry to traditions and practices that date back thousands of years in some cultures around the world. As economies and cultures become globalized, the blending of modern and traditional therapeutic disciplines, and the melding of the science and heritage of healing, have enriched the spa industry and increased consumer recognition, even as this process creates challenges for the industry to define or measure itself. There is an ongoing, but perhaps healthy, tension among industry operators on the definition of a spa. Currently the term “spa” is defined in a variety of ways, both across different countries and regions and even within countries. Even the linguistic origin of the word “spa” seems to be debated. Below we explore some of the existing views and debates on what is a spa. Using water-based or not as a definition The linguistic origin of the term “spa” and whether the word is related to water is unclear. According to some researchers, the term was derived from the name of a Belgian town where mineral springs were used for healing purposes since medieval times. According to some others, the word “spa” is an acronym of various Latin phrases that mean “health through water.” A few other accounts trace the word to the old Walloon word espa, meaning “fountain.”1 It is true that in many cultures spas are closely tied to therapeutic treatments associated with water. Therefore, some would 1Jonathan Paul De Vierville, “Spa Industry, Culture, and Evolution,” Massage and Bodywork Magazine, August- September 2003, www.massageandbodywork.com/Articles/AugSep2003/Cultureandevolution.html.Copyright Global Spa Summit 2008 8 SRI International
  • 13. The Global Spa Economy 2007 define a spa as only those establishments that offer authentic water-based therapeutic treatments, prescribed and/or supervised by doctors or qualified professionals, in a healing and relaxing setting. However, establishments have proliferated around the world that offer a menu of services (including massage, body, and/or facial treatments) that do not involve water-based therapies, and these establishments are more often than not considered to be spas by the business operators and their consumers. Using size and services to identify spas for benchmarking For the purposes of benchmarking or conducting industry censuses or counts, many organizations have chosen to define a spa by its size (e.g., an establishment must have at least five treatment rooms to be included as a benchmark) or by the types of treatments offered (e.g., an establishment must provide more than one type of spa service – facial treatments, body treatments, massage, or water-based therapeutic treatments – to be included in the count). It should be noted that a number of establishments that consumers around the world may consider to be “spas” may not meet these criteria. For example, a small salon that has only four treatment rooms and only offers facial treatments would be considered a “spa” by many consumers, but may not be counted in benchmarking studies or censuses that use a size-based or service-based definition. Using an exclusive versus democratic (or mass market) definition The proliferation of day spas, “value” spa chains, new business models such as mobile spas, and the expansion/crossover of health clubs and beauty salons into the spa industry have raised concerns about service quality and image amongst some in the industry. On the high end of the market are the “brand name” and exclusive spas, which offer ambience, luxury facilities, and high-quality service delivered by well- trained staff at prices aimed at upscale consumers. On the other end of the market are establishments that offer services for a fraction of the price, aimed at the mass market and consumers seeking those price points. They may specialize and offer only one type of service, such as massage. These market developments raise questions about who should be qualified to use the term “spa” for marketing and promotion purposes. Defining spas in the local, cultural, and historical context Rising levels of income, education, and sophistication among travelers and consumers worldwide have dramatically elevated the consciousness and desirability of treatments that are derived from historical and culturally based healing traditions, techniques, and ingredients. The market potential of this development is being captured by global, premium-brand spas that have expanded their service menus to incorporateCopyright Global Spa Summit 2008 9 SRI International
  • 14. The Global Spa Economy 2007 these kinds of treatments. At the same time, establishments that offer traditional bathing, healing, herbal, and therapeutic treatments derived from centuries-old practices also recognize the potential of branding themselves as spas, and some are investing in new services, equipment, facilities, as well as modifying their ambience. European bath houses and saunas, Japanese onsens, Turkish-style hammams, Indian ayurveda centers, and Thai massage establishments do not necessarily fit the traditional Western concept or business model of spas, but a certain portion of these have begun and will continue to cross over to the spa market as they evolve and adapt to the needs and desires of modern consumers. Taking into account these emerging market trends, and for the benefit of the industry, this study has adopted a decidedly inclusive approach in its estimation of the global spa economy. As stated above, an inherent goal of this study is to promote the value of flexibility in defining the term “spa” and to understand its different interpretations by businesses and consumers around the world. Spa Typologies Working within this framework, the global spa economy model captures five general categories, or “typologies,” of spas, as described below.  Day/Club/Salon Spas. Facilities that offer a variety of spa services (e.g., massage, facials, body treatments, etc.) by trained professionals on a day-use basis. They typically offer private treatment rooms and a quiet and peaceful atmosphere. Club spas are similar to day spas, but operate out of facilities whose primary purpose is fitness. Salon spas are also similar in nature, but operate out of facilities that provide beauty services (such as hair, make-up, nails, etc.).  Destination Spas and Health Resorts. Offer a full-immersion spa experience in which all guests participate. All-inclusive programs provide various spa and body treatments along with a myriad of other offerings such as: fitness activities, healthy cuisine, educational classes, nutrition counseling, weight loss programs, preventive or curative medical services, mind/body/spirit offerings, etc. Because of their similar business structures (e.g., overnight stays in which all guests participate in full-immersion spa and wellness-based activities), this report includes traditional European-style health resorts and Indian ayurvedic resorts in the same category as destination spas.2 2The estimation methodology counts all revenues and employment for these properties as being part of the spa economy, including room revenues, food and beverage revenues, and other non-spa service revenues.Copyright Global Spa Summit 2008 10 SRI International
  • 15. The Global Spa Economy 2007  Hotel/Resort Spas. Similar to a day spa, but the spa facility is located within a resort or hotel property. Unlike destination spas, at hotel/resort spas services are typically paid for on an à la carte basis, and meals are not included. Spa treatments and services generally complement a hotel stay or a wide range of other activities at a resort.  Medical Spas. A spa facility that operates under the full-time, on-site supervision of a licensed healthcare professional. Provides comprehensive medical and/or wellness care in an environment that integrates spa services with traditional or alternative medical therapies and treatments.  “Other” Spas. This category encompasses all other spas that are not captured by the categories described above, including the following:  Historically-/Culturally-Based Spas. These spa facilities vary from country-to- country and have spun out of historical healing traditions, techniques, and ingredients, such as: European bath houses and saunas, Japanese onsens and sentos, Turkish-style hammams, Indian ayurveda centers, Thai massage establishments, Chinese medicine/massage practitioners, etc. This study attempts to capture the portion of such facilities that have evolved into spas by adding spa-like services (e.g., massage, facials, body treatments, wellness education, etc.).  Mobile Spas. Professional practitioners provide spa services on-site at a customer‟s home or office.  Single Service Spas. Similar to a day/club/salon spa, but specializes in providing only one type of spa service (e.g., just massage or just facial treatments).  Cruise Ship Spas. Similar to a hotel/resort spa, but located on board a cruise ship.  Mineral/Hot Springs Spas. A day-use spa facility with an on-site source of natural mineral, thermal, or sea water that is used in spa treatments. “Stay” spas that use an on-site source of mineral, thermal, or sea water for treatments are classified as hotel/resort spas or destination spas/health resorts, depending on their characteristics. 2. The Spa Industry Cluster In this study of the global spa economy, SRI has employed an industry cluster framework that has been widely used since the 1980s by industry and government stakeholders around the world. The industry cluster concept is recognized as a useful analytical and organizing mechanism for high-level strategic planning, advocacy, andCopyright Global Spa Summit 2008 11 SRI International
  • 16. The Global Spa Economy 2007 investment resource planning. Industry leaders have found the cluster concept powerful because it links together a broad cross-section of businesses and organizations that are interconnected economically to relate to each other within a coherent framework. Such an approach allows industries to organize resources, structure their collaboration, speak as one voice to policymakers and consumers, and conduct advocacy and public relations efforts more effectively and efficiently. When viewed through this framework, the spa industry cluster is much larger than it may initially appear. In order to estimate the size of the global spa economy, SRI has defined and delineated the specific businesses and industry segments that comprise the spa industry cluster. The spa industry cluster framework – or how these industry segments relate to one another – is illustrated in the following diagram. The Spa Industry Cluster Spa Facility Operations Beauty & Beauty Spa Capital Spa-Related Products Industry Investment Hospitality Spa & Tourism Fitness & Fitness Education Products Industry Spa Consulting Beauty & Wellness Spa Media, Medicine Industry Associations Spa-Related & Events Real Estate Healthy Foods & Spa-Branded Nutrition Industry Products Core Industries Enabled Industries Associated Industries The spa industry cluster consists of core, enabled, and associated industries:  Core industries include spa facility operations; spa capital investments (e.g., construction of new spas, spa renovations and expansions, etc.); spa consulting; spa education; spa media, events, and associations; and spa-branded products.  Enabled industries are directly induced by the core spa industry and include spa- related tourism and spa-related real estate.Copyright Global Spa Summit 2008 12 SRI International
  • 17. The Global Spa Economy 2007  Associated industries represent a selected set of industries that are interconnected with the spa industry through a common emphasis on health and wellness, and, to some extent, common sales and marketing channels. Associated industries are closely related to the spa industry, but not strictly a part of it; they are directly promoted by the spa industry, and, in turn, the spa industry is promoted by them. Associated industries include: beauty and beauty products; fitness and fitness products; beauty and wellness medicine; and healthy foods and nutrition. B. Quantifying The Size Of The Spa Economy Determining what is included in the spa industry is only the first step in estimating the size of the global spa economy. Quantifying the size of the spa industry is an ambitious endeavor that poses another set of challenges:  There is a dearth of data on the spa industry for the majority of countries around the world.  Within the traditional industry classification frameworks used by national governments and international organizations, it is not possible to separate spas from other related beauty, fitness, tourism, and medical industries. Therefore, conventional public sector data sources are of limited use when conducting research of this nature.  A number of high-quality spa industry studies have been conducted, but these studies cover no more than 20 countries around the world. Big data and research gaps exist for the fast-growing countries in Asia, Latin America, and the Middle East. Furthermore, each of these studies utilizes different methodologies for qualifying and quantifying spas, making it difficult to compare one study‟s findings to another. Faced with these challenges, the SRI team pursued multiple lines of inquiry gather data from primary and secondary sources, including: a global survey that collected approximately 1,000 responses; national and international-level qualitative and quantitative data and reports; existing spa industry reports; and over 50 high-level executive interviews. These inputs were used to create a consistent and comparable estimation model to quantify the spa industry in 210 countries, including those where major data gaps exist. An important lesson that emerged from this exercise is the colossal need for the industry and governments to collect and maintain information on the spa industry. It is the hope of the research team that this small step is a productive one for the industry.Copyright Global Spa Summit 2008 13 SRI International
  • 18. The Global Spa Economy 2007 III. The 2007 Spa Economy SRI estimates that the total size of the global spa economy was $254.7 billion in 2007. This estimate includes $60.3 billion in core spa industries and an additional $194.4 billion in spa-enabled industries, as shown in the table below. Size of the Global Spa Industry, 2007 (US$ billions) Core Spa Industries $60.31 Spa Facility Operations $46.81 Spa Capital Investments $12.99 Spa Education $0.31 Spa Consulting $0.07 Spa Media, Associations, & Events $0.13 Spa-Branded Products n.a. Spa-Enabled Industries $194.35 Spa-Related Hospitality & Tourism $106.05 Spa-Related Real Estate $88.30 Total Spa Economy $254.66 Spa facility operations represent $46.8 billion in revenues, or 78% of the “core” industry. The spa industry has been experiencing rapid growth in many regions around the world, and this growth is reflected in a significant level of capital investment, estimated at over $12.9 billion in 2007. The other “core” sectors – including education; consulting; and media, associations, and events – are relatively small by comparison, but still represent important pieces of the industry. Together, these sectors earned an estimated $0.51 billion in revenues in 2007. A significant amount of activities in the tourism and real estate sectors are influenced by the burgeoning spa, health, and wellness trend. SRI estimates that $106.0 billion in global tourism and hospitality revenues were “enabled” by the spa industry in 2007. Additionally, an estimated $88.3 billion in global real estate construction revenues were “enabled” by the spa lifestyle concept in 2007. The spa industry sits solidly within a broader set of lifestyle, health, and wellness- driven industries. Four “spa lifestyle associated industries” have been identified in this study as being directly interconnected with the spa industry. As shown in the following diagram, these four associated industries represent a global market that exceeded $1 trillion in 2007.Copyright Global Spa Summit 2008 14 SRI International
  • 19. The Global Spa Economy 2007 The Spa Industry Cluster (US$ billions) Spa Facility Operations $46.81 Beauty & Beauty Products Industry Spa Capital Spa-Related $500.21 Investment Hospitality $12.99 & Tourism Fitness & Fitness Spa $106.05 Products Industry Education $0.31 $241.27 Spa Consulting Beauty & Wellness Spa Media, $0.07 Medicine Industry Associations Spa-Related $195.84 & Events Real Estate $0.13 $88.30 Healthy Foods & Spa-Branded Products Nutrition Industry n.a. $162.35 Core Industries Enabled Industries Associated Industries $60.31 $194.35 $1,099.68 Spas are a sizable global industry when compared to other higher profile recreation and leisure industries. With spa facility operations earning nearly $47 billion globally, the spa industry is smaller than the more established golf and commercial sports industries. However, the spa industry is significantly larger than the global motion picture industry as measured by box office sales, as well as the global cruise industry. Comparison of Spas with Other Global Industries (US$ billions) Core Spa Industries $60 Commercial Sports Industry3 $150 Golf Industry (golf facility operations)4 $80 Motion Picture Industry (box office sales)5 $27 Cruise Industry6 $21 3 Parker, Philip M., The 2007-2012 World Outlook for Commercial Sports, ICON Group Ltd.: 2006. 4 Estimated by SRI International. 5 Motion Picture Association of America, Theatrical Market Statistics 2007. 6 Business Research & Economic Advisors, The Contribution of the North American Cruise Industry to the U.S. Economy in 2006, Prepared for Cruise Lines International Association, August 2006.Copyright Global Spa Summit 2008 15 SRI International
  • 20. The Global Spa Economy 2007 A. Core Spa Industries 1. Spa Facility Operations Spa facility operations represent the core of the spa economy. They include the wide variety of services offered at spas – including massages, facials, body treatments, salon services, water-based treatments, health assessments, and much more – as well as sales of products at spas. In 2007 there were an estimated 71,762 spas operating around the world, including:  45,113 day/club/salon spas;  11,489 hotel/resort spas;  1,485 destination spas and health resorts;  4,274 medical spas; and  9,310 “other” spas.7 Together, these spas generated an estimated $46.8 billion in revenues and employed an estimated 1.2 million persons in 2007. Global Spa Facilities by Type, 2007 Estimated Total Estimated Total Estimated Total Spa Revenues Number of Spas Spa Employment (US$ billions) Day/Club/Salon Spas 45,113 $21.0 659,106 Hotel/Resort Spas 11,489 $12.6 269,363 Destination Spas & Health Resorts 1,485 $6.2 112,239 Medical Spas 4,274 $4.6 51,843 Other Spas 9,310 $2.4 130,958 Total 71,672 $46.8 1,223,510 Global Distribution of Spas, by Type of Spa, 2007 7 Definitions of each type of spa are provided in section II of this report.Copyright Global Spa Summit 2008 16 SRI International
  • 21. The Global Spa Economy 2007 Number of Spas Worldwide, by Type of Spa, 2007 In terms of numbers, day/club/salon spas comprise the majority of spas around the Destination Hotel/Resort world, accounting for about 63% of all spa Spas Spas & Health Resorts (11,489) 16.0% facilities. At 16%, hotel/resort spas are (1,485) 2.1% second in terms of numbers. Other spas, Medical Spas (4,274) 6.0% medical spas, and destination spas/health resorts are smallest in terms of numbers, at Other Spas Day/Club/Salon 13%, 6%, and 2%, respectively. (9,310) 13.0% Spas (45,113) 62.9% In terms of revenues, however, hotel/resort spas and destination spas/health resorts account for a much larger share of the market Revenues of Spas Worldwide, by Type of Spa, 2007 as compared to their overall number of facilities. This is because these types of spas typically have much higher average revenues Hotel/Resort per facility than do day/club/salon spas. Spas ($12.6) 26.9% Day/club/salon spas account for only about Day/Club/Salon 45% of global revenues (as compared to Spas ($21.0) 44.9% 63% of global facilities). They are closely Destination followed by hotel/resort spas and destination Spas & Health Resorts spas/health resorts, which together account ($6.2) 13.2% for 40% of global revenues. Medical spas, Medical Spas Other Spas which also have higher average revenues per ($4.6) 9.9% ($2.4) 5.1% (US$ billions) facility, account for 10% of global revenues, Employment by Spas Worldwide, by Type of Spa, 2007 but only 6% of facilities. Other spas tend to be smaller in size and comprise only 5% of global industry revenues. Hotel/Resort Spas (269,363) 22.0% A little over half of all spa employees around the world work in day/club/salon spas. Destination Spas & Health Hotel/resort spas also account for a large Resorts Day/Club/Salon (112,239) 9.2% Spas share of industry employment, with 22% of (659,106) 53.9% Medical Spas the workforce. This is followed by destination (51,843) 4.2% spas/health resorts, with 9% of employment, Other Spas (130,958) 10.7% and other and medical spas (with 11% and 4% of employment, respectively).Copyright Global Spa Summit 2008 17 SRI International
  • 22. The Global Spa Economy 2007 The spa industry has a strong and growing presence in all regions of the world, but it is also heavily concentrated in a few regions and countries. Together, Europe, North America, and Asia-Pacific account for over 90% of industry revenues. Global Spa Facilities by Region, 2007 Estimated Total Spa Estimated Total Estimated Total Spa Revenues Number of Spas Employment (US$ billions) Europe 22,607 $18.4 441,727 Asia-Pacific 21,566 $11.4 363,648 North America 20,662 $13.5 307,229 Middle East-North Africa 1,014 $0.7 20,938 Latin America-Caribbean 5,435 $2.5 82,694 Africa 389 $0.3 7,273 Total 71,672 $46.8 1,223,510 Among the world‟s top 20 largest spa-going countries in terms of revenues, all are located within the three top regions (as shown in the table above), with the exception of Mexico and Argentina. The five largest countries in terms of revenue (United States, Japan, Germany, France, Italy) account for over 55% of industry revenues worldwide. The twenty largest countries, as shown in the table below, account for 85% of world revenues. Eleven countries in the world have spa revenues over $1 billion annually. Top 20 Spa Countries, 2007 Estimated Total Spa Estimated Total Estimated Total Spa Revenues Number of Spas Employment (US$ billions) United States 17,845 $12.06 275,788 Japan 6,442 $5.67 104,246 Germany 3,971 $3.84 86,917 France 2,746 $2.30 54,430 Italy 2,391 $2.24 50,942 United Kingdom 2,468 $1.72 43,835 China 4,518 $1.72 82,113 Spain 1,816 $1.53 34,637 Canada 2,817 $1.46 31,441 South Korea 2,465 $1.26 31,974 Austria 999 $1.22 24,072 Mexico 1,855 $0.87 29,793 Russia 1,625 $0.82 30,653 Switzerland 555 $0.70 14,307 Australia 674 $0.44 6,938 Greece 474 $0.43 9,515 Argentina 1,168 $0.42 14,246 Thailand 1,401 $0.39 48,680 India 2,359 $0.38 22,175 Hong Kong 578 $0.37 9,793Copyright Global Spa Summit 2008 18 SRI International
  • 23. The Global Spa Economy 2007 Spa Industry Profile: Europe  In terms of revenues, number of spas, and employment, Europe is the largest regional spa market in the world. It had an estimated 22,607 spas in 2007, earning $18.4 billion in revenues and employing 441,727 people.  Europe‟s massive spa market has evolved from bathing and wellness traditions that date back to medieval, and even Roman, times. The region has a deep-rooted spa and wellness culture that emphasizes the use of natural and water-based elements for therapeutic, curative, and preventive treatments.  In Europe, the “other” spas category primarily captures the extensive bath house and sauna facilities that are especially prevalent in northern and eastern European countries and in the former Soviet Bloc. A selected portion of these facilities in each country is estimated to have crossed over into the spa industry by adding spa facilities and services. Because they are smaller-sized establishments, these spas represent approximately 2% of European spa market revenues.  Europe is also unique in that it is home to a large number of health resorts that emphasize wellness, traditional healing therapies, and medically-based services. For instance, in Russia and eastern Europe, there are hundreds, or even thousands, of sanatoriums dating from the Soviet era, which offer wellness-based healing/medical services and frequently require a long-term stay. A large portion of these sanatoriums – many of which were state-owned or subsidized and have a hospital-like atmosphere – are now out-moded or even closed down. However, a small number are being modernized and re-cast as higher-end health resorts and are crossing over into the spa industry. Overall, health resorts and destination spas represent an estimated 27% of European spa industry revenues. Spa Facilities in Europe, 2007 Estimated Total Estimated Total Estimated Total Spa Revenues Number of Spas Spa Employment (US$ billions) Day/Club/Salon Spas 14,933 $7.55 237,473 Hotel/Resort Spas 4,297 $4.61 84,117 Destination Spas/Health Resorts 1,202 $4.93 91,962 Medical Spas 913 $0.87 9,248 Other Spas 1,262 $0.39 18,927 Total 22,607 $18.35 441,727Copyright Global Spa Summit 2008 19 SRI International
  • 24. The Global Spa Economy 2007 Europe’s Top Ten Spa Markets, 2007 Estimated Total Estimated Total Spa Revenues Number of Spas (US$ millions) Germany 3,971 $3,842.7 France 2,746 $2,299.0 Italy 2,391 $2,237.5 United Kingdom 2,468 $1,724.0 Spain 1,816 $1,527.0 Austria 999 $1,220.8 Russia 1,625 $823.4 Switzerland 555 $701.9 Greece 474 $426.8 Netherlands 507 $366.1 “Typical” European Spas  As a region, Europe encompasses a wide range of countries at vastly different levels of income and development. PPP GDP per capita8 in Europe ranges from under $2,000 in some of the former Soviet countries to over $60,000 in the most wealthy western and northern European countries. Because of the heterogeneity of the European market, typical spa sizes vary dramatically across different countries within the region.  Average day/club/salon spas are assumed to range in size from $125,000 to $660,000 in revenues and from 5 to 25 employees.  The “other” spas category, which primarily captures establishments that have their roots in Europe‟s sauna and bath house traditions, are estimated to be to be slightly smaller than day/club/salon spas.  Typical medical spas are estimated at $320,000 to $1.2 million, with 4 to 12 employees.  Average hotel/resort spa revenues range from $450,000 to $1.5 million and from 10 to 24 employees across different countries in the region.  Destination spas and health resorts are comparatively larger, because the entire revenues and employment of these facilities (including lodging, food, spa, and all other services) are counted as part of the spa economy. On average, they range from $1.5 to $5.5 million and 30 to 100 employees. Country Coverage: The data presented here covers a total of 52 countries across western, eastern, and central Europe, as well as the former Soviet Union, including: Albania, Andorra, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Kazakhstan, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Moldova, Monaco, Netherlands, Norway, Poland, Portugal, Romania, Russia, San Marino, Serbia & Montenegro, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan. 8 Purchasing power parity GDP per capita is the GDP per capita adjusted according to the cost of goods and services in each country, allowing for a more accurate comparison of the standard of living across countries.Copyright Global Spa Summit 2008 20 SRI International
  • 25. The Global Spa Economy 2007 Spa Industry Profile: Asia-Pacific  Asia-Pacific is the world‟s third largest spa market in terms of revenues and second largest market in terms of number of spas. The industry size is estimated at $11.4 billion in 2007, with 21,566 spas and 363,648 employees.  Spas are a relatively new, but high growth industry in Asia-Pacific. Across the region – and especially in the emerging market countries of south/southeast Asia and the Pacific islands – the market is typically dominated by large hotel/resort spas catering to international tourists. However, some of the middle and upper income countries (namely, Japan, Korea, Hong Kong, Singapore, Australia, and New Zealand) also have a significant day/club/salon spa sector serving the local market. Medical spas are a new, but rapidly growing sector in parts of Asia, linked with a rising interest in medical tourism in the region.  While the Asian spa industry is considered to be “new” based on its modern/Western conceptualization, the region has a remarkable number of culturally-based healing and wellness therapies that have evolved over thousands of years. Facilities and practitioners that offer these traditional services are beginning to see the value of adding spa services and amenities and aligning themselves with the spa industry. The “other” spas category for Asia-Pacific attempts to capture this trend by quantifying the number of traditional practitioners that have crossed into the spa market. These traditions vary from country-to-country and include: onsens and sentos in Japan, bath houses in Korea, ayurveda centers in India, Thai massage practitioners in Thailand, Chinese medicine/massage practitioners in China and other southeast Asian countries, and so on. These “emerging” spas represent an estimated 13% of industry revenues in Asia-Pacific. Spa Facilities in Asia-Pacific, 2007 Estimated Total Estimated Total Estimated Total Spa Revenues Number of Spas Spa Employment (US$ billions) Day/Club/Salon Spas 10,805 $5.57 162,733 Hotel/Resort Spas 2,944 $3.04 80,162 Destination Spas/Health Resorts 82* $0.28 3,937 Medical Spas 939 $1.05 12,430 Other Spas 6,796 $1.44 104,387 Total 21,566 $11.39 363,648 *This figure is larger than might be expected because it includes a number of health resorts in Australia and New Zealand, as well as ayurvedic resorts in India.Copyright Global Spa Summit 2008 21 SRI International
  • 26. The Global Spa Economy 2007 Asia’s Top Ten Spa Markets, 2007 Estimated Total Estimated Total Spa Revenues Number of Spas (US$ millions) Japan 6,442 $5,668.0 China 4,518 $1,718.7 South Korea 2,465 $1,255.7 Australia 674 $440.2 Thailand 1,401 $393.8 India 2,359 $383.9 Hong Kong 578 $374.3 Singapore 553 $329.8 Taiwan 587 $247.7 Indonesia 878 $164.6 “Typical” Asian Spas  Asia-Pacific has a handful of developed/wealthy economies with per capita PPP GDPs in the $30,000 to $45,000 range (such as Australia, New Zealand, Hong Kong, Japan, and Singapore), along with a large number of low income countries with incomes of $1,500 to $3,000. Average spa sizes and revenues vary accordingly.  “Typical” day/club/salon spas in Asia-Pacific range from $75,000 to $800,000 of revenues and 6 to 25 employees, depending on a country‟s level of development.  “Other” spas include Japanese onsens, Indian ayurveda centers, Thai and Chinese massage practitioners, and other culturally-rooted wellness traditions that have morphed into spas. They are typically estimated to be two-thirds to one-half the size of day/club/salon spas.  Asian hotel/resort spa revenues are comparable to those in other high income regions due to a concentration of wealthy clientele among locals and tourists. This sector is segmented by upscale, globally branded spas and mid-range hotel/resort spas serving a growing local middle class market in countries such as China and India. Average Asian hotel/resort spa revenues are assumed to be $250,000 to $2.2 million, with 10 to 37 employees.  Most destination spas and health resorts are estimated at $1 million to $5 million and 30-125 employees (including lodging and food in addition to spa services). At the high end of the market are a handful of premier destination spas with revenues upwards of $20 million. At the low end of the market are a significant number of ayurveda-based spa resorts in India that cater to both the local and foreign market.  Asian medical spas are estimated to range, on average, from $750,000 to $1.3 million, and 10 to 17 employees. They are a relatively new portion of the market in Asia and are assumed to be located only in the higher income countries. Country Coverage: This data encompasses 43 countries across the Asia-Pacific region: American Samoa, Australia, Bangladesh, Bhutan, Brunei, Cambodia, China, Fiji, French Polynesia, Guam, Hong Kong, India, Indonesia, Japan, Kiribati, Laos, Macau, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Myanmar, Nepal, New Caledonia, New Zealand, North Korea, Northern Mariana Islands, Pakistan, Palau, Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, South Korea, Sri Lanka, Taiwan, Thailand, Timor-Leste, Tonga, Vanuatu, Vietnam.Copyright Global Spa Summit 2008 22 SRI International
  • 27. The Global Spa Economy 2007 Spa Industry Profile: North America  The North American spa industry ranks second in the world in terms of revenues and third in the world in terms of the number of spas. The region‟s estimated 20,662 spas had approximately $13.5 billion in revenues and 307,229 employees in 2007.  The North American market is dominated by day/club/salon spas and hotel/resort spas, which together comprise nearly 75% of industry revenues in the region.  Both the United States and Canada have highly-developed spa markets, but industry segments continue to grow and new business models continue to emerge in both countries. An increasing number of mobile establishments are offering spa services on the premises of a customer‟s home or office. There is also a growing number of establishments that specialize in a single spa service, such as massage or facials, and cater to “entry-level” spa-goers at lower price points. While these establishments may not be considered as true “spas” under strict industry definitions, they are helping to bring the spa concept to a broader portion of the consumer market. The “other” spas category in North America captures these emerging specialty spas, as well as cruise ship spas. This category represented about 4% of industry revenues in 2007. Spa Facilities in North America, 2007 Estimated Total Estimated Total Estimated Total Spa Revenues Number of Spas Spa Employment (US$ billions) Day/Club/Salon Spas 15,355 $6.67 201,272 Hotel/Resort Spas 2,090 $3.32 61,945 Destination Spas/Health Resorts 138 $0.61 11,281 Medical Spas 2,081 $2.39 26,332 Other Spas 998 $0.54 6,400 Total 20,662 $13.53 307,229Copyright Global Spa Summit 2008 23 SRI International
  • 28. The Global Spa Economy 2007 North America’s Spa Markets, 2007 Estimated Total Estimated Total Spa Revenues Number of Spas (US$ millions) United States 17,845 $12,063.2 Canada 2,817 $1,462.2 “Typical” North American Spas  Average incomes in the United States and Canada are among the highest in the world, and average spa revenues are accordingly quite high as compared to those in developing and middle-income countries.  Day/club/salon spas are estimated to range, on average, from $200,000 to $500,000 in revenues, and larger establishments may exceed $1 million in revenues. They typically range from 8 to 15 employees.  The North American market continues to pioneer new business models, such as “value” spa chains and mobile spas, which are proliferating rapidly. The “other” spas category primarily captures these establishments, which tend to be slightly smaller than day/club/salon spas, typically ranging from $100,000 to $400,000 of revenues and from 5 to 10 employees.  Average hotel/resort spas in North America earn $850,000 to $1.8 million in revenues, with 11 to 35 employees.  Destination spas and health resorts can range from $2.5 million to $20 million and upwards, and from 40 to 100+ employees.  Medical spas are an increasing portion of the North American market (representing 18% of revenues). They are estimated to earn an average of $1.2 million annually and have 12 to 15 employees. Country Coverage: For this study, the North American region includes the United States and Canada.Copyright Global Spa Summit 2008 24 SRI International
  • 29. The Global Spa Economy 2007 Spa Industry Profile: Middle East-North Africa  The Middle East and North Africa had approximately 1,014 spas, earning about $747 million in revenues and employing 20,938 persons in 2007.  The spa industry in Middle East-North Africa differs significantly from that of other regions in that it is dominated by the hotel/resort spa sector. Hotel/resort spas represent over 60% of industry revenues in the Middle East, as compared to 25% in North America, Europe, and Asia-Pacific. Day/club/salon spas are still a comparatively small portion of the industry in the Middle East and North Africa, with 19% of revenues in 2007.  The Middle East has a historic bathing tradition linked with hammams or Turkish baths, which have their roots in the early days of Islam and which were derived from Roman and Greek bathing traditions. Like other culturally-rooted wellness traditions and therapies around the world, the hammams have many synergies with the spa industry, and some are beginning to add upgraded spa facilities and services. Conversely, many traditional day spas and hotel/resorts spas are adding a cultural element to their services by offering specialized treatments that are grounded in hammam bathing traditions. The “other” spas category in the Middle East region attempts to quantify the traditional hammams and bath houses that have crossed over to the spa sector – this category represented just over 1% of industry revenues in 2007. Spa Facilities in Middle East-North Africa, 2007 Estimated Total Estimated Total Estimated Total Spa Revenues Number of Spas Spa Employment (US$ billions) Day/Club/Salon Spas 440 $0.14 6,259 Hotel/Resort Spas 441 $0.45 12,554 Destination Spas/Health Resorts 7 $0.11 1,300 Medical Spas 26 $0.03 331 Other Spas 99 $0.01 494 Total 1,014 $0.75 20,938Copyright Global Spa Summit 2008 25 SRI International
  • 30. The Global Spa Economy 2007 Middle East-North Africa’s Top Ten Spa Markets, 2007 Estimated Total Estimated Total Spa Revenues Number of Spas (US$ millions) United Arab Emirates 212 $267.9 Israel 190 $116.2 Tunisia 41 $86.2 Saudi Arabia 96 $52.4 Egypt 146 $43.7 Oman 25 $32.1 Morocco 79 $30.8 Bahrain 24 $27.4 Kuwait 33 $22.2 Qatar 19 $19.9 “Typical” Middle Eastern-North African Spas  The Middle East-North Africa region is split between a handful of wealthy Gulf countries (most with PPP GDPs per capita in the range of $20,000 to $30,000), along with a number of low-to-middle income countries (with per capita incomes of $4,000 to $8,000). Because the Middle East spa market is dominated by hotel/resort spas catering to international tourists, average spa revenues and sizes are somewhat less tied to country income levels than they are in other countries around the world.  The average hotel/resort spa in the region is estimated to range from $500,000 to $1.5 million and have 14 to 43 employees. There are also a small number of very high-end destination spas, health resorts, and thalassotherapy resorts that average $10 to 15 million of revenues and 150+ employees.  Typical day/club/salon spas are estimated to average from $125,000 to $550,000 of revenues and from 7 to 28 employees.  In the Middle East, the “other” spas category captures establishments that have evolved from the hammam and Turkish bath tradition. They are assumed to be about one-half to one-quarter of the size of day/club/salon spas.  There are a handful of medical spas serving a wealthy clientele in the Gulf countries. These spas are estimated to average $1 million of revenues and 13 employees. Country Coverage: The Middle East-North Africa region includes 20 countries: Afghanistan, Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates, West Bank and Gaza, Yemen.Copyright Global Spa Summit 2008 26 SRI International
  • 31. The Global Spa Economy 2007 Spa Industry Profile: Latin America-Caribbean  Latin America-Caribbean is the fourth largest spa region in the world, but its industry is significantly smaller than those of the top three regions (Europe, North America, and Asia-Pacific). It had an estimated 5,435 spas, with revenues of $2.5 billion and employment of 82,694 persons in 2007.  The spa market in Latin America-Caribbean is evenly split between day/club/salon spas and hotel/resort spas, each accounting for about 39-40% of industry revenues in 2007.  The Andes region, stretching from Panama in the north to the Patagonia region in southern Chile and Argentina, is home to thousands of hot/thermal springs. Many of these springs have been developed into resorts and bathing facilities, primarily catering to local and regional tourists. While many are very basic, a portion of these establishments offer a higher grade of services, amenities, and accommodations and have crossed over to the spa industry. The “other” spas category in Latin America-Caribbean quantifies this very small sector of the industry, which accounted for less than 1% of overall industry revenues in 2007. Spa Facilities in Latin America-Caribbean, 2007 Estimated Total Estimated Total Estimated Total Spa Revenues Number of Spas Spa Employment (US$ billions) Day/Club/Salon Spas 3,381 $1.00 48,480 Hotel/Resort Spas 1,539 $0.99 26,571 Destination Spas/Health Resorts 48 $0.21 3,426 Medical Spas 313 $0.29 3,478 Other Spas 154 $0.01 740 Total 5,435 $2.52 82,694 Latin America-Caribbean’s Top Ten Spa Markets, 2007 Estimated Total Estimated Total Spa Revenues Number of Spas (US$ millions) Mexico 1,855 $868.6 Argentina 1,168 $419.8 Brazil 643 $284.2 Puerto Rico 177 $114.8 Colombia 250 $102.6 Chile 199 $102.0 Dominican Republic 171 $75.0 Venezuela 156 $70.7 Uruguay 76 $41.7 Bahamas 66 $39.1Copyright Global Spa Summit 2008 27 SRI International
  • 32. The Global Spa Economy 2007 “Typical” Latin American-Caribbean Spas  The Latin America-Caribbean region is comprised of predominantly low- and middle- income countries, with PPP GDP per capita ranging from $3,000 to $15,000. A handful of Caribbean countries have average incomes that exceed $20,000 per capita (e.g., Aruba, Barbados, British Virgin Islands, Cayman Islands, and Bermuda). Accordingly, average spa revenues are lower in this region as compared to other wealthier and more developed regions of the world.  A number of Latin American countries have a strongly-rooted beauty culture (e.g., Colombia, Venezuela), and therefore have a higher than average number of day/club/salon spas and medical spas relative to their income levels. These countries also have a growing medical tourism market, which supports the growth of medical spas.  Day/club/salon spas revenues are estimated to average $150,000 to $300,000, and employment ranges from 12 to 20 people.  “Other” spas captures a small number of mineral/thermal springs-based day spas scattered throughout the Andes region. They are assumed to be about one-third the size of the larger day/club/salon spas.  Hotel/resort spas have estimated revenues of $450,000 to $850,000 and employ 15 to 23 people on average. However, there is significant investment activity in this region, and new hotel/resort spas currently opening in the region are expected to have much higher revenue models.  The existing destination spas and health resorts (many of which are built around mineral/thermal springs) typically cater to the local/regional market and have $1.5 to $3 million of revenues. There are a handful of upscale, internationally-branded destination spas with higher revenue profiles ($10 to 15 million+).  Medical spas are assumed to be concentrated primarily in Mexico and several middle-income Central and South American countries, with an estimated size of around $750,000 to $1 million and 9 to 17 employees. Country Coverage: The Latin America-Caribbean region covers 45 countries: Anguilla, Antigua & Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Mexico, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, St. Kitts & Nevis, St. Lucia, St. Martin, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago, Turks & Caicos Islands, U.S. Virgin Islands, Uruguay, Venezuela.Copyright Global Spa Summit 2008 28 SRI International
  • 33. The Global Spa Economy 2007 Spa Industry Profile: Africa  Africa has a very small spa market, and the industry is concentrated in a handful of wealthier countries and upscale tourism destinations (e.g., South Africa, Namibia, Botswana, Kenya, and Seychelles). The number of spas is estimated at 389, with $276 million in revenues and 7,273 employees in 2007.  Like in the Middle East, the African spa industry is dominated by high-end hotel/resort spas and a small number of destination spas and health resorts that cater to wealthy foreign tourists. Together, these account for over 78% of the region‟s spa industry revenues. The only country with a significant local day/club/salon spa market is South Africa. Spa Facilities in Africa, 2007 Estimated Total Estimated Total Estimated Total Spa Revenues Number of Spas Spa Employment (US$ millions) Day/Club/Salon Spas 199 $57.8 2,891 Hotel/Resort Spas 178 $180.6 4,014 Destination Spas/Health Resorts 8 $35.5 333 Medical Spas 2 $2.0 25 Other Spas 2 $0.2 10 Total 389 $276.2 7,273 Africa’s Top Six Spa Markets, 2007 Estimated Total Estimated Total Spa Revenues Number of Spas (US$ millions) South Africa 284 $170.2 Seychelles 16 $36.4 Botswana 19 $14.5 Kenya 15 $13.1 Mauritius 12 $8.7 Namibia 12 $7.4Copyright Global Spa Summit 2008 29 SRI International
  • 34. The Global Spa Economy 2007 “Typical” African Spas  The majority of African countries are very poor, and therefore the spa industry is assumed to be negligible throughout most of the region. South Africa is the only country in Africa with a sizeable spa industry. In 34 out of the 48 countries in this region, the spa industry is estimated to be zero for the purposes of this study.  There is also a small, but significant high-end niche tourism market in several southern African countries and islands, which supports a small sector of upscale hotel/resort spas, destination spas, and health resorts.  A “typical” day/club/salon spa in Africa is estimated to have $75,000 to $300,000 in revenues and 4 to 15 employees.  Hotel/resort spas, which almost exclusively serve wealthy international tourists, are estimated at $850,000 to $1.2 million, with 19 to 27 employees. There are a handful of small destination spas and health resorts in South Africa, along with one very upscale destination spa in Seychelles. Country Coverage: The estimates presented here consider the following African countries: Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo (Dem. Rep.), Congo (Rep.), Cote dIvoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome & Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, Zimbabwe.Copyright Global Spa Summit 2008 30 SRI International
  • 35. The Global Spa Economy 2007 2. Spa Capital Investments In 2007, significant investments were made in the construction of new spas and the expansion of existing facilities. Spa capital investments include expenditures on the construction and finishing of spa facilities, initial outlays for spa equipment and amenities, and expenditures for major upgrades and expansions of existing spas facilities beyond regular upkeep and maintenance. Global spa capital investments are estimated at $13 billion in 2007, which represents 27.7% of total spa industry revenues. Conversations with industry executives suggest that this investment rate is likely to accelerate in 2008, as a large number of projects are already in the works, especially in the emerging markets of Asia, the Middle East, and parts of Latin America and Europe. The estimated distribution of 2007 spa capital investments across the world‟s regions is provided in the table below. Global Spa Capital Investments by Region, 2007 Estimated Number Estimated Total % of World of Investment Capital Investments Total Projects (US$ billions) Europe 1,827 $4.9 37.8% Asia-Pacific 2,995 $3.6 28.0% North America 1,114 $1.8 13.5% Middle East-North Africa 313 $1.0 7.9% Latin America-Caribbean 543 $1.6 12.3% Africa 38 $0.1 0.5% Total 6,830 $13.0 100.0% As one of the world‟s fastest growing spa markets, Asia received the largest number of spa investment projects and had an estimated $3.6 billion of capital investments in 2007. Europe, in a period of rapid expansion, received $4.9 billion of investments in 2007 (and had an average cost per project that was slightly higher than in Asia- Pacific). North America, which has a well developed spa market, received an estimated $1.8 billion of capital investments in 2007. Middle East-North Africa has a small spa market by comparison, but has been experiencing very high rates of investment – primarily in the Gulf countries – estimated at $1.0 billion in 2007. The Latin America-Caribbean spa market is also more modest in size but growing rapidly, receiving an estimated $1.6 billion of capital investments in 2007.Copyright Global Spa Summit 2008 31 SRI International
  • 36. The Global Spa Economy 2007 3. Spa Education The spa education sector comprises two main components: spa therapist education and spa management education. Together, these sectors accounted for over $311 million of revenues throughout the global economy in 2007. Global Spa Education Expenditures, 2007 Estimated Spa Education-Related Expenses (US$ millions) Spa therapist education $309.4 Spa management education $2.0 Total $311.4 Spa therapist education includes spending by individuals who are seeking training and professional qualifications in order to enter or advance in the spa industry.9 For example, individuals in North America and Western European countries may pay $5,000 to $10,000 for coursework that allows them to obtain the initial certification necessary to enter the spa industry as a therapist. In addition, in a number of countries spa therapists are required to take continuing education in order to renew their certification. In 2007, individuals around the world spent an estimated $309.4 million on spa therapist education. The bulk of spa therapist Spa Therapist Education Expenditure by Region, 2007 education expenditures are in North America Europe and North America, ($143.1), 46.3% where workforce requirements Europe ($118.2), 38.2% for entering the industry are Asia-Pacific much higher than in the ($39.1), 12.6% developing world. In high Latin America-Carib. ($7.3), 2.4% income markets, spa therapists will typically pay for their own Middle East-N. Africa ($1.4), 0.5% initial education or credentials. Africa Expenditures on continuing (US$ millions) ($0.3), 0.1% education are more likely to be split between the employee and employer. In the United States, for example, continuing education for estheticians – who are in especially rare supply – is frequently paid for by employers or product producers. Massage therapists, on the other hand, are more likely to be self-employed and are more likely to pay for their own continuing education. In Europe, it is estimated that the cost of continuing 9 Estimates for spa therapist education do not include the training provided and paid for by spa-related employers and spa products companies, because these expenditures are already captured in the core industry cluster revenues and their resulting multiplier impacts.Copyright Global Spa Summit 2008 32 SRI International
  • 37. The Global Spa Economy 2007 education for spa therapists is roughly split between the employee and employer. In emerging markets, the bulk of training is likely to be provided by employers, with most training taking place in high-end destination spas and urban or resort hotels. Spa management education is a small but critical part of the spa economy. Spa management education courses are provided by a small number of hospitality management programs worldwide, typically as an elective course within a broader curriculum to qualify for a professional degree in tourism/hospitality management or a similar field. Spa management education is also commonly offered as short training courses or online courses through associations, private companies, or nonprofits. Expenditures on spa management education are estimated at $2.0 million globally in 2007. 4. Spa Consulting Spa consulting is a vital segment of the spa economy, providing services such as conceptualization, design, and branding of new spas; spa management and training solutions; and spa-related research and benchmarking. This industry segment consists of many small companies led by specialized professionals who have high-level executive experience in the spa industry, as well a number of small units operating within larger travel, research, consulting, and management companies around the world. The size of the spa consulting sector is estimated at approximately $68.0 million in 2007. Global Spa Consulting Revenues, 2007 Spa Consulting Total $68.0 million 5. Spa Media, Associations, And Events Spa-related media, associations, and events are combined as one segment for this study because these activities are frequently conducted by businesses and organizations who are engaged in more than one type of activity in the promotion of the spa industry; therefore, their revenues often come from a combination of these sources. For example, many companies that organize spa and related industry trade shows and events often publish magazines and operate websites that promote the industry. Similarly, many spa and related industry associations publish magazines as well organize events and trade shows. The combined size of the global spa media, associations, and events sector is estimated at $133.1 million in 2007. Global Spa Media, Associations, and Events Revenues, 2007 Spa Media, Associations, and Events Total $133.1 millionCopyright Global Spa Summit 2008 33 SRI International
  • 38. The Global Spa Economy 2007 6. Spa-Branded Products Spa facilities derive a considerable portion of their revenues from sales of products, including specialty and therapeutic skin and body care products, prestige cosmetics, and much more. In European and U.S. spas, for example, product sales may represent as much as 10%, 20%, or even 30% of total annual revenues. In fact, spas are becoming an increasingly lucrative and important retail channel for many of the world‟s top cosmetics and beauty products companies. While at one time department stores represented the primary “prestige” sales outlet for cosmetics and skin care products, a growing share of these sales are now occurring through spas, salons, doctor‟s offices, and other specialty outlets. For the Estee Lauder company, for example, 11% of product sales in 2006 occurred through salons, spas, and similar kinds of specialty outlets. On the other hand, department store channels in North America fell from 46% of sales in 2002 to 37% of sales in 2006.10 Outside of spas themselves, there is a growing trend of branding a wide variety of products as “spa products,” as marketers try to appeal to the increasing consumer segment that is interested in a health- and wellness-driven lifestyle. Spa-branded products are appearing on the shelves at all ends of the spectrum – from mass market outlets to department stores and specialty/prestige outlets. Therapeutic skin and body care products, cosmeceuticals, microdermabrasion products, anti-aging products, and so on are all being marketed to consumers as a way to enjoy spa-style pampering at home. The spa-branding trend is not limited to skin care and body care products. Other product categories capitalizing on this trend include aromatherapy products and candles; personal massage devices; bathrobes and bath linens; loungewear, leisure, and fitness clothing; and much more. In the United States, even the home construction and renovation market is benefiting from the spa-branding trend. An increasing number of high-end home bathroom renovation projects are aimed at creating a spa- like atmosphere within individuals‟ homes. Given the relatively new and amorphous nature of spa-branded products, there is currently no global data available to measure the size or growth rate for this market. Even measuring the spa-branded portion of the skin care and body care products market is a challenge, because there is no existing data source that segments the market in this way. Just as an example of potential market size, the U.S. cosmeceuticals market (which could be considered to be solidly part of the spa- branded products trend) is projected to be $14.4 billion in 2007, with an annual 10 Packaged Facts, Skincare Products in the U.S., December 2006.Copyright Global Spa Summit 2008 34 SRI International
  • 39. The Global Spa Economy 2007 growth rate of around 5%.11 The global cosmeceuticals market is estimated as large as $55 billion.12 Due to the lack of global data, this study does not attempt to quantify the size of the spa-branded products market – but the size of the sector worldwide can be assumed to be significant.13 B. Spa-Enabled Industries 1. Spa-Related Hospitality And Tourism Health and wellness tourism, which includes visits to spas, is a relatively new but rapidly growing travel niche, with demand growing at 10%, 20%, and even 30% annually in some countries around the world. An increasing number of tourists are taking “spa vacations” specifically aimed at rest and relaxation, pampering, and stress reduction. Many more travelers now enjoy spa treatments as a complement to other travel activities, such as visiting friends and family; business trips; and recreation, culture, or shopping-oriented trips. SRI estimates that 142 million international and domestic “spa trips” were taken in 2007.14 Approximately 88% of these trips were taken domestically, or within travelers‟ home countries, and 12% of trips were taken internationally. “Spa trips” represent an estimated 2% of total international and domestic trips taken around the world in 2007. 11 Packaged Facts, Market Trends: The U.S. Cosmeceuticals Market, January 2005. Cosmeceuticals are skin care, makeup, and hair care products that are positioned as not only enhancing appearance, but also having therapeutic or preventive benefits. 12 Strategic Research Institute, 5th Annual Cosmeceuticals Conference Overview, www.almevents.com/ conf_page.cfm?instance_id=29&web_id=1082&pid=692. 13 The portion of the spa-branded products market that covers personal care and cosmetics/toiletries items is part of the broader global beauty and beauty products market, which is included in this study as an “associated spa lifestyle industry.” This industry is discussed and quantified in section III.C. of this report. 14 For the purposes of this study, a “spa trip” is defined as a trip of at least one night‟s duration, either within or outside of a person‟s country of residence, in which the person‟s motivation for the trip includes the enjoyment of spa services or treatments.Copyright Global Spa Summit 2008 35 SRI International
  • 40. The Global Spa Economy 2007 Spa Tourism, 2007 Estimated Number of "Spa Trips," 2007 Estimated Spa Travel Expenditures, 2007 # of International Spa Trips (17,661,283) International 12.4% Spa Travel Expenditures ($39.8) 37.5% Domestic Spa Travel # of Domestic Expenditures Spa Trips ($66.2) 62.5% (124,247,825) 87.6% (US$ billions) Total spa-related travel expenditures were an estimated $106.0 billion in 2007.15 Because international travelers typically spend more per trip, international spa travel expenditures represent a larger share of spending (38%) as compared to their share of the number of spa trips (12%). Domestic spa travel expenditures represent 62% of overall spa travel spending and 88% of total spa trips. SRI estimates that average spending per trip was $2,254 for an international spa traveler and $533 for a domestic spa traveler. Global Spa Tourism by Region, 2007 Estimated # of “Spa Trips” Estimated Spa Travel (millions) Expenditures (US$ billions) Europe 47.9 $48.4 International 7.4 $15.1 Domestic 40.5 $33.3 Asia-Pacific 53.3 $26.9 International 2.8 $7.1 Domestic 50.5 $19.8 North America 25.4 $17.2 International 1.4 $5.8 Domestic 24.0 $11.4 Middle East-North Africa 1.5 $2.3 International 1.2 $2.1 Domestic 0.3 $0.2 Latin America-Caribbean 12.6 $10.3 International 4.5 $8.9 Domestic 8.1 $1.5 15 Expenditures data includes spending by tourists on accommodations, food and beverage, transportation, entertainment and shopping (including spa-related treatments and products), and other activities.Copyright Global Spa Summit 2008 36 SRI International
  • 41. The Global Spa Economy 2007 Africa 1.3 $1.0 International 0.4 $0.8 Domestic 0.8 $0.2 Total 141.9 $106.0 International 17.7 $39.8 Domestic 124.2 $66.2 Asia-Pacific is the world‟s largest spa travel region, with an estimated 53.3 million “spa trips” in 2007, closely followed by Europe, with 47.9 million “spa trips.” Due to differences in income levels, however, estimated spa travel spending was higher in Europe ($48.4 billion) than in Asia-Pacific ($26.9 billion). Top international spa travel destinations in these and other regions (in terms of number of trips) include: Thailand and Indonesia in Asia-Pacific; Spain, Italy, France, Germany, UK, and Austria in Europe; Mexico, Dominican Republic, and Puerto Rico in Latin America-Caribbean; as well as the United States and Canada. In terms of domestic tourism, major spa travel countries include: Japan, Taiwan, and South Korea in Asia-Pacific; Germany, Italy, France, UK, Russia, and Finland in Europe; Mexico and Argentina in Latin America- Caribbean; as well as the United States and Canada. 2. Spa-Related Real Estate Incorporating the recreation, leisure, and wellness lifestyle concept into real estate development is a growing global trend that is accelerating in high-income and emerging economies alike. The spa-related real estate category attempts to capture the economic impact of global real estate construction that is associated with the spa- inspired lifestyle. While it is sometimes difficult to isolate the significance of spa facilities within a lifestyle-driven real estate development that also includes golf and other recreational amenities, there is strong consensus among developers that spa is an integral component, and in some markets a key selling point, for buyers seeking a leisure and wellness lifestyle package in their real estate purchasing decisions. SRI estimates that global spa-related real estate investment totaled over $88 billion in 2007.16 This estimate is conservative, as it mainly captures construction activities within commercial/mixed-use projects. There are also an increasing number of purely residential construction projects around the world that incorporate spa facilities and market the spa lifestyle as a key selling point. Because there is no global, comparable data source for residential construction across countries, this report does not estimate 16 This estimate is extrapolated from global real estate investment data, the share of those investments made in hospitality and mixed-used developments, and the estimated portion of those investments that incorporate a spa- related lifestyle component. Total global real estate investment in hospitality and mixed-use projects is estimated at $177 billion by Cushman & Wakefield.Copyright Global Spa Summit 2008 37 SRI International
  • 42. The Global Spa Economy 2007 the spa-related residential construction that is occurring outside of mixed-use and hospitality-related developments. Global Spa-Related Real Estate Investment, 2007 Spa-Related Real Estate Investment Total $88.3 billion The real estate impact of the spa industry does not stop there. Since spa facilities typically enhance the overall value of a development, there is a premium related to spa-related real estate. This premium is defined as the additional amount that a buyer is willing to pay for a home or property located within a spa lifestyle development, as compared to an equivalent development that does not have a spa. Interviews with real estate development executives put the range of the “spa premium” at 10% to 40%. However, this premium is only “realized” as an economic impact when a sale or resale of a property takes place. Because spa lifestyle real estate is a relatively new concept, sales of these kinds of properties have only started to reach a significant level in recent years, and there is no global data for these transactions. For this reason, the “spa lifestyle premium” has not been calculated for this report. C. Associated Spa Lifestyle Industries The rapid growth of the spa sector in recent years is closely linked with a broader trend of increasing emphasis on health and wellness, or the enhancement of mind, body, and spirit. The health and wellness trend is driving development and re-labeling of many new products and services across a wide variety of consumer markets – such as food and beverages, clothing, housewares, personal care, mind-body fitness, self- help products and services, etc. The concept of health and wellness is amorphous and continues to evolve as it works its way more deeply into popular nomenclature. According to the U.S. National Wellness Institute (NWI), wellness is defined as “an active process through which people become aware of, and make choices towards, a more successful existence.”17 NWI presents six dimensions of wellness, which together encompass a wide variety of human activities and endeavors:  Social: Contributing to one‟s environment and community; building better living spaces and social networks. 17National Wellness Institute, Defining Wellness, www.nationalwellness.org/index.php?id=390&id_tier=81. The National Wellness Institute was launched in 1977 to serve professionals and organizations that promote optimal health and wellness in individuals and communities across the United States and internationally.Copyright Global Spa Summit 2008 38 SRI International
  • 43. The Global Spa Economy 2007  Occupational: Enriching one‟s life and achieving personal satisfaction through work; the interconnectedness of work to living and playing.  Spiritual: Developing belief systems and values; creating a world view.  Physical: Benefiting from regular physical activity, healthy eating habits, strength and vitality, personal responsibility, self-care, etc.  Emotional: Developing awareness and acceptance of ones feelings; self-esteem, self-control, and determination as a sense of direction.  Intellectual: Pursuing creative and stimulating mental activities; sharing one‟s gifts with others.18 Looking at the health and wellness concept through this lens, any attempt to define and measure health and wellness in terms of an “industry” is challenging and could easily encompass a very broad cross-section of sectors, products, and services. The global health and wellness trend is also being captured and measured through the concept of LOHAS, an acronym for “Lifestyles of Health and Sustainability.” The LOHAS concept captures the segment of the consumer market that is focused on “health and fitness, the environment, personal development, sustainable living, and social justice.” In the United States alone, this market is estimated at $209 billion, covering about 19% of U.S. adult consumers. Market segments counted in this estimate include: personal health products and services, natural lifestyle products and services, green building, alternative energy, alternative transportation, and ecotourism.19 The spa industry sits solidly at the center of the global health and wellness trend. It is both a driver and beneficiary of this evolving concept. In order to capture the important synergies between the spa industry and other health and wellness-related industries, this study has identified four industries as “spa lifestyle associated industries:”  Beauty and beauty products industry: Beauty, hair, and nail care services; cosmetics, toiletries, and other beauty and personal care products and appliances.  Fitness and fitness products industry: Health clubs and fitness services; fitness and exercise clothing; fitness and exercise equipment; mind/body fitness services and products (e.g., yoga, Pilates, etc.).  Beauty and wellness medicine industry: Cosmetic and plastic surgery (surgical and non-surgical procedures); prescription skin care pharmaceuticals; weight loss and 18 Ibid. 19 LOHAS Online, About LOHAS: A History of the Sustainable Marketplace, www.lohas.com/about.html.Copyright Global Spa Summit 2008 39 SRI International
  • 44. The Global Spa Economy 2007 weight control services, pharmaceuticals, and related products; and medical tourism.  Healthy foods and nutrition industry: Organic foods; functional foods; vitamins and dietary supplements. These four industries were selected based on their interconnectedness with the spa industry. The products and services represented by each of these sectors are, to a certain extent, linked with or marketed and sold through spa facilities, but also represent much broader industries that reach far beyond the spa sector. A wide variety of “spa-branded” cosmetics, beauty products, foods, and nutritional items are sold at spas for example, but these sectors also encompass a vast global market for natural, organic, therapeutic, and healthy foods and personal care products that are sold through many different channels. Many health and fitness clubs are gradually incorporating spas into their facilities, but there is also a broader, rapidly growing global industry for exercise, fitness, and mind-body wellness activities (such as yoga and Pilates). Similarly, an increasing number of medical spas are offering cosmetic and dermatological procedures, nutritional counseling, weight loss services, and other medically-based wellness services alongside traditional spa services, but this represents only a fraction of the global beauty and wellness medical market. SRI estimates that the four “spa lifestyle associated industries” represented a global market of $1.1 trillion in 2007. Global Spa Lifestyle Associated Industries, 2007 Global Market Size (US$ billions) Beauty and beauty products industry $500.2 Fitness and fitness products industry $241.3 Beauty and wellness medicine industry $195.8 Healthy foods and nutrition industry $162.4 Total $1,099.7 D. Economic Impact Of The Spa Industry The spa industry‟s impact on the global economy includes both the direct effects of the core sectors, as well as their indirect and induced (or multiplier) effects on the overall economy. In economics, the idea of the multiplier is that changes in the level of economic activity in one industry have a “ripple effect” that results in an impact on many other industries throughout the economy. For example, a portion of each dollar spent at a spa is then spent by the spa owner to purchase goods and services for the spa facility. The producers of these goods and services must, in turn, increase production – these are indirect effects. In addition, spa employees spend much of theirCopyright Global Spa Summit 2008 40 SRI International
  • 45. The Global Spa Economy 2007 incomes purchasing goods and services, and this requires companies in a myriad of other industries to hire employees and increase output to meet this demand – these are induced effects. Therefore, the spa industry‟s total economic impact includes both the employment and revenues of spa-related businesses, as well as the employment and revenues generated in other sectors of the economy through subsequent purchases of goods and services by spa-related businesses and employees. Additional economic impacts are generated through the spa industry‟s influence on “enabled” industries, such as tourism and real estate. Overall, in 2007, the $60.3 billion core spa industry generated a total economic impact of $374 billion for the world economy, including the direct, indirect, and induced economic impacts of core spa industry activities as well as the impacts of spa-enabled industries. Economic Impacts of the Global Spa Industry, 2007 Spa Industry Spa Industry Indirect & Economy-Wide Direct Impact Induced Impact (US$ billions) Impacts (US$ billions) Core Spa Industries $60.31 Spa Facility Operations $46.81  Spa Capital Investments $12.99  Spa Education $0.31  Spa Consulting $0.07  Spa Media, Associations, & $373.97 Events $0.13  Enabled Spa Industries $194.35 Spa-Related Hospitality & Tourism $106.05  Spa-Related Real Estate $88.3  Total Spa Economy $254.66 Note: Some of the industry segments included in the direct spa economy calculations are excluded from the multiplier analysis, because they do not represent new economic activity or their inclusion would result in double-counting. For more details on the economic impact estimation methodology, see section V.Copyright Global Spa Summit 2008 41 SRI International
  • 46. The Global Spa Economy 2007 IV. How To Use The Findings To Move The Spa Industry Forward How can stakeholders make use of this study to move the spa industry forward? Advocating To Policymakers When viewed through the industry cluster framework, the spa sector is a large and significant global industry. The size and impact of the spa industry need to be communicated clearly and strongly to government leaders so that:  Appropriate investments in human resources can be made to ensure that adequate and qualified workers are in the pipeline to fill jobs in a rapidly growing, labor- dependent industry.  Policy/regulatory changes that affect the sector can be made to enable proper classification of establishments for consumer protection, but not to hinder industry growth.  Public sector resources can be leveraged on behalf of the industry. Strategic economic sectors often receive government attention and resources for research, data collection, and investment promotion. Communicating and publicizing the size of the global spa industry and its economic impacts will encourage national governments to take the spa industry seriously, to treat it as a strategic economic sector, and to make appropriate investments to support industry growth. Joining Industry Stakeholders Together An industry is stronger, and its voice louder, when it is bigger and more inclusive.  Bringing establishments that have evolved from distinctive cultural and historical wellness and healing contexts under the spa umbrella will attract more stakeholders and champions into the industry, thereby enriching and strengthening the industry and what it offers to consumers.  It is evident from the size of the four “spa lifestyle associated industries” that the spa industry is well-positioned at the nexus of booming lifestyle and wellness trends. The spa industry and its associated industries share consumers who have similar characteristics, preferences, and outlooks. Linking the spa industry with its associated industries can help to cross-promote a broader wellness consciousness and lifestyle and will ultimately increase consumer awareness of spas.Copyright Global Spa Summit 2008 42 SRI International
  • 47. The Global Spa Economy 2007 Reaching Out To Consumers A decidedly inclusive approach to defining “spa” best captures the potential of the industry as it is viewed by current and future spa consumers.  Consumers around the world make different associations with the term “spa.” Allowing for an interpretation of “spa” through the lens of local cultures and traditions enables establishments to evolve and move under the spa industry umbrella, as they make investments and adapt to the needs and desires of the modern consumer.  A more “democratic” and less “elitist” approach to labeling what is and what is not a spa will help appeal to a broader market. Today‟s value-conscious salon spa or mobile spa customer may become tomorrow‟s customer of a high-end destination spa. Informing Investors As a sector that is just beginning to take off on a global scale, the spa industry presents investors with exciting and lucrative investment opportunities.  This study provides a comprehensive and global view of the spa industry‟s size, scale, potential, and opportunities for current and prospective investors.  Adopting a flexible and culturally-inclusive view of “spa” enhances and enriches investment opportunities by highlighting opportunities for diversifying into emerging economies and niche markets within the spa industry. Attracting Qualified Professionals To The Industry Although human resources were not a focus in this study, a constant theme that emerged in the research is the continued shortage of qualified professionals to meet the demand of the rapidly growing spa industry. This labor shortage applies both to spa therapists and spa management professionals.  The size and potential of the spa economy should be emphasized to the potential workforce and education establishments, conveying the message that the spa industry is a growing sector with career mobility that is worthwhile of individual and institutional investments in education, training, and certification.  The career prospects in this large and growing industry need to be communicated to the current and future crop of spa management professionals in order to attract more talent to the industry. This research can help to support dialogue between theCopyright Global Spa Summit 2008 43 SRI International
  • 48. The Global Spa Economy 2007 spa industry and higher education institutions active in the fields of hospitality and business administration, in order to develop specialized technical and management curricula that will produce strong professionals for the spa industry.Copyright Global Spa Summit 2008 44 SRI International
  • 49. The Global Spa Economy 2007 V. Spa Economy Research And Estimation Methodology A. Data Collection Unique challenges for spa industry data collection Collecting spa data and quantifying the global spa industry pose several unique challenges:  For most industry studies, reliable and comparable regional data is typically only available from public sector sources. In the United States and globally, industry data is collected by various government agencies (i.e., UNIDO, Eurostat, U.S. Census Bureau, U.S. Bureau of Labor Statistics, etc.) according to standardized industry coding systems, which include NAICS in the United States, NACE in Europe, ISIC worldwide, as well as hundreds of other country-specific classification systems. While these industry classification systems do a good job of measuring “traditional” industry activities, they are not set up to measure new and/or evolving service, knowledge-based, and high-tech industries, such as spas, tourism, information technology, biotechnology, environmental technology, etc. For example, in the North American Industry Classification System (NAICS), spa businesses might be classified under any of the following codes:  For Day/Club/Salon Spas: 81211 – Hair, Nail, and Skin Care Services; 81219 – Other Personal Care Services; or 71394 – Fitness and Recreational Sports Centers  For Hotel/Resort and Destination Spas: 7211 – Traveler Accommodation  For Medical Spas: 62111 – Offices of Physicians The lack of a consistent industry code to classify spas, and to separate them from other related beauty, fitness, tourism, and medical industries, means that standard public sector industry data sources are of limited use when conducting research of this nature.  A wide variety of spa industry studies have been conducted at the country and regional levels by government agencies, industry associations, and private research and consulting firms – including ISPA, Intelligent Spas, Diagonal Reports, and Euromonitor, to name just a few. These studies provide the only reliable source of data currently available for the global spa industry. However, the lack of a commonly-accepted industry definition of what is a “spa” means that each study defines the sector differently. Therefore, the data available in these studies is notCopyright Global Spa Summit 2008 45 SRI International
  • 50. The Global Spa Economy 2007 comparable across countries and can only be used as a guide when conducting global-level analysis.  A number of spa research and consulting firms conduct spa benchmarking studies, which are typically targeted at investors and industry insiders for the purposes of investment planning, feasibility analysis, and forecasting. For the purposes of global research, these studies present the same definitional issues described above. In addition, they often focus on specific portions of the spa sector – i.e., large resort/hotel spas or large day spa chains. Given that the global spa industry also has thousands of small, privately and locally-owned establishments, such benchmarking data cannot be assumed to be representative of spas in every country around the world and can only be used as a guide for this kind of study. Conducting a true global industry census is a truly momentous endeavor, which is why few, if any, such studies have ever been conducted at the global level. At best, all most industry analysts can do is collect data from government and private sources in each individual country and make adjustments to ensure comparability. This methodology is used by international organizations (such as UNIDO or Eurostat) when compiling country-based industry data. However, given the limitations described above, even this approach is not feasible for the spa industry. Data collection methodologies used for this study The SRI research team pursued a number of data collection methods, as described below, in order to compile the most comprehensive spa industry data and research available within the scope and time frame of this project. Together, these data streams are used to make the most informed and accurate spa industry estimations that are possible on a country-by-country basis.  Primary survey data. Primary data was collected through a global survey of spas and spa-related businesses. The Internet-administered survey collected information on revenues, employment, and capital investments from approximately 1,000 businesses around the world. It should be noted that while this survey had a large number of responses, it was not intended to be a global census. The survey provided valuable data on the typical size, revenues, and characteristics of different types of spa businesses in countries around the world; this information was a key input for the spa economy estimation model.  Primary Internet-based data. The research team conducted exhaustive Internet- based research to collect primary data on several specific types of spas, including hotel/resort spas, destination spas, and cruise ship spas. This research included the following: compiling the number and locations of hotel/resort spas for over 50Copyright Global Spa Summit 2008 46 SRI International
  • 51. The Global Spa Economy 2007 major international/regional hotel brands around the world; visiting the websites of over 600 destination spas, health resorts, ayurvedic resorts, thalassotherapy resorts, and medical resorts worldwide (to count, verify, and assess size); verifying hotel/resort spa data for small, high-tourism countries through tourism and hotel directory websites; and compiling cruise ship spa data through the websites of 30 major international cruise lines and the annual reports of key hospitality and spa management companies.  Secondary reports and data. Existing regional and country-level data and information were collected through a wide variety of secondary resources, including spa industry research studies done by private companies, industry associations, and government agencies.  Executive interviews. More than 50 hours of interviews were conducted with industry executives who represent all the core spa-related sectors (spas, education, media, consulting, etc.). The interviews focused on variations across spa markets in different countries and regions, including the nuances in consumer perception of what constitutes a spa; the structure and characteristics of the spa market; and the distribution of spas across different business models, revenues, and employment sizes. The executives interviewed also provided specific feedback on country-level spa estimates for a large number of the countries that were included in the study.  Economic and demographic data. For every country included in the study, 10 to 15 economic and demographic indicators were collected to serve as parameters for the spa estimation model. Indicators included: population, per capita income, GDP, consumer spending patterns, and domestic and international tourism arrivals and expenditures, among others. This data came from standard international sources (e.g., World Bank, World Tourism Organization, Euromonitor, etc.). B. Estimation Methodologies The SRI team developed spa economy estimates using a tailored analytical model that incorporates multidimensional inputs and factors. The model covers 210 countries in all regions of the world. In general, specific data points for each country were collected using the methods described above, and a rigorous estimation model was then developed to account for a variety of parameters (such as country size, standard of living, tourism characteristics, etc.). Qualitative inputs from executive interviews, existing industry studies, and other relevant research were used to formulate and verify estimates. Spa estimates were also benchmarked for scale against a variety of related sectors at an international, regional, or country level, including health clubs, beauty salons, beauty and cosmetic products, hotel/resorts, and tourism.Copyright Global Spa Summit 2008 47 SRI International
  • 52. The Global Spa Economy 2007 Spa Facilities  Hotel/Resort Spas. To estimate the global number of hotel/resort spas, the SRI team first counted the number of hotel/resort spas country-by-country for 50 brands and sub-brands of upscale hotel and resort chains, as well as selected spa chains with an established presence in hotels. As another benchmark, the team compiled the total number of luxury hotels by country using a variety of online search engines, which served as an additional baseline and cross-check for luxury hotel/resort spa estimates. For countries with poor coverage using these two methodologies, SRI further supplemented the estimates by online queries using search engines to find hotels and resorts with spas within specific countries, and by visiting tourism and hotel directory websites for a large number of high-tourism countries. In order to include locally and regionally based hotel/resort spas not captured through the above channels, SRI then extrapolated the country totals to account for the entire market of hotel/resort spas and made country-by-country adjustments based on tourism market characteristics (e.g., whether tourism is dominated by mass tourism, niche tourism, luxury/exclusive clientele; whether there is a large degree of domestic tourism; etc.). Hotel/resort spa revenues and employment were estimated country-by-country, based on regional and country industry averages gathered through survey data, secondary sources, and executive interviews. The specific hotel/resort and spa chains covered through this research include the following: Accor (including Sofitel), Aman Resorts, A-Rosa Resorts, Banyan Tree Hotels & Resorts (including Angsana Resorts), Canyon Ranch, Capella Hotels & Resorts, COMO Hotels & Resorts, Danubius Hotels, Dreams Resorts & Spas, Excellence Group Resorts, Fairmont Raffles Hotels International (including Fairmont, Raffles, and Swissotels), Four Seasons Hotels & Resorts, Hilton (including Conrad Hotels & Resorts and The Waldorf Astoria Collection), Golden Door, Hyatt Regency Hotels (including Park Hyatt Hotels, Grand Hyatt Hotels, and Hyatt Resorts), Intercontinental Hotels & Resorts, Isrotel Hotels, Jumeirah Hotels & Resorts, Karisma Hotels & Resorts, Kempinski Hotels, Kimpton Hotels, Mandara Spas, Mandarin Oriental, Marriott Hotels & Resorts (including JW Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton Hotel Company, and Bulgari Hotels & Resorts), Movenpick Hotels & Resorts, Oberoi Hotels & Resorts, Occidental Hotels & Resorts, Omni Hotels, Orient-Express Hotels, Palace Resorts, The Peninsula Hotels, Pueblo Bonito Resorts & Spas, Rezidor Group (including Radisson SAS and Regent), Shangri-La Hotels and Resorts (CHI spas), Six Senses Resorts and Spas,Copyright Global Spa Summit 2008 48 SRI International
  • 53. The Global Spa Economy 2007 Sonesta Collection, and Starwood Hotels & Resorts (including Le Meridien, W Hotels, Westin, Sheraton, St. Regis Hotels & Resorts, and The Luxury Collection).  Destination Spas and Health Resorts. Country-by-country data on destination spas and health resorts was initially gathered through a global database provided by SpaFinder and through data gathered from secondary reports. The SRI research team then verified and expanded this database by visiting the websites of over 600 destination spas, health resorts, thalassotherapy resorts, medical resorts, and other related resorts worldwide. Additional data was collected through online directories of luxury hotel/resorts and spas, through country-specific Internet queries for over 50 countries, and through secondary reports for specific regions. Destination spa and health resort revenues and employment were estimated country-by-country, based on regional and country industry averages gathered through survey data, secondary sources, and executive interviews, as well as research team projections based on the size and average room rates for the destination spas and health resorts counted in each country.  Day/Club/Salon Spas; Medical Spas; “Other” Spas. The SRI team initially collected all available country-level data on these types of spas through available secondary sources and reports published by private firms, associations, and government agencies, as well a through a U.S.-based database provided by SpaFinder. This data was then compared on a country-by-country basis and adjusted to account for definitional differences across different sources. For countries where no data was available, the research team developed an estimation methodology based on measuring each spa type on a per capita basis and making adjustments for a number of different country parameters, including: standard of living (purchasing power parity GDP per capita20); the degree of urbanization; income distribution; characteristics of the beauty, health, and wellness market; and cultural/historical traditions related to beauty, bathing, saunas, etc. Spa revenues and employment for each category were estimated country-by-country, based on regional and country industry averages gathered through survey data, secondary sources, and executive interviews.  Cruise Ship Spas. Cruise ship spa data was collected primarily using the annual report of Steiner Leisure, which operates the spas on a large share of luxury cruise ships worldwide, supplemented by research conducted through the websites of 30 major international cruise lines. 20Purchasing power parity GDP per capita is a GDP per capita figure that is adjusted according to the cost of goods and services in each country, allowing for a more accurate comparison of the standard of living across countries.Copyright Global Spa Summit 2008 49 SRI International
  • 54. The Global Spa Economy 2007 Spa Capital Investment  To estimate hotel/resort and destination spa investments in 2007, SRI counted the new hotel/resort openings and major hotel/resort renovations by country in 2007 and 2008 for the chains referenced above by perusing their annual reports, press releases, and websites, as well as other online sources. The research team then estimated the average investment expenditures per hotel/resort spa by chain, and applied these figures to the number of hotel/resort openings in 2007 and 2008. Adjustments were made according to SRI estimates of the proportion of hotels that would have spas by hotel/resort chain, as well as an estimated proportion of spending that would have been incurred in 2007. However, investments made by the large global brands represent only one segment of hotel/resort capital investment. In order to capture expenditures made by national, local, and independent spas, SRI extrapolated the estimated country totals based on estimated growth rates of new spas for each region.  Capital investments in other types of spas (day/club/salon spas, medical spas, “other” spas, cruise ship spas) were estimated based on projected regional growth rates and the projected regional number of new properties for each spa type in 2007. Total capital investment for each spa type in each region was then calculated based on estimates of average per-spa size and per square foot construction costs. Data for this analysis was collected through a combination of primary survey data, secondary sources, country-specific and region-specific research, and executive interviews. Spa Education  Spa Therapist Education. This category includes the education of spa therapists, primarily massage therapists and estheticians. It covers two components: 1) education expenses accrued by individuals who sought initial training or credentials in 2007 in order to enter the spa industry; and 2) education expenses accrued by individuals who sought continuing education in 2007 in order to advance in their careers in the spa industry. The estimate only includes education expenditures paid for by spa therapists themselves. It does not include the extensive training provided and paid by employers and spa products companies, because those expenditures are already captured in the core industry cluster revenues and their resulting multiplier impacts. Estimating global spa therapist education expenditures is complicated by a lack of standardization for training, certification, and licensing in the spa industry, not only across countries, but also within countries. While there are movements underway toCopyright Global Spa Summit 2008 50 SRI International
  • 55. The Global Spa Economy 2007 clarify and standardize, these initiatives cover only a fraction of the world‟s spa service employees. The closest to a global standard is the certification awarded by the Swiss-based Comité International d‟Esthétique et de Cosmétologie (CIDESCO). Credentials from the British-based International Therapy Examination Council (ITAC), as well as the Confederation of International Beauty Therapy and Cosmetology (CIBTAC), are also recognized internationally, especially in former British colonies. However, therapists holding these credentials are only a small percentage of the total global spa workforce. Within the United States, the National Certification Board for Therapeutic Massage and Bodywork (NCBTMB) provides the most widely held national certification, but a parallel national certification for estheticians is only recently emerging. To estimate the spa therapist education expenses accrued by individuals, SRI examined the certification and licensing requirements and costs for massage therapists and estheticians in different markets and regions of the world. SRI then estimated the number of individuals seeking initial and continuing training in each country market in 2007, based on the following parameters: the requirements for training and certification prior to employment; estimates of the worker attrition rate; estimates of the hiring rate for service workers in each country; and estimates of the portion of continuing education expenditures that are paid for by employers versus employees. The estimated number of individuals seeking training in 2007 was then multiplied by the individually-paid costs for training, certification, and continuing education, and summed across the regions, to arrive at an estimate for global spa therapist education expenditures.  Spa Management Education. This category includes professional education courses provided to mid-level and upper-level spa managers, as well as persons seeking to move into management positions within the industry. Spa management education courses are provided by a small number of hospitality management programs worldwide, typically as an elective course within a broader curriculum to qualify for a professional degree in tourism/hospitality management or a related field. More commonly, spa management education is offered through short training courses or online courses by private companies, associations, and nonprofits. To estimate the size of spa management education expenditures in 2007, SRI gathered survey and primary research data on spa management education courses offered by various providers around the world. If a hospitality/tourism, business, or other professional program offered at least one spa management course, the research team apportioned a percentage of the program‟s estimated tuition revenues to spa management education. The number of students estimated to take these courses and the estimated costs of these courses were derived fromCopyright Global Spa Summit 2008 51 SRI International
  • 56. The Global Spa Economy 2007 survey data. That figure was supplemented by estimates made by the research team for the à la carte and short-term courses offered by associations, nonprofits, and private training companies in order to arrive at an estimate of global spa management education expenditures. Spa Consulting  Spa consulting. Spa consulting includes the following activities: conceptualization, design, and branding of new spas; spa management and training solutions; spa research and benchmarking; and other related services. This industry segment consists of small companies led by highly specialized professionals who have high- level executive experience in the spa industry, as well as small units operating within larger travel, research, consulting, and management companies around the world. Global spa consulting revenues were estimated by extrapolating from more than one hundred survey responses collected from spa consulting companies through a global survey, supplemented by data collected through interviews with executives in spa consulting firms. Spa Media, Associations, & Events  Media, associations, and events are combined into one spa segment for this study because these activities are frequently conducted by businesses and organizations that are engaged in more than one type of activity in the promotion of the spa industry, and therefore, their revenues often come from a combination of these sources. For example, many companies that organize spa and related industry trade shows and events often publish magazines and run websites that promote the industry. Similarly, many spa and related industry associations publish magazines as well as organize events and trade shows. To estimate the size of this spa industry segment, SRI conducted extensive research to compile a list of spa industry associations, expos, trade shows, and magazines/media outlets worldwide.  For spa associations, the research team compiled a list of more than 60 associations that specialize in the spa industry around the world and then estimated their combined revenues based on survey responses and published information on membership and activities.  For spa events, SRI compiled information on consumer and trade shows in the spa industry, as well as major beauty shows that have a significant spa component – a list that totaled more than 50 events/shows globally. SRI estimated revenues from these events based on published information on the size of the shows, such as theCopyright Global Spa Summit 2008 52 SRI International
  • 57. The Global Spa Economy 2007 number of exhibitors and sponsors, the cost of exhibition space and participation, and other related data points. For trade shows and events in which spa is a component but not the primary focus of the event (e.g., beauty shows), SRI apportioned only part of the estimated event revenues to the spa economy.  For spa media, SRI compiled a list of 45 spa-related consumer and trade publications, including the key magazines and directories for the spa industry around the globe. The research team estimated subscription and advertising revenues for these publications based on circulation characteristics, supplemented by inputs from more than 30 media companies that participated in the global survey conducted for this project. These estimates were then cross-checked and benchmarked against industry-level estimates of overall magazine revenues and their distribution across the fitness/spa, hospitality, and beauty sectors worldwide. In addition, as with most industries, the Internet is a critical and rapidly growing media and advertising channel for the spa industry. However, this is an emerging and evolving channel that marketing and advertising executives are still struggling to quantify and measure, with no source of national or international data available. SRI estimates that Internet advertising adds 20% to overall print media advertising revenues. Print and Internet advertising revenues were combined to reach an overall spa media revenue estimate. Spa-Related Hospitality & Tourism  This category measures the portion of international and domestic tourist trips and expenditures that can be considered “spa trips.” For the purposes of this study, a “spa trip” is defined as a trip of at least one night‟s duration, either within or outside of a person‟s country of residence, in which the person‟s motivation for the trip includes the enjoyment of spa services or treatments.  To calculate the number of “spa trips,” the SRI team collected data from the World Tourism Organization (WTO) for: 1) international tourist arrivals by country, and 2) domestic tourist trips by country.21 For countries where WTO statistics were not available, SRI made extrapolations based on the characteristics of the country and its tourism market. Based on a small number of international spa tourism studies, as 21 According to the WTO, international tourist arrivals is defined as the number of tourists who travel to a country other than that in which they have their usual residence, but outside their usual environment, for a period of at least one night (but not exceeding 12 months) and whose main purpose in visiting is other than an activity remunerated from within the country visited. Domestic tourist trips are defined as trips made by a resident of a given country within his/her residential country, but outside of his/her usual environment, for a duration of at least one night but less than 12 months, and whose main purpose is other than the exercise of a remunerated activity in the place visited.Copyright Global Spa Summit 2008 53 SRI International
  • 58. The Global Spa Economy 2007 well as various country-based surveys and statistics on traveler motivations, the SRI team estimated the percentage of international and domestic trips in each country that could be considered “spa trips.” These percentages ranged from 0% to 20% for international trips and from 0% to 10% for domestic trips. The number of “spa trips” was then calculated using the WTO data on total international and domestic tourist trips.  To calculate “spa trip” expenditures, the SRI team collected data from WTO and other sources for: 1) international tourism receipts by country, and 2) domestic tourism expenditures by country. This data encompasses expenditures by tourists on accommodation, food and beverage, transportation, entertainment, shopping, and other activities. For countries where these statistics were not available, SRI made extrapolations based on the characteristics of the country and its tourism market. The team then calculated the average expenditure per tourist per “spa trip” for each country. Average expenditures per “spa trip” were multiplied by the total number of “spa trips” in each country to calculate total spa tourism expenditures. Spa-Related Real Estate  Since spa-related real estate is not an investment category tracked by national or global real estate markets, SRI gathered general data on the global commercial real estate investment market; the regional distribution of investments made in 2007; and the distribution of investment activities in the categories of offices, retail, industrial, hospitality, and mixed-used projects. The SRI team reviewed real estate investment data from a variety of sources, including: CB Richard Ellis Global Research; Cushman & Wakefield‟s International Atlas Summary 2008; Cushman & Wakefield Knowledge Center; Ernst & Young‟s Real Estate Market Outlook 2007 and 2008; Jones Lang LaSalle Global Research; KPMG‟s Trends in Global Real Estate 2007; PricewaterhouseCoopers‟ Global Real Estate Now: Insights, Observations and Research; and Reuters Real Estate. The research team decided to use Cushman & Wakefield‟s International Atlas Summary 2008 as the primary data source for this report because it provides the most comprehensive and detailed data on the global distribution of investments across regions and across different real estate investment categories. The Cushman & Wakefield commercial real estate data is apportioned into four categories: offices, retail, industrial, and “other.” Based on interviews with real estate industry executives, SRI determined that spa-related real estate falls within the “other” category, which is primarily made up of hospitality and mixed-used projects. This is because spa-related real estate is typically developed within a largerCopyright Global Spa Summit 2008 54 SRI International
  • 59. The Global Spa Economy 2007 hotel/resort investment project that includes golf courses, club houses, dining, recreation, and other amenities that enhance relaxation and lifestyle. According to Cushman & Wakefield, total investment in hospitality and mixed-used real estate projects is estimated at $176.7 billion globally in 2007 (or 19% of total global commercial real estate development). Interviews with executives from global hospitality and spa-related real estate companies revealed a wide range of opinions, but a conservative estimate by SRI following these interviews is that about 50% of hospitality and mixed-use investments have a spa lifestyle component built into the real estate development concept. This amounts to $88.3 billion of global investment in spa-related real estate in 2007. Spa Lifestyle Associated Industries  “Spa lifestyle associated industries” represent a selected set of industries that are interconnected with the spa industry through a common emphasis on health and wellness, and, to some extent, common sales and marketing channels. The following four industries have been identified for this report as “spa lifestyle associated industries.” Each of these sectors has a component that is marketed and sold through spa facilities, but they also encompass much broader global industries in their own right, which are marketed and sold through a wide variety of non-spa channels.  Beauty and beauty products industry: Beauty, hair, and nail care services; cosmetics, toiletries, and other beauty and personal care products and appliances.  Fitness and fitness products industry: Health clubs and fitness services; fitness and exercise clothing; fitness and exercise equipment; mind/body fitness services and products (e.g., yoga, Pilates, etc.).  Beauty and wellness medicine industry: Cosmetic and plastic surgery (surgical and non-surgical procedures); prescription skin care pharmaceuticals; weight loss and weight control services, pharmaceuticals, and related products; and medical tourism.  Healthy foods and nutrition industry: Organic foods; functional foods; vitamins and dietary supplements.  To calculate the market size for each of the spa lifestyle associated industries, the SRI team collected consumer spending and industry size data from a wide variety of secondary reports and sources across the sub-components of each industry as defined above. Key data sources included Euromonitor, Kalorama Information, Global Industry Analysts Inc., IHRSA, ASAPS, and others. Where market data wasCopyright Global Spa Summit 2008 55 SRI International
  • 60. The Global Spa Economy 2007 only available for selected countries and regions, or where the data did not match the industry definitions outlined above, the SRI team made estimations and adjustments using economic parameters such as country size, income levels, regional market and cultural characteristics, etc. Market size data for each industry sub-component was then summed to reach estimates for the market size of each spa lifestyle associated industry. Economic Impact Of The Spa Industry The impact of spas on the global economy includes both the direct economic activity generated by the spa sector itself (its core and enabled industries), as well as the indirect and induced (or multiplier) impacts that occur as spas‟ direct impacts create ripple effects in economies around the world.  Direct Economic Impact. The direct economic impact of spas is simply the size of the spa industry cluster in terms of revenues and employment. The “global spa economy” can be calculated by adding together the size of each of the core and enabled industries. Direct Impact of the Global Spa Economy + Spa Facility Operations Industries + Spa Capital Investment Core + Spa Education + Spa Consulting + Spa Media, Associations, & Events Industries + Spa-Related Hospitality & Tourism Enabled + Spa-Related Real Estate = Global Spa Economy  Indirect/Induced Economic Impact (Multiplier Impact). The spa facilities and spa- related companies that comprise the spa industry must, in turn, purchase goods and services from other companies. These purchases are considered the “indirect” impacts of the spa industry. Furthermore, the employees directly employed by the spa industry will spend much of their income purchasing a wide variety of goods and services, which increases demand and supports jobs in other sectors of the economy. These impacts are considered “induced” impacts. Together, the indirect and induced impacts make up the multiplier impact of the spa economy. Multiplier values vary from region to region, and from industry to industry, based on the unique characteristics of a region‟s economy. Industries with more linkages to other industries within a region will have a greater multiplier effect on finalCopyright Global Spa Summit 2008 56 SRI International
  • 61. The Global Spa Economy 2007 economic activity relative to the initial, direct effect. Conversely, economies and industry sectors dependent on a large share of imported supply will have smaller multiplier effects. Service-based industries that depend largely on locally-supplied labor to generate revenues – like the spa industry – frequently have higher multiplier impacts than capital-intensive industries that depend on imported inputs. A few countries use sophisticated input-output analysis models to calculate multiplier values for many different industries; however, very few industry multipliers are available to make comparable calculations across countries in all regions of the world. The World Travel and Tourism Council (WTTC) has developed a Tourism Satellite Accounting model, which calculates the direct and “multiplier” impacts for the tourism industry in 176 different countries.22 For this study, the SRI team decided to use tourism industry multipliers, as derived from WTTC data, to calculate the multiplier impact of the spa economy. Since tourism encompasses sectors such as entertainment and leisure, accommodations, food and beverage, and other related activities – activities that are similar to what the spa industry encompasses – the tourism multipliers are the best possible proxy for global multiplier values for the spa industry. The SRI team utilized WTTC data to derive regional multipliers for industry output (or revenues). These multipliers were then applied to the estimated values for core spa industry revenues to calculate the global economic impact of the spa industry. Some of the industry segments included in the direct spa economy calculations were excluded from the multiplier analysis, because they do not represent new economic activity or their inclusion would result in double-counting. Multiplier analysis was calculated based on core spa facility revenues, spa capital investment revenues, and spa education revenues. The following industry segments were excluded from the multiplier analysis: (1) spa consulting, and (2) spa media, associations, and events. Because activities in these sectors are typically paid for through spa facility revenues, the economic impact of these sectors was already captured in the multiplier impact calculated for spa facility revenues. The market size for the two enabled industries was added to the multiplier impact for the core industry to reach a total economic impact estimate. 22For more information on WTTC Tourism Satellite Accounting, see: www.wttc.travel/eng/Tourism_Research/ Tourism_Satellite_Accounting/.Copyright Global Spa Summit 2008 57 SRI International
  • 62. The Global Spa Economy 2007 VI. References American Society for Aesthestic Plastic Surgeons. Statistics 2007. Association Research Centre Inc. 2006 Canadian Spa Sector Profile. Prepared for the Canadian Tourism Commission. July 2006. Association Research Centre Inc. Spa, Health, & Wellness Sector Foreign Competitor Profiles. Prepared for the Canadian Tourism Commission. December 2006. Business Research & Economic Advisors. The Contribution of the North American Cruise Industry to the U.S. Economy in 2006. Prepared for Cruise Lines International Association. August 2006. CB Richard Ellis. Global Research. www.cbre.com/EN/Research/. Cushman & Wakefield. International Investment Atlas Summary 2008. 2008. Cushman & Wakefield. Knowledge Center. www.cushwake.com. Datamonitor. Organic Food: Global Industry Guide. August 2007. De Vierville, Jonathan Paul. “Spa Industry, Culture, and Evolution.” Massage and Bodywork Magazine. August-September 2003. Diagonal Reports. The European Spa Market 2007 (France, Germany Italy, Spain, UK). 2007. Ernst & Young. 2007 Real Estate Market Outlook. 2007. Ernst & Young. 2008 Real Estate Market Outlook. 2008. Ernst & Young. International Real Estate Library Online. www.ey.com/global/ content.nsf/International/Dynamic_Library. Euromonitor International. World Consumer Spending 2007/2008. 2007. European Spas Association. Statistics: Overnights and Guests in European Spas. www.espa-ehv.com/en/statistik2007e.html. Feedback Research Services. U.S. Skin Care Markets & Trends: Assessments and Overviews 2005. February 2005.Copyright Global Spa Summit 2008 58 SRI International
  • 63. The Global Spa Economy 2007 Global Industry Analysts, Inc. Sports and Fitness Clothing: A Global Strategic Business Report. November 2007. Global Industry Analysts, Inc. Weight Control Products: A Global Strategic Business Report. March 2008. Golf 2020 and SRI International. The 2005 Golf Economy Report. 2008. Hartman Group of Seattle. Identifying the Spa Traveler: A Look at U.S. and Canadian Consumer Attitudes and Motivators for Spa Vacations. Prepared for the Canadian Tourism Commission and International Spa Association. 2006. IBISWorld. Weight Loss and Dietary Centers (NAICS 81219a): Executive Summary Report. December 2007. Intelligent Spas. Spa Industry Profile Australia, 2002-2007. 2006. Intelligent Spas. Spa Industry Profile Benchmarks Asia Pacific: A comparison of Spa Industry Profile Survey Results of Australia, Indonesia, Malaysia, Philippines, Singapore and Taiwan. 2007. Intelligent Spas. Spa Industry Survey Thailand 2004. 2005. International Spa Association. 2007 Spa Industry Study. November 2007. International Spa Association. ISPA 2006 Spa-Goer Study: U.S. and Canadian Consumer Attitudes and Spa Use. September 2006. International Spa Association. 2004 Spa Industry Study. September 2004. IHRSA. The IHRSA Global Report: The State of the Health Club Industry. 2007. JETRO. “Spas Offer Business Opportunities.” JETRO Japan Economic Report. August- September 2006. Jones Lang LaSalle. Global Research. www.research.joneslanglasalle.com. Just-food. Global Market Review of Functional Foods – Forecasts to 2012. August 2006. Kalorama Information. Obesity: The World Market for Pharmaceutical and Surgical Treatment. June 2006. Kalorama Information. The Market for Physical Fitness Equipment. November 1999.Copyright Global Spa Summit 2008 59 SRI International
  • 64. The Global Spa Economy 2007 KPMG. Trends in Global Real Estate 2007. 2007. Lang Research Inc.. Travel Activities & Motivations Survey: Interest in Health Spas Profile Report. December 2001. Lang Research Inc.. U.S. Travel Market – Fine Dining and Spa Visits While On Trips: A Profile Report. August 27, 2007. Leisure Database Company. 2008 State of the UK Spa Industry Report. 2008. MedSci Communications & Consulting Co. 2005 Canadian Spa Goers Survey. Prepared for Leading Spas of Canada and Elmcrest College. February 2006. Mitsui Knowledge Industry. A Look at the Japanese Spa Industry (draft report). May 2008. Motion Picture Association of America. Theatrical Market Statistics 2007. Ontario Ministry of Tourism. Travel Activities and Motivations of Canadian Residents: An Overview. March 2007. Ontario Ministry of Tourism. Travel Activities and Motivations of U.S. Residents: An Overview. January 2007. Packaged Facts. Market Trends: The U.S. Cosmeceuticals Market. January 2005. Packaged Facts. Skincare Products in the U.S. December 2006. Parker, Philip M. The 2007-2012 World Outlook for Commercial Sports. ICON Group Ltd.: 2006. PKF Consulting and PKF Hospitality Research. Trends in the Hotel Spa Industry. 2007. PricewaterhouseCoopers. Global Real Estate Now: Insights, Observations and Research. March 2007. Reuters Real Estate. www.reutersrealestate.com. Rotter, Christine. “National Tourist Office Campaign Bears Fruit.” Wellness Focus: A Special Publication of the Budapest Sun. April 13-19, 2006. Topaz Consulting Group. Spa Industry Survey Report for Great Britain and Ireland. 2006.Copyright Global Spa Summit 2008 60 SRI International
  • 65. The Global Spa Economy 2007 Tourism Victoria. Victoria’s Spa and Wellness Tourism Action Plan 2005-2010. Tsymbal, Nina. Overview of the Current State of the Russian Spa Industry. May 2008. U.S. Commercial Service. Japan: Spa Market for Cosmetics and Beauty Products. December 2006. World Bank. World Development Indicators Online. www.worldbank.org. World Tourism Organization. UNWTO World Tourism Barometer. Vol. 5, No. 3. October 2007. World Tourism Organization. Yearbook of Tourism Statistics, 2007 Edition. World Travel & Tourism Council. Tourism Satellite Accounting Regional Reports. 2008. “Yoga Journal Releases 2008 „Yoga in America‟ Market Study.” Yoga Journal Press Release. February 26, 2008.Copyright Global Spa Summit 2008 61 SRI International
  • 66. The Global Spa Economy 2007 VII. About the Research Team Founded in 1946 as Stanford Research Institute, SRI International is an independent, non-profit organization that performs a broad spectrum of problem-solving consulting and research and development services for business and government clients around the world. More than half of SRI‟s 1,500 staff members have advanced degrees and professional expertise, including management consultants, economists, scientists, engineers, psychologists, and other specialists. More information on SRI is available at: www.sri.com. The research team that carried out the Global Spa Economy 2007 study is drawn from the Economics Program within SRI‟s Center for Science, Technology, and Economic Development. Based in Washington, DC, the Economics Program provides top quality research, analysis, and advice to private and public sector clients seeking to make sound decisions and improve competitiveness in a changing policy and economic environment. Economics Program staff have conducted numerous economic impact studies at the microeconomic (project), sector, macroeconomic, and international levels. A number of these studies have focused on the economic impacts of tourism, golf, and other industries, allowing these industries to position themselves more effectively to policymakers, consumers, investors, and other stakeholders. Most of the analyses required tailored economic models crafted specifically by SRI for clients. Economics Program staff, all of whom hold advanced degrees in economics, business administration, public policy, and related disciplines, are highly familiar with the quality, breadth, and limitations of alternative data sources, as well as with quantitative relationships and dynamics among different economic statistics and industry variables. Some of the sample projects completed by the Economics Program include: The U.S. Golf Economy Reports and State-Level Golf Economy Reports. In 2002, SRI was commissioned by Golf 20/20 and the World Golf Foundation to conduct a groundbreaking study that estimated the “gross domestic product of golf.” This study created a major public recognition of the size and contribution of the sport to the U.S. economy. Subsequently, eight U.S. states commissioned SRI to conduct studies of the economic impact of golf at the state level. SRI recently completed an updated U.S. Golf Economy report, which was a centerpiece for the launch of National Golf Day on April 16, 2008 at the U.S. Capitol by a large coalition of golf industry stakeholders. Says Joe Steranka, CEO of PGA of America, "The stature of golf will grow as more public and private officials in our nations capital have a greater understanding of theCopyright Global Spa Summit 2008 62 SRI International
  • 67. The Global Spa Economy 2007 scale of our industry and the impact golf has on jobs, tourism, tax revenues and other economic and environmental impacts at the local, state, and national levels." Measuring the Concept of “Access” for FedEx. SRI was commissioned by FedEx Corporation to articulate the concept of Access and measure its impact on people, businesses, and nations across the world. As part of the research, SRI developed and trademarked the Access Index with FedEx, created a measurement of different dimensions of Access, and quantified its impact on key beneficiaries. The study helped bolster FedEx‟s global thought leadership based on a future-looking paradigm. SRI is currently working with FedEx to launch the updated Access Index 2008. More information on this study can be found at: access.fedex.com. Benchmarking Competitiveness for Knowledge-Based Industry Development in the Gulf States. Recently, SRI was commissioned by the Gulf Organization for Industrial Consulting to craft a regional roadmap for developing knowledge-based industries in six Gulf States: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. To inform strategy development, SRI conducted a competitiveness benchmarking among the Gulf States and across the world to highlight the key advantages, disadvantages, and opportunities for investment and policy interventions in each country. Intensive data collection and international benchmarking are providing the solid groundwork needed by each state to develop its own tailored roadmap for moving toward knowledge-driven economic growth. Economic Impact Assessment of Resort Hotel Development in Curaçao. For the Central Bank of the Netherlands Antilles, SRI utilized data-based projections and modeling techniques to evaluate the macroeconomic impact and feasibility of two proposed major resort developments on the island of Curaçao. SRI‟s analysis was a key factor in the Central Bank‟s decision to provide special financial considerations for launching the resort projects. Economic Impacts and Benefits of a Biotechnology Park Development in Kobe, Japan. On behalf of the City of Kobe, SRI collaborated with Bechtel Corporation to create a biomedical cluster strategy and park development plan for Kobe. A major component of this study was a detailed economic impact assessment of the project. The significant economic impacts estimated for this investment were used as a focal point to unite stakeholders – including city government, business leaders, a consortium of Japanese universities, private and public-funded research facilities, potential venture capital providers, the airport development authority, and the port authority – to develop strategic investment attraction plans for the park.Copyright Global Spa Summit 2008 63 SRI International
  • 68. The Global Spa Economy 2007 In our experience, companies, industries, and government leaders have found that quantifying what is considered difficult or impossible to measure, using rigorous research modeling techniques, can prove to be a powerful tool for positioning, branding, advocacy, and public recognition. We are very grateful for the opportunity to work with the Global Spa Summit and many spa industry executives to jointly make this small leap forward for the global spa community. Contact information for the research team: Economics Program SRI International 1100 Wilson Blvd., Suite 2800 Arlington, VA 22209 United States (703) 524-2053Copyright Global Spa Summit 2008 64 SRI International
  • 69. How You Can Contribute To Global Spa EconomyResearchThe Global Spa Economy 2007 study is a landmark first step in developing a frameworkto quantify the global spa industry. It is a first attempt to provide a snapshot of the globalspa economy in 2007 for 210 countries. Given limited available data, an important lessonthat emerged from this exercise is the colossal need to collect and maintain information fora global industry that has significant economic impacts.It is our hope that, over time, the spa economy measurement framework will be refinedand strengthened, but we can only do so by joining together as an industry. Therefore, wewelcome and invite your inputs, contributions, and collaboration. In particular, we hopethat you will share intelligence about new industry research and data that emerge in theregions, countries, and spa markets where you operate. This intelligence will be invaluablefor creating more robust analysis and measurement of the spa economy, where littleinformation exists right now.If you would like to share any data, insights, or studies for the next Global Spa Economyreport, please contact the Global Spa Summit by email: research@globalspasummit.orgor through www.globalspasummit.org.We thank you in advance for your contribution to ongoing Global Spa Economy research.Sincerely,Global Spa Summit Board