Day Spa Business Plan

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Market Analysis Summary

There are about 12,000 spas in the U.S. and Canada, according to ISPA, and seven out of ten are day spas. Today, Spa Industry revenues total $12 billion annually, with Day Spas accounting for over $7 billion of this figure and growing at 25% per year.

There are several existing day spas and a number of individual LMTs (Licensed Massage Therapists) in Freeway County, but none with our service/product range within a five mile radius. To find a such a comprehensive day spa, residents currently have to travel into the city. The going rate for massage in Freeway County is $70-$90 per hour, which is slightly above most of the other residential areas in the metropolis, which can even be as low as $40 per hour in saturated or low-income areas. This larger metropolitan area spent $464 million on entertainment and recreation in 2004. 

4.1 Market Segmentation

We are primarily targeting potential clients within a five-mile radius of Culway Plaza with a household income over $25,000. Our secondary market will include visitors staying in a local hotel. Within the U.S., approximately 14% of the population has never tried a massage. We will assume that a conservative 70% of these two categories has tried a massage and would undergo one again, if offered appealing services at the right price. Our market Analysis table thus reflects 70% of the local and visiting population who might be targeted.

Within this group, clients who use spa services fall into four basic groups:

  1. Clients recovering from injuries or accidents / Massage Therapy (Madame Pamperzhou, owner, has professional contacts for referral in this area.)
    • Often also seeing a chiropractor or physical therapist (more often referral from chiropractor)
    • Frequently paid by insurance
    • Usually insurance will pay for short-term therapy only, although clients will sometimes supplement out-of-pocket
    • Our spa will be set up to take insurance patients and bill to insurance when prescribed by a qualified physician.

  2. Clients pampering themselves / Massage Therapy, Body and Facial Treatments
    • Individuals with high disposable income
    • Sometimes have chronic pain or old injury issues
    • Massage 1 - 4 times a month for relaxation
    • Huge anti-aging and beauty market potential
    • Traffic continues to be a huge problem in Metropolis and our therapies are valuable for this segment of the population.
    • Local hotels that do not offer spa services will be able to refer to our local facility or use our out-call services.

  3. Clients who prefer alternative health care
    • Use massage as preventative health care
    • Use other alternative practices - e.g. acupuncture, Chiropractor, Naturopath, Herbalist, etc.
    • Try to have massage as regularly as they can afford - usually once per month
    • Commuters in Metropolis suffer through some of the worst traffic in the country.  As the population grows, the traffic worsens and the need for massage therapies increases.  Extended hours will capitalize on those who want an appointment on their way home from work. 

  4. Serious Athletes
    • Injury and workout recovery, also preventative.
    • Many serious runners, surfers, bicyclists and college athletes in the local area.
    • Massage for improved performance - great for word-of mouth referrals if they see results.
    • California climate allows this client-segment to be less seasonal than in most parts of the country.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Within 5 Miles over $25k 2% 284,950 288,883 292,869 296,911 337,885 4.35%
Other-Visiting Hotel in Area 0% 150,000 150,000 150,000 150,000 150,000 0.00%
Total 2.91% 434,950 438,883 442,869 446,911 487,885 2.91%

4.2 Target Market Segment Strategy

As individual as our clients are, they seem to fall into one of four general categories: Injury Recovery, Self-Pampering/Relaxation, Alternative Care Users,  and Athletes. Besides the obvious differences in the style of massage or treatments each of these prefer, they also represent separate groups for marketing and retention purposes.  In addition, the booming anti-aging market is an additional momentum builder.

The Injury recovery group is usually referred by a Chiropractor, self-referred through our listing on the American Specialty Health Network site, or referred by another client who found massage helpful during an injury recovery. Marketing to this audience is done indirectly, through the referring parties. While car insurance will typically pay for massage for only a limited time (less than one year), many health insurance policies now have Alternative Care coverage with a renewable annual maximum. Most people do not know that regular massage therapy is covered on their insurance when prescribed by a physician. We will work to educate clients of their benefits and be able to bill to insurance on the appropriate patients. 

Clients who have the disposable income to indulge in massage and body treatments for self-pampering or relaxation are the core of our long-term repeat customers. These clients will come once a week to once a month for years, and often refer other family and friends. This type of client can be  difficult to find - an ad in the local alternative news weekly (especially with a coupon for $5 off) or a donation to a charity auction may result in a one-time visit, or a long-term client. Another source of usually one-time visitors is the Gift Certificate - friends pampering friends for a birthday or other special occasion. Our desired location will provide an excellent demographic to provide this type of client. 

The third group are Alternative Care users. These are people who mistrust allopathic medicine, and prefer to use chiropractors, naturopaths, herbalists, and acupuncturists. A local networking group of alternative care providers is a great way to get referrals, as well as placing posters on other practitioners offices, and ads in the local alternative newspaper.

The final group is another backbone of this business - the amateur athletes. There is a large population of runners and bicyclists in the local area, as well as out-of-town participants who return for annual events, and book massages during those times. They are a very loyal group, and will readily give word-of-mouth recommendations, especially if they see massage as having given them a specific boost to their performance. This group will cross over from the Injury group, and become long-term clients after the specific initial injury has healed. They also tend to have chronic injuries or pain, especially as they age, which can encourage them to become repeat clients. 

4.3 Service Business Analysis

We are part of the retail health and beauty industry, which has four major types:

1) Salons with Day Spa Services:  Hair salons that offer limited spa services like massage and facials.

2) Heath & Beauty Products:  Stores selling only merchandise products covering the wide range of products available, but not inclusive of those sold by salons and spas.

3) Hotels with Spa Services:  Major hotels with on-site spas. 

4) Medical Spa:  Focus mainly on non surgical cosmetic but also have massage therapy, facials and microdermabrasion.

4.3.1 Competition and Buying Patterns

Customers choose spa services based on proximity to their daily commute, quality and an exceptional experience.  With our combined services, we expect to dominate the Day Spa market. There is not one direct competitor of this nature within the area where we are intending to locate. 

The closest competitor is the Heavenly Spa which is a Hair salon that offers additional, limited, spa services. The Hyatt Regency Hotel also offers massage treatments, but will mostly cater to visitors to the area and not the local residential base. Finally, Atmosphere Spa, located in Plaza Center is not a traditional day spa but combines a day spa with a female gymnasium. No men are allowed at Atmosphere Spa, either. The going rate for massage in Freeway County is $70-$90 per hour which is slightly above most of the other residential areas in Metropolis which can even be as low as $40 per hour in saturated or low-income areas.