GSS Day 2 featured four different breakout sessions and numerous global authorities, each more fascinating than the next.

China: Big Opportunity or Big Risk?  Ensuring Success in the New Biggest Market. Moderator Polly Johson, CEO SpaEquip; Panelists Elmar Hadamzyk, M.D. Thermarium; Sheila McCann, Corporate Director of Spa Shangri-La; Simon Shepherdson M.D. International Leisure Consultants.

A lot has changed in China, in the 32 years since China’s “open door policy” was introduced. We are seeing a more and more discerning market, and more and more demanding customers.

In 1983 China’s first international luxury hotel opened, which isn’t that long ago really. In the 80s and even into the 90s China would “buy what we had to sell” – it’s not like that now.

First, the panel was questioned on their top 3 success secrets in China:

• Respect the traditional culture and different thought processes
• Focus on quality issues
• Be aware that it’s a hungry young market for knowledge
• Creativity
• Flexibility – being able to adapt to local ways
• Patience, especially with administration. Payments can take time.

What 3 things drive them crazy about doing business in China?

• Licensing
• Sexual Harassment
• Getting paid!
• Slow decision-making

What are the differences in setting up a spa in China vs. other countries?

• Legal structures constantly changing, and structure/process is opaque.
• Need for great consideration concerning government regulations and responses.
• Need to have a Chinese partner
• Construction is often done on time, even early!
• Team of only children can create challenges
• Migrant workforce with potential for filial responsibilities
• Issues can change from province to province

Considerations for working in China:

• Find a good service provider consultant; you may be able to be paid in Euros
• To sell equipment in China, get an agent or set up a wholly owned foreign company, although the latter requires approx. US140k investment for 2 years
• Talk to tax consultant service
• Operate on the “straight and narrow;” be fully certified aware of licensing issues and a  expirations.   Be anal about maintaining your various licenses
• Massage in particular can still have a seedy reputation, establish clear guidelines
• Staff training around code of conduct is vital
• Make your business attractive to the staff; pay them well and provide benefits
• Find a good law firm
• It is not necessary to learn Mandarin; expectation is that will communicate in English you will use your specialized skills for business and use a translator.  The barrier is culture, not language.

Intellectual property issues?

• Need to be patient and “put up with it.”  Trade fairs now have legal offices and there are avenues to handle this.  To the Chinese, copyrighting means “the right to copy!”  On the bright side, there are actually some interesting possibilities for utilizing the skills of those who copy well.

Last bits of advice?

• China is for the long term business plan, no fast money here
• Be prepared to be self-analytical and embrace different culture context
• More than 100 cities with over a million people aspirational people each  – smile!

 

Beauty and the Feast: What Can the Largest and Most Profitable Part of Our Industry Teach Us About Profitability? Moderator Kim Matheson, President, Natural Resources Consulting; Panelists Daniela Steiner, CEO Steiner Cosmetics; Paul Linder, G.M. Chiva-Som; Gustavo Albanesi, Founder, Buddha Spa Brazil; Neil Orvay, M.D. Asia Spa & Wellness.

The panelists, who all run businesses with beauty and/or hybrid components, described their business models.  Steiner is offering spa suites, with different services available within each suite, sometimes even at the same time.  They can also send therapists to perform beauty services in the guest’s room, or will stay open beyond normal hours for guests for a much larger than normal price.  Her business also has a location where they have different revenue streams under one roof, such as a tea lounge, a hairdresser, a swimming pool and Turkish Hammam, and gymnastics.  This facility offers clients a membership program, and the other vendors pay her rent.  This makes it possible to still make a profit in facilities with high rent.

The ChivaSom model, with a high ratio of staff to treatment rooms, is profitable.  The average stay of a guest is 8-10 nights, and some guests will spend as long as 8 hours per day in treatments!

Sense of Touch, Orvay’s Hong Kong chain of 7 day spas, started as a nail and waxing salon, but has expanded into spa services, and now more than 50% of their revenue comes from body and sincare.  Their therapists, as throughout much of Asia and the rest of the world, don’t have to specialize in one modality, but can perform multiple modalities depending client demand.  His new concept is “Fast Beauty,” opening soon in one of his former SOT locations;  no appointment “fast” services, as the name implies.

Albanesi’s Buddha Spa has 8 locations in Brazil, 4 of them franchised, and he is also the president of the Brazilian Spa Assoc.  The Brazilian market has historically been more segmented, with salons providing hair and nail services, and skincare coming from esthetic clinics.  Although Brazil is a very body-conscious country, bodyshaping has not been that profitable, since clients have to visit the spa 10-20 times to see a result, and the spa has to invest a lot in the equipment.   They are just now seeing a surging demand for massage, for which they can charge 25-35% more, and there are lower delivery costs.

Question for Orvay – How has he approached the market and made it profitable?  He started with an LPG machine which was expensive for him to procure, but gave clients a reason to come to the spa.  Also, Sense of Touch does not focus on packages, but rather on a la carte services.  Total opposite of how it’s done in Brazil; they charge a premium for facial services with their technology.

Two part question for Linder; 1)Does he feel there is a conflict between beauty and wellness, and 2) can he comment on their new product line and results?  Linder responds that ChivaSom is probably the world’s most successful destination spa, have been in the top 10 on the Conde Nast list for the last 10 years.  He advises that you have to be true to your business mission; they sell “whole retreats,” not just beauty.  No crème in the world will take away your personal issues.  Plus, being  in Thailand they are fortunate as Thai staff are excellent caregivers.  As for the ChivaSom products, they’ve just launched a 27 unit product line that is between 95-100% natural and produced in Thailand.  They’ve hit over $20k in sales in first 4 months, and have a deal in the works for a promotion at Harrods in UK, which came about since 40% of their clientele are from there.

Question for Steiner; How does the brand within a brand approach make sense from a profit perspective?   Steiner responds that beauty salons and spas should be more like lifestyle malls.  If you have only one brand, it’s boring for both the staff and the clients, sometimes you want something different.  She is successful with the model of having different providers share her space and pay rent to her.

Question for Albanesi; Can he elaborate on some of the new concepts in Brazil?   Brazil has some large cosmetic brands with thousands of stores, and are now associating services with their products, bringing credibility and more exposure to consumers.

The panelists remarked on the masstige approach; how can we compete against large conglomerates trying to get into our business?  Orvay says that just increases people’s awareness of spa brands and treatments.  Well capitalized companies in the market can help to develop the customer base.   Do the panelists have concerns about integrity vs. profit in their ventures? Steiner responds that 20 years ago, maybe yes, but today, we have to be profit oriented, while giving clients the best loving hands we can.

 

Differentiating With Design: Moderator, Chris Singer VP WATG; Panelists Emmanuelle Linard, E.D. Edelkoort; Sonu Shivdasani, CEO Six Senses; Adrian Egger, M.D. at Klafs; Ed Ng, Director at AB Design

Linnard mentions that spas embody two major trends; nature (earth) and culture (manmade technology).  Spas are incorporating both into treatments and materials.  Egger concurs that the latest features in European spas are marrying simplicity with high technology.  Ng offers that spas can hide technology through clever interior design.  Shivdasani adds that technology used in a bad way can reduce the level of engagement for clients, which is a current battle being faced.

Ng remarks that spas used to be “hidden in the basement” now we are given good views and provide clients some awareness of their surroundings, and retail areas that don’t look like retail and feature good lighting and sensory appeal.  Shivdasani  remarks that sometimes relaxation havens can also be created from challenging locations.  Eggers says that good design needs to consider the use and flow of the space, and should conserve energy for staff.

All agreed that spas could do a better job of using imagery to create the desire in clients to visit a spa.  A discussion was also had about the merits of different materials and finishes in the spa, and the need to weigh green and design initiatives with cost and upkeep efficiencies.  An audience member also contributed that copper has some impressive sanitary benefits and should not be overlooked; this person cited an Ayurvedic study from Bangalore in which a plastic bucket of water containing cholera, e-coli and two other types of bacteria was completely free of pathogens after being hooked into a copper coil overnight.

 

Managing Through Crisis: Cataclysmic Events, Geopolitical Instability, and Public Health Emergencies: Moderator: Mia Kyricos, VP Core Performane; Panelists Roberto Arjona, CEO Golden Door; Jeff Matthews, COO Mandara; Dave McCaughan, EVP McCann Worldwide, Samir Patel, M.D. Six Senses

Kryicos kicked things off with a question for the group, “How to you manage your brand integrity when there are competing priorities?”  Patel responds that customers expect brand integrity at all times, catastrophe or not.  McCaughan contributes a thought process covering these points:

What has the reaction of your loyal customers been following the catastrophe?

What support can you offer to your people and customers?

How can you bring motivation around you to your staff and the potential customers?

McCaughan says the faster you can get habits back on track, the better.  He recommends prioritizing the order of care as:

1.      Your staff

2.      Your customers

3.      Your investors

Most of your clients are aware of any recent events, but the situation can be different in various regions and it is important to communicate clearly.

Kyricos asked how the panelists recommend managing the human side of operations after a crisis?  Arjona replies that you need to communicate honestly and keep your employees by your side, lead by example.  The panelists were then asked how to respond to varying client demand after a crisis.  Matthews responded, “When the demand is declining, the first reaction of the managers is to cut costs by firing people. This is not the right reaction; not only you need your employees by your side, but cutting jobs can negatively affect your brand image.”  Patel advises starting the recovery together with your staff, behaving according to your brand values and building trust.  Matthews adds that a ritual or ceremony can provide some transition back to business as usual and give your staff a chance to move on.

Kyricos, “How do you manage marketing and more especially communication, since it is usually the first budget to be cut when corporations are facing crisis?”  Arjona responds, “During an economic crisis, the best strategy is to increase marketing, but after a natural crisis, it is important to be careful with the promises made by your brand.  For instance, after the recent tsunami, most companies cut back their marketing budget, which created dysfunction of the industry.”  McCaughan adds that “Even after a crisis, customers can find advantages, such as price reductions, and marketing should emphasize those advantages.  It is important to try to project the duration of the stabilization phase before customers return, which will vary based on the market.  In Europe or US, it takes 9 quarters to recover customers’ confidence after a major disaster, while in Asia it takes less than 2 quarters.”

Some of the other important points that were surfaced:

• Crisis can provide an opportunity to innovate; i.e. change your spa menu or a business process.
• Take advantage to go back to the roots of your brand.
• You cannot influence the media, they’re too powerful, but you should prepare a post-crisis campaign to communicate with your clients.
• In the event of a national crisis; create a commission and include all of the stakeholders; i.e. media and business.
• Understand the risks, so you can properly communicate, and get back to your habits as fast as possible.
• Don’t panic, for strong brands these setbacks are only temporary.