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Spas Offer Business Opportunities

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									          Topic Report                                       (c) JETRO Japan Economic Report, August-September 2006




                                           Spas Offer Business Opportunities

                                                                                                                Misako Ito
                                                                                                 Japanese Economy Division

          Summary
                With Japanese consumer interest in health continuing to rise, hotels have been building spas to
          make their facilities increasingly attractive. Overseas spa operators are now investing in spas in
          Japan, and local governments are promoting spa development to attract more tourists. If issues such
          as a shortage of skilled personnel could be resolved, the spa industry has strong potential for rapid
          growth.


          1. Overseas investors target Japanese spa industry

          A. Essential facility for luxury hotels

               A number of new, primarily luxury hotels have opened up in central Tokyo, and since 2002
          many existing hotels have undergone major remodeling. Despite concerns about excess competition,
          one positive development has been an increase in the number of hotels offering spas to enhance their
          appeal and differentiate themselves amidst mounting competition (Fig. 1).

          Fig. 1 Leading Tokyo Hotels with Spas
                    Hotel                             Location Opened                        Spa facilities
The Ritz-Carlton, Tokyo                               Roppongi  2008 Spa (planned)
The Peninsula Tokyo                                    Hibiya   2007 Spa (planned)
Mandarin Oriental Tokyo                              Nihonbashi 2005 The Spa at Mandarin Oriental Tokyo
Conrad Tokyo                                          Shiodome  2005 Spa Mizuki
Tokyo Prince Hotel Park Tower                           Shiba   2005 Strelitzia Garden spa & fitness center
The Strings Hotel Tokyo                              Shinagawa 2003 Lunatua aromatherapy
Royal Park Shiodome Tower                             Shiodome  2003 Mandara spa
Grand Hyatt Tokyo                                     Roppongi  2003 Nagomi spa & fitness center
Four Seasons Hotel Tokyo at Marunouchi               Marunouchi 2002 Spa & fitness center
Park Hyatt Tokyo                                      Shinjuku  1994 Club on the Park
Fours Seasons Hotel Tokyo at Chinzan-so                Mejiro   1992 Yu, The Spa at Four Seasonsg
InterContinental The Grand Yokohama                  Yokohama 1991 Spa Bay Window
Hotel New Otani Tokyo                                 Akasaka   1964 Amour Spa & Suites
Hotel Okura                                          Toranomon 1962 Grand Comfort Floor
           Source: Corporate web sites

               A rapidly growing interest in spas has been sparked by Japanese travelers who have
          experienced spas overseas and hope to enjoy similar services in Japan. In addition, many luxury
          American and European hotels in Japan consider spas an essential feature in their establishments. As
          a result, most new hotels are now outfitted with spas, while existing hotels, including both the old
          and new hotel “trinities”1, are undertaking major remodeling to incorporate spas.




          1
            The old trinity comprises the Imperial Hotel, Hotel Okura and Hotel New Otani, while the new trinity is the Fours Seasons Hotel
          Tokyo at Chinzan-so, Park Hyatt Tokyo and Westin Tokyo.
             Topic Report                                         (c) JETRO Japan Economic Report, August-September 2006




             B. Foreign firms enter the market

                  In most cases, Japanese firms operate spas on their own, but recently an increasing number of
             firms are using overseas expertise, equipment and or brands (Fig. 2). Examples that have been
             associated with luxury Japanese hotels include the Mandara spa from Bali, Indonesia in the Royal
             Park Shiodome Tower, and the Banyan Tree Hotels and Resorts spa from Singapore in the Sheraton
             Grande Ocean Resort at Phoenix Seagaia Resort in Miyazaki Prefecture. Other cases have included
             spa specialists that have invested in Japan, or have provided products or expertise.
                  Singaporean spa companies have been extremely enthusiastic about investing in Japan. In
             Singapore, where spas have become quite popular, the government has supported overseas
             investments, leading to several in Japan. Chung Tze Khin, first secretary of the Singapore Embassy’s
             commercial office in Japan, says there are three attractions to investing in the Japanese spa market:
             “The Japanese have long appreciated hot springs, there is a vibrant market—due to the demand for
             wellness in a stress-filled society and the interest in preventive medicine—and senior citizens want
             to enjoy high-quality lifestyles.” Such attractions are expected to continue drawing investment from
             overseas.

                 Fig. 2 Foreign Investment in the Japanese Spa Market
            Foreign firm             Home base       Japan partner           Business                   Location(s) in Japan
St. Gregory Spa                                 Nissen Estate (H Force) Spas               Azamino, Laforet Harajuku & Tokyo Bay
Banyan Tree Spa                                             -           Spas               Phoenix Seagaia Resort
                                     Singapore
The Aspara (Cosmoprof International)            SpaCare Japan           Personnel training Hatchobori
Essence Vale                                    SJ International        Spas               Daiba
Taman Sari Royal Heritage Spa                               -           Spas               Laforet Zao Resort & Spa
                                     Indonesia
Mandara Spa                                     Shiseido                Spas               Royal Park Shiodome Tower
Thermes Marins du Pacifique           France    Thalasso System Japan Technology licensingSouth Boso Peninsula, Yokohama & Gamagori
              Sources: Corporate web sites, and news reports


             2. Strong growth potential

                   Interest in spas began around                         Fig. 3 Scale of Spa Market
             2003, so it will take more time for
             a spa industry to take shape.2 A                           (¥ billion)
                                                                 500
             lack of data makes it difficult to                                400                                                                 400
             determine the scale of this                         400
             fledgling industry. Even a clear                                                   300                               300
             definition of “spa” does not yet                    300
             exist, as various industry                                                                          200
             associations use different                          200
             definitions3. Many consider the
             spa industry to embrace, at least                   100
             partially, health-related services                     0
             such as esthetic salons, hot
             springs, fitness centers and                                    Beauty          Healing         Massages           Fitness       Heated-pool
             massage services (Fig. 3).                                    treatments                                                           bathing

                                                                            Source: Nippon Spa Association, 2003

             2
               Ministry of Health, Labour and Welfare statistics classify spas among “other services.”
             3
               According to the Nippon Spa Association, a spa is “a comprehensive facility offering heated or cold-water bathing and various and
             treatments to help customers maintain and restore health and beauty in a soothing, relaxing environment.” The Japan Spa
             Association, however, uses both the general definition of “hot springs, related areas and facilities offering specialized hot-springs
             treatments” and the narrower definition of “a facility offering a full range of traditional medical and healthcare treatments, based on
             water and the natural powers of healing, for mentally and physically healthy lifestyles.”
Topic Report                             (c) JETRO Japan Economic Report, August-September 2006




     The spa market is growing each year, and already employs a large number of people (Fig. 4). A
search of an Internet-based phone directory came up with some 5,000 spa-related companies,
including spas themselves and companies providing spa amenities/equipment and related
manufacturers. The scale and range of industries, products and personnel lead many to believe that
the growth potential is strong.

Fig. 4 Spa-Related Industries

Health services (as of 2001)
Sales: ¥12 trillion
Employment: 2 million
Note: Includes health checkups and maintenance, health consultation, health-related information
systems, sports, dietary management and stress relief and health product distribution.
Source: METI

Spa facilities (as of 2003)
Sales: ¥39.7 billion
Total customers: 40.1 million
Source: Institute for Free Time Design

Public baths (as of 2004)
Total locations: 27,074
Ordinary public baths: 7,130; with private rooms: 1,343; with health center: 2,287;
 with sauna facilities: 2,169; other: 14,145
Source: MHLW

Fitness clubs (as of 2005)
Total locations: 1,503
Employment: 64,475
Sales: ¥371.9 billion
Note: Excludes clubs without pools.
Source: METI

Esthetic salons (as of 2002)
Total locations: 5,877
Employment: 47,794
Sales: ¥234.3 billion
Source: METI

Massage & shiatsu (as of 2005)
Licensed practitioners: 174,249
Source: Toyo Ryoho Kenshu Shiken Zaidan (Oriental Therapy Experimental Research Foundation)

Spa-related companies (as of 2006)
Total locations: 5,232
Note: Based on Internet search hits for “spa,” tabulated by prefecture. Includes hot springs, lodges,
makers of spa products and equipment, spa builders, and others.
Source: iTownpage website (http://itp.ne.jp/)
Topic Report                              (c) JETRO Japan Economic Report, August-September 2006




     Trends among spa customers                Fig. 5 Synthetic Consumption Index Trends
also offer hope for the market’s
future. The Cabinet Office’s            110.0
synthetic consumption index,                          (2000 = 100)
which synthesizes various
                                        105.0
demand-side trends such as
family income and expenditures,
has shown a steady increase over        100.0
the past few years (Fig. 5).
Moreover, the Japan Productivity
Center for Socio-Economic                 95.0
Development’s 2006 white paper
on leisure found that leisure time        90.0
and expenses had increased                      1
                                                       1

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slightly since the previous report
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                                              94

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in 2003, indicating that Japanese
consumers are more aware of                        Source: Cabinet Office
their free time (Fig. 6). In the
2003 report, a survey found               Fig. 6 Share of Replies Indicating Increase in Leisure Time, Expenses
that people who listed hot
                                   40          24.8                                                              Leisure expenses                      25
springs as a leisure activity           23.3           22.8                                                                                      (%)
increased by four points over                                  21.5                                              Leisure time
                                               32.8                   20.7
the 2000 poll, placing it at the        31.5                                              19.3
                                                      28.8                   19.2 18.7                                                                 20
top at over 40%. The report        30                                                            17.9 17.6 18.1
                                                                                                                          17.6
                                                              25.9 26.0 26.5 24.9                                                  16.2
notes that baby boomers, who                                                                                                 14.2 14.8
are set to retire en mass                                                                       22.3                                   15
                                                                                         20.9          21.2        20.6
                                                                                                              19.8      18.5 18.4 20.2
beginning in 2007, place high      20
priorities on enjoying local                                                                                                                           10
areas, health and nature.
Since spas reflect all three       10
categories, and represent                                                                                                                              5
health management and
resort environments,
                                    0                                                                                                                  0
consumer interest is projected
                                         91     92     93      94     95     96    97     98     99     00       01       02       03       04    05
to grow.
                                        Source: Japan Productivity Center for Socio-Economic Development

      In view of changing consumer tastes, local governments are incorporating spas into their
regional promotion strategies. Okinawa Prefecture, for example, holds seminars around the country
to introduce its spas and is promoting the development of health-related industrial clusters for
companies in fields such as food, leisure and medical care. The hope is that spas might become a
means of stimulating local economies.


3. Future challenges

A. Legal framework and skilled personnel needed

      Future growth of the spa industry will depend on how successfully it deals with several key
challenges. The first challenge is the need for a legal framework. Spas have not yet been established
as an official industrial category, so there is no regulatory system. For example, because spa
facilities provide services using water in tubs, they are within the scope of the public bath law, but
this law is inappropriate for regulating spas. Enacted in 1948 to regulate public baths, hot springs,
Topic Report                             (c) JETRO Japan Economic Report, August-September 2006




gyms and other facilities equipped with baths, saunas and esthetic salons, the law severely restricts
the provision of services to men and women in the same rooms. Spas built within hotels, however,
are subject to the inn law, which circumvents the rigorous requirements of the public bath law.
Industry representatives have called for a legal framework to iron out these discrepancies and
provide a solid foundation for growth and development.
     Finding skilled personnel is another issue. Because the concept of spas is still not widely
understood, there are strongly rooted views that confuse spa therapists with sex services, which has
discouraged some from entering the trade. The severe shortage of personnel is also due to the rapid
increase in new facilities. Expert therapists are often hired away or strike out on their own, so many
spas suffer high turnover.
     Employing skilled personnel from other countries is possible, but obtaining visas for them can
be difficult because spa therapists and masseurs are not recognized vocations under current
immigration regulations in Japan. In ongoing negotiations of a broad-scoped economic partnership
agreement, Japan and Thailand have agreed to consider visas for spa therapists and home caregivers.
In addition, the Ministry of Economy, Trade and Industry (METI) is studying ways of enabling Thai
spa-service specialists to be accepted more smoothly into Japan. If such efforts are successful, it will
become much easier for spas to hire sufficient skilled personnel.
     A key challenge for foreign firms interested in investing in Japan is finding good local partners.
Even if a foreign firm has a strong track record in operating spas overseas, it still requires local
knowledge to succeed in the Japanese market. Some foreign companies have even approached local
governments in Japan to obtain information on potential partners who could provide support and
information about topics such as regulations, market characteristics and how to work with local
communities.

B. Therapist training

     Some companies have begun offering training for spa therapists. Pacific Hospitality Group, a
spa planning and operations consultancy, is offering training through colleges it opened in Aoyama,
Tokyo in 2003 and Okinawa in 2006. According to Nippon Spa College Director Yumiko Hori, this
is necessary to ensure that Japan has a stable supply of skilled personnel. The company is training
personnel in Okinawa to help develop a local spa industry since thef subtropical prefecture is a good
environment for people who want to visit a spa in hope of lowering their blood sugar levels or losing
weight.
     SpaCare Japan, associated with the Singaporean spa The Aspara, opened the Cosmoprof Spa
and Makeup Academy Japan as a therapist training facility in Tokyo in 2005. Under a licensing
agreement with SpaCare International, SpaCare Japan offers a curriculum designed to help students
acquire licenses from international organizations such as the Confederation of International Beauty
Therapy and Cosmetology. Mie Prefecture’s Thalassa Shima Hotel & Resort offers thalassotherapy
based on the therapeutic properties of seawater, and has been training therapists at its International
Spa Academy in Tokyo since April 2005.
     Given the difficulties of bringing therapists from overseas, it is crucial for Japanese personnel
to be trained by taking advantage of local skill sets. Ms. Hori says, “Japanese service providers are
very strong in terms of hospitality.” The Singapore Embassy’s Chun notes, “Communication skills
are extremely important because customers are not looking for just massages, but a range of high-
quality services, including advice on their lifestyles.”
     Countries such as Singapore and Thailand offer national examinations for therapists and people
can receive training at high-quality educational institutions. It is to be hoped that Japan's public and
private sectors will cooperate in providing a similar environment for training.


4. Capitalizing on regional culture

    When foreign spa operators enter the Japanese market, a key to their success is how well they
can match their services and facilities to local needs. From a public relations standpoint, foreign
Topic Report                              (c) JETRO Japan Economic Report, August-September 2006




investors should also give something back to their host areas apart from merely providing local
employment. Possible solutions include local production and procurement. For example, a company
locating in Okinawa might use dinnerware made of local Ryukyu glass and offer treatments with
local “kucha” mudstone, which reputedly helps combat rheumatism and headaches.
      Another key to success is confirming local conditions in advance, such as the existence of a
suitable customer base and easy access to the candidate facility. The range of spas and related
business models is quite broad, and include in-hotel and destination spas, short-term day-visit spas,
club spas and more. Accordingly, foreign companies have the freedom to invest in the type of
facility that best suits their expertise or business objective. In this sense, the spa market offers great
potential.
      Many in the industry welcome the idea of foreign spa operators entering Japan and introducing
new services that could help to further popularize spa culture. If foreign operators can partner with
qualified local partners to develop locally tailored services, the potential boom in spas could play a
role in further invigorating Japan’s regional economies.



References

Gekkan Rejaa Sangyo Shiryo (Leisure Industry Data Monthly), September 2005
Gekkan Hoteru Ryokan (Hotels & Inns Monthly), December 2005

								
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