Nustra Spa Story QSV – Quality Service Value
Value Added: A Trip To The Spa
So you want to escape from the economic malaise and set your mind adrift with a 50- minute deep facial or a 50-minute deep massage for $95 each.
Sounds like an unaffordable indulgence these days, doesn’t it? The $11 billion U.S. spa industry, which has enjoyed several years of growth, is expected to get whacked by the same slowdown that is hitting sports tickets, upscale boutiques and private-jet travel.
Elizabeth Snowdon of Nusta Spa sees her business competing not just with other spas, but with other luxury expenses. But Elizabeth Snowdon is betting that the money-minded of Washington will see her Nusta Spa in downtown Washington as downright cheap compared with the $5,000 mink coat for a Christmas gift or the $2,000 New Year’s trip to New York with dinner at the 21 Club and a Broadway show.
It’s all relative, she figures:
“Here is something nice that I can do for myself. I really may not take that weekend away or go on vacation, but I can spend half a day at the spa. That’s going to be my mini-vacation and makes me feel good, and make me feel like I had a break.”
Whether sentiment like that is reality or smart marketing, business owners such as Snowdon are trying to remain upbeat this holiday season in the face of the worst economic downturn in decades. They really don’t have any choice. It’s hustle or watch your business go elsewhere.
The robust economy of the past decade spurred a big increase in the number of spas, according to the International Spa Association. As of June 2007, the most recent numbers available, there were 18,100 spas in the United States, compared with 14,600 the year before. Competition has been heavy, with some spa owners vying for the best massage therapists because of the loyal clients they bring with them.
Eyal Uzana of Eyma Salon & Spa in Bethesda said he has seen some pullback in his day spa traffic in recent months, although the hair salon part of his business is doing fine.
“If you’ve got gray hair, you’ve got gray hair,” Uzana said, referring to the clients who need coloring every five weeks or so. “We have had the spa for four years, and there is a lot of competition. And I feel it with the economy. People are waiting a little longer for a facial or are using cream instead of coming in for a visit.”
Carl Boger, associate dean of academics at the Hilton College of Hotel and Restaurant Management at the University of Houston, estimates that 5 to 7 percent of all spas nationwide won’t make it through the coming year. Those that do are likely to see customers skip the high-cost options like stone massages in favor of basic treatments such as facials and massages. “The occasional users are going to cut back,” he predicted.
But that doesn’t mean there’s not money to be made for those who have done their homework.
Snowdon, who went to Stanford for undergrad and got an MBA from Duke, provides an interesting glimpse into the ever-gentle world of wellness. Snowdon’s approach to her customers reminds me of a business case study that I read about Southwest Airlines. Southwest’s competition wasn’t other airlines. The Texas-based airline’s competition was the car. How far would a Texan have to drive before a dirt-cheap hop on a commuter plane became more economical — and convenient? Southwest doesn’t see itself as an airline. It sees itself as a transportation company.
Same idea here. Snowdon doesn’t see her enemy as only the spa down the street, but also the weekend at the Greenbriar Resort in West Virginia. Or the Christmas trip to London. Or the new bracelet from Tiffany. Nusta Spa is in the luxury goods business, not the spa business.
“With the overall economic condition and people feeling the impact on their disposable income, the spa industry overall is less reactive to bad economic times than people would think,” said the 37-year-old businesswoman.
Nusta Spa has been open since 2004 and has been profitable since 2005. After bouncing around Wall Street, Snowdon took a chunk of her inheritance (her great-grandfather was a top executive at Johnson & Johnson) as collateral to borrow $1.5 million to start the spa. It’s on 20th Street NW, south of Dupont Circle.
There are about a half-dozen spas within a couple of blocks of Nusta. Snowdon’s second-in-command, Erin Morris, said the spa’s prices are competitive with its neighbors’ and that it hasn’t had to reduce them to pull in clients.
Before opening, Snowdon did her research.
“I had a life coach, and we talked on the phone every other week and he gave me homework assignments,” said Snowdon, a Mount Pleasant resident who attended and sits on the board of National Cathedral School. “My life coach said that between now and the next time we talk, I want you to go and talk with spa managers.”
Snowdon poked around to see how nimble the downtown spas were. “I did a lot of calling up and saying, ‘I’m interested in a massage at six o’clock on a Thursday,’ and they didn’t have availability.” Or she would pop in a place and ask if she could get a facial immediately or that afternoon.
Her reporting told her that there was room for some competition.
Nusta works to accommodate people who want same-day appointments and stays open until 8 p.m. It also touts its green credentials, with soy ink, walls made with recycled lumber from a Pennsylvania barn and eco-friendly facial compounds.
When she was doing her research, Snowdon said, “there was no high-end day spa. You had a hair salon and a hotel spa, but I wanted a place where you got amenities and a robe and slippers and tea without the hair machines going.”
She hired a spa consultant, who taught her the importance of sterilized equipment and pampering. She talked to a real estate broker to start learning the basics of real estate, which involved terms like triple net lease and shared costs. She met with an architect to help her design the space. She even sat in on meetings to learn about heating, ventilating and air-conditioning systems.
She grabbed the word Nusta from a tribal language used in Peru. The word means “wealth” or “royalty.”
Despite a financial adviser and an accountant who advised her on money, Snowdon’s friends and family told her she was crazy to plunge into an industry where she had no experience except as a client.
“It was, ‘What are you getting into?’ My mom, who is uber-practical, said ‘This isn’t a practical thing to do,’ ” Snowdon said.
She said one of her smartest moves was hiring talented service providers — the massage, facial and nail people — who had a loyal following. She put ads in The Washington Post, the Post Express and Craigslist to lure others. She did lots of interviews: “I would go around and if someone I had heard was a great massage therapist, I would try to get the word in and tell them I had heard they were good and that we were opening a new business.”
Her recruitment efforts paid off.
Snowdon said the spa now employs 21 people, including an on-site spa manager. There are 15 full-time employees. The employees she first hired are paid hourly plus commission, while newer employees are paid straight commission. She said she wanted to guarantee that employees had income when she first started, so she had an hourly wage. Straight-commission employees might receive half the fee, while hourly/commission employees receive $8.50 an hour and around 35 percent of the fee.
A good massage therapist can earn $60,000 to $70,000 a year with tips, she said. She tries to maintain morale as well as quality by scheduling sufficient breaks during the day for the staff members, especially the massage therapists, whose job is physically taxing.
“The hardest part is the people-management piece,” she said, and not crossing the line between managing the employees and being their friend. “I am running the business and having these financial considerations, but I want input and want [employees] to be happy, but I also can’t give [employees] everything [they] want.”
In addition to payroll, Snowdon said she spends around $150,000 annually on rent. Other major expenses include insurance and electricity costs. (“You have to be insured in case you push someone off the massage table,” Snowdon said.) And then there’s the $400,000 air-filtration system and the $18,000 microdermabrasion machine, which helps smooth complexions by rubbing away the outer layer of skin. At a cost of $140 a session, the treatment is one of the spa’s highest-margin services.
Big mistakes? Snowdon bought a water wall, which creates a relaxing, bubbly noise, even though “everyone told me, ‘Don’t do a water feature.’ ” The wall leaked and has proved difficult to clean. Snowdon now calls the wall “the bane of my existence.”
All told, Snowdon said Nusta Spa grosses around $100,000 a month, most from massages, facials and nails, while about 15 percent comes from product sales. Around 70 percent of her customers are women, most of whom walk to the spa from the surrounding offices during the week. The spa is open seven days a week.
Customers come from many sources, including friends, word of mouth and employees who bring customers from their established practice. Walk-in business has not been a big part of the practice.
The business has been successful enough that Snowdon pays herself an annual salary, which is drawn in quarterly increments. It’s less than six figures.
“This is never about me having my private jet,” she said. “It’s trying to find that thing that you are kind of excited to get out of bed every day for.”
She eventually would like to expand the company, but she fears overly rapid growth would stretch the business and cause mistakes. The current economic climate doesn’t help, either.
“There are kinks to be worked out here,” she said. “I don’t know how that plays out.”