By Julekha Dash
Staff - Baltimore Business Journal
From the January 7, 2005 Baltimore Business Journal
Last year, Judy Sulisafaj Kelly and Colleen Smith made a career move that turned heads among their friends.
The two new moms left their jobs at a local staffing firm to enter a world of waxing, exfoliation and aromatherapy. Nine months after opening their new spa Studio 921 in South Baltimore with the help of a bank loan, the partners said they made the right decision.
"I never want to go back to corporate America," Smith said.
But Smith and Kelly want to bring corporate America into the spa. By offering such amenities as wireless Internet access and hosting business meetings, Studio 921 is one of a growing number of Baltimore-area day spas whose owners have capitalized on the growing number of well-heeled consumers flooding into new residential developments throughout this region.
Local spa operators and entrepreneurs are investing hundreds of thousands of dollars to set up shop near other high-end destinations, eager to lure individuals with disposable dollars as the economy grows. Marketing-savvy spa owners have devised corporate programs to go after a largely untapped corporate market and they are displaying decor to attract men, a growing segment of the spa market.
Meanwhile, new retail developments in Baltimore City have made the city the local hot spot for the spa boom. New developments such as Canton Crossing and Inner Harbor East are giving spa owners prime spots with plenty of parking and other retailers that can help draw many of the nearly 10,000 residents who will call downtown Baltimore home by the end of this year.
"There's a segment of the population that loves to be pampered," said Scott D. Berman, a partner in the hospitality and leisure consulting group at PricewaterhouseCoopers LLP.
Local, national growth
Locally, the spa boom is taking many forms.
FX Studios Inc., which targets male clients with its high-tech accents, opened its 11,000-square-foot spa in Hunt Valley last spring. Meanwhile, 34-year-old About Faces Day Spa & Salon will open its fifth salon in Canton Crossing in 2006 and is eyeing other sites for expansion in Annapolis, Bel Air and Columbia. The planned Ritz-Carlton Residences will include a spa in the Key Highway complex.
But industry insiders say the local spa industry's defining moment arrived in November when Elizabeth Arden's Red Door Spa opened at the Village of Cross Keys.
Red Door's opening "lends credibility to what we're doing and the entire Baltimore marketplace," said Patrick Brennan, CEO of About Faces. Rather than being worried about the powerhouse's arrival, spa owners said the chain will only help grow demand.
Nationally, there are about 12,100 spas in the United States, up about 25 percent since 2002, according to the International Spa Association. In the Northeast -- which includes Maryland -- there are about 2,800 spas, which is about 36 percent more than dotted the region in 2002.
The nation's spas generated about $11.1 billion in revenues in 2003 -- a 124 percent growth from 1999. Spas in the Northeast generated $700,000 in revenues on average in 2003. That figure is about 20 percent less than the revenues in 1999, when the economy was stronger.
Location, location, location
Industry experts say one of the most critical factors determining a spa's success is location.
Having adequate parking is essential when clients can spend several hours getting their hair colored or bodies buffed, spa owners say.
About Faces, long a fixture in suburban areas, had craved a downtown spot, but parking remained a problem, Brennan said. But Canton Crossing, the mixed-use development at the corner of Boston and Clinton streets in Baltimore City, not only offered parking but an area that houses a mix of professionals and retired individuals who represent the spa's target demographic.
"We have a large metro population that's only going to grow," said Brennan, whose company's revenues grew from $12 million in 2003 to almost 16 million in 2004. About Faces spas are located in Timonium, Towson, Pikesville and Salisbury.
Studio 921's owners fell in love with their Fort Avenue location, adjacent to a Merritt Athletic Club and the Wine Market. Being located near a health club helps attract customers who are interested in health and wellness. The spa offers a fitness package, that includes an hour of personal training at Merritt, followed by a sports massage.
Investing in relaxation
But getting a spa off the ground requires more than a good location. It also requires a sizable investment.
Startup costs for opening a day spa run around $150 per square foot, said Mark Bomse, vice president of Erwin L. Greenberg Commercial Corp. in Owings Mills, which is redeveloping Hunt Valley Centre.
FX Studios owner David Behan poured $1.3 million of personal money in his venture. Behan is also president of Dunleary Inc., a family-owned specialty chemical distributor in Towson that sells to companies such as McCormick & Co. Inc. and Procter & Gamble Cosmetics.
Behan wanted to capitalize on the male population's growing interest in grooming services, thanks to popular cultural trends like the television show "Queer Eye for the Straight Guy."
"I was always the one guy amongst women" at spas, Behan said. To attract the male crowd, FX Studios is loaded with liquid crystal display televisions featuring Dolby surround sound so clients can watch sports or news programs.
They can also go to the movies while getting their hair cut.
Behan has acquired the licensing rights to show Hollywood films on its four, 16-foot screens. Employees at the spa rotate the movies every eight weeks, and display movie times on the spa's Web site so clients can schedule their visits accordingly. "A Fish Called Wanda" and the "Sixth Sense" were among the 16 movies playing at FX Studios at press time.
Men comprise 55 percent of Behan's clientele. Nationally, 29 percent of spa clients were male in 2003, versus 25 percent in 2002, according to the spa association.
Targeting businesses' business
Men also comprise much of another market targeted by spa owners: the corporate market.
Three months ago, Behan hired a marketing director to attract corporate clients. FX began offering a rewards program that allows companies to earn points, similar to airlines' frequent flyer programs. Its corporate clients include Procter & Gamble, McCormick & Co. and Black & Decker Corp.
The owners of Studio 921 -- Kelly and Smith -- also have leveraged their corporate connections to help build their client base. The spa's relaxation room offers wireless Internet access and has hosted business meetings held by executives at Morgan Stanley and Salomon Smith Barney Inc.
Going after the corporate market "was part of our business plan," Kelly said.