Super spas 2006

By Sophia Banay

updated 3:23 p.m. ET May 12, 2006

Interested in a seaweed wrap or a caviar facial? For people looking to refresh and rejuvenate, it has never been easier to find a luxury spa treatment. What's getting harder, for the spas at least, is staying competitive and profitable in an increasingly crowded market.

The global spa industry generates approximately $40 billion in revenue per year, according to Spa Finder, a New York City-based spa travel and marketing company and the publisher of SpaFinder.com and Luxury SpaFinder magazine. But growth in the industry is slowing significantly. The reason is market saturation. Not only are established spas such as the Golden Door and Canyon Ranch battling to hold on to their long-time customers and attract new ones, but there is also growing competition from new stand-alone luxury spas as well as from hotel chains like Peninsula, Four Seasons (nyse: FS - news - people ) and Marriot's (nyse: MAR - news - people ) Ritz-Carlton chain.

The number of spa openings in the U.S. is increasing at a rate of just 12% per year, down dramatically from the 2000 peak of 51%, according to a 2004 report by the Lexington, Ky.-based International Spa Association. The same report states that U.S. revenue for 2003 ($11.2 billion) represents a 1.8% decline over 2002. Worldwide figures are not available.

Of course, such pressure is good news for consumers. Spas are being forced to continually innovate and improve in order to stay ahead of the, ahem, mudpack.

"With the large increase in the number of spas, and their density in the population, spas are trying to differentiate themselves," says Stephanie Perrone, the vice president of business development at New York City-based Coyle Hospitality Group, which provides quality assurance services to spas.

Terry Herman, a Chicago-based spa consultant, agrees. "Managers recognize the tremendous profit-generating potential of spas," she says. But to stay competitive, "they have to make it a phenomenal experience. Spa amenities have gotten even more upgraded and luxurious recently. People want to be titillated to the extent that they'll talk about the experience forever and never forget it. And with that comes the price tag."

Herman cites the $500 facial--such as the one offered at the Cornelia Day Spa in New York City, which combines two kinds of facials, one of which requires a specially trained technician--as proof that treatments have become more rarefied than ever as spas compete for high-paying customers.

Another way to stay profitable in a tough market is to cater to a specific demographic. "You'll see a lot of niche marketing," says Perrone. "There are getaways just for fitness now. Skincare studios, which have been around for a while, are becoming more popular. Spas with medically based treatments, like intense pulse light and laser hair-removal services, have been a trend for the past two years and are popping up all over."

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