Spacation anyone?

When Red Door Spa Holdings, Elizabeth Arden's 100-year-old spa chain, finally decided to look beyond American shores, it booked airline tickets to India. In a mission spearheaded by CEO Todd Walter himself, the company dissected India's demographics and key spending patterns for almost a year before deciding to scout for locations. "We chose India because of its young and growing population that demands the lifestyle of their western counterparts. The health and wellness market will grow dramatically over the next decade," reckons Walter.

The American spa brand should know a thing or two about the business. It is the largest operator of luxury day or stand-alone spas and salons in North America today, with over 30 spas in New York, Chicago and Washington D.C. and revenues of $150 million (Rs 690 crore). As for India, independent studies indicate that the potential is huge. Research firm Frost & Sullivan estimates that the beauty and spa industry alone is worth Rs 4,100 crore and would grow five fold by 2014.

"Growing disposable incomes, a rising affluent class and an increased emphasis on preventive care has fuelled the wellness growth in India," says Anurag Dubey of Frost & Sullivan's Health IT and Healthcare Delivery Practice, South Asia and Middle East. A Nielsen survey estimates a total of 2.5 million affluent households across 35 Indian cities with three in 10 individuals visiting a spa or a parlour every month.

The sheer market size and the unorganised nature of the spa industry make India an attractive stop for international players. French skin care player L'Occitane has already awarded the master franchise for its spas to Sanghvi Brands, a privately-held wellness company, and has partnered with Devi Resorts, a group of luxury boutique hotels, to launch three spas in its properties in Jaipur and Udaipur by October.

It is confident of a turnover of Rs 30-40 crore in the next two years and plans to launch at least eight spas in the next two years. L'Occitane and its franchisee feel that a steady flow of international and well-heeled Indian visitors to such locations assures it a fairly consistent customer base. "It would take us about 30 months for a decent break-even in a day spa, and in hotels, we hope to accomplish it in 18 months," says Darpan Sanghvi, MD of Sanghvi Brands.

Indian players, too, don't want to miss out on the action. They are cannily avoiding a head-on battle with the international giants by building their own USP. So, while L'Occitane prides itself on its ability to customise treatments based on its international store products, the big home-grown spa brands like Ananda in the Himalayas and Amattra are offering traditional ayurvedic therapies. Ananda, India's sole destination spa and the flagship of the IHHR Hospitality Group, incorporates yoga and ayurveda in personalised treatments that cover nutrition, exercise, stress management, detoxification, deep relaxation and anti-ageing.

The group claims that the Ananda business has grown steadily over the years, riding out the recession on the strength of worldwide recognition and customer loyalty. "Customers and total revenue have shown an increase of over 30 per cent compared to 2009 and we expect to finish about 25 per cent higher than 2008 (pre-recession) levels at the end of this year," says Mahesh Natarajan, Vice President for Marketing at IHHR Hospitality, declining to divulge the revenues.

Amattra, the Mayar Group's spa brand, is doing brisk business with its two spas in Delhi. "We're a preventive spa brand offering ayurveda therapies to people with definite lifestyle disorders," says Abhit Sud, MD of Mayar Health Resorts. The company, whose clients include Congress MP Rahul Gandhi and former British Prime Minister Tony Blair and his wife Cherie, says it is growing at over 70 per cent year on year since 2004.

"We hope to double revenues of our spa business from $7.5 million (Rs 34.5 crore) to $15 million (Rs 69 crore) by 2014," adds Sud. Mayar certainly seems gung-ho, with plans to launch Amattra health destination resorts - properties offering ayurvedic treatments for lifestyle ailments. Mayar's first 100-room property is coming up in Sohna, Gurgaon. Four more resorts will come up by 2015. Delhi-based wellness firm VLCC, which runs four day spas, is also gearing up for expansion. VLCC is present in 225 locations across 90 cities offering slimming, skin and hair solutions. "We're also planning to start medi spas, which offer clinical treatments, in India, in collaboration with a US-based company," says Vandana Luthra, Founder and Mentor of VLCC.

India has over 2,000 spas across three broad formats, day spas, spas within hotels and destination resorts, according to industry estimates. And if Red Door's research is to be believed, the fragmented market is expected to swell, with 1,000 new spas by 2011. So, can all the players stay afloat? Make no mistake, the Indian market is only for long-term players, given the high real estate costs and expensive procedures, products and therapies. L'Occitane, for one, has already tweaked its business model for India. Globally, it operates its 35 spas under three broad formats: day spas, spas within hotels, and petit spas (small treatment rooms within stores).

In India, it is beginning with a narrow focus: tie-ups with hotels. "Rentals are a big problem in India, and if you pay fixed rent in a great location, you can't make money," reasons Sanghvi. It took Amattra five years to break even in 2009. "The biggest challenge was to convince spa-starved Delhiites about a curative wellness model, which was not just another salon or a massage parlour," laughs Sud. Treatments at Amattra start from Rs 3,500 and go up to Rs 7 lakh. Above all, a spa venture is a long-term process as it involves a gradual build up of customer loyalty.

Amattra today claims to have a customer retention rate of 90 per cent with 700 members, and attributes the success of its new wellness brand, Three Graces, to awareness and a loyal clientele. The global chains would concur. L'Occitane prides itself on its three million global loyalty programme customers. For instance, in Hong Kong, over 70 per cent of the guests at its spas are repeat customers and the remaining 30 per cent are referred to by existing clients. "Spas can be marketed only by delivering superior services and quality," asserts Sud.

Most spa chains, then, are trying to broadbase their customer base by wooing the middle class. L'Occitane has priced its treatments in India at least one-fourth less than its prices elsewhere in the world. Amattra has tied up with banks and offers equated monthly installment or EMI facilities for its packages. And while premium spas continue to cater to the posh brigade in five-stars, home-grown spa brands are emerging to cater largely to the middle class - like Bangalore's The 5th Element and Bodycraft.

That may well be the way to go. Frost & Sullivan's Dubey cites the success story of Four Fountains Spas. A Pune-based chain of affordable spas, the company was founded by IIM alumni Sunil Rao, Anurag Kedia and Saurabh Garg in 2007. A Four Fountains spa cost Rs 45 lakh to build compared to Rs 10-20 crore for a high-end spa and its services start at Rs 449. With revenues topping Rs 2 crore, the group has already broken even with four spas and is now looking at a national footprint of 300 spas in 50 cities by 2014. Spa-ctacular indeed!