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Money in massage!

Kishore Singh | December 18, 2004

As a facility, a spa is probably one of the more expensive indulgences in corporate life, yet promoters say it isn't likely to deliver profits very soon -- or even at all.

"A spa doesn't make money by itself," says Ashok Khanna, managing director of Ananda, India's first and still its only destination spa.

Which makes the Mayar Group's latest venture, the ultra luxe Amatrra Spa in New Delhi, a strange business proposition. Why would anyone want to pump in Rs 23 crore (Rs 230 million) into a venture that isn't likely to deliver a black bottomline sooner rather than later?

Managing director Ashit Sud, scion of the Rs 900 crore (Rs 9 billion) Mayar Group's trading business with interests in newsprint and timber, says break-even could be as soon as two years, and pay-back in six years, but there's little to support that optimism.

"But then, a stand-alone spa isn't a money-spinner anyway," he argues, "it's also an important aspect of our backward integration process with our ayurveda business."

A business in which he's recently invested to the tune of Rs 43 crore (Rs 430 million) on an annual turnover of just Rs 10-11 crore (Rs 100-110 million).

"We are at a stage where we have to decide our policy -- whether we grow the manufacturing facility, or invest in brand building."

Mayar's ayurvedic factory in New Delhi has 32 formulations patented and proprietary to the group, but sales -- despite electronic promotions -- did not take off to the desired level, and distribution is currently limited to the 12 northern states.

"We were keen to get into the services segment to promote the ayurvedic arm," says Sud.

Initially, the group had identified a 120-acre estate in Gurgaon for the spa project, but when the 45,000 sq ft space became available at The Ashok in the heart of the city, the Suds grabbed the opportunity for their lifestyle spa.

All formulations used at the spa are naturally their own, and these are also available for sale at a spa boutique, but clearly this is not enough to sustain the ayurvedic arm of the group's business.

It would seem Amatrra is going to be part of a chain, or will resort to franchising its expertise -- though with only two months behind it, Sud insists it's still early days to decide on the future course of their enterprise.

What makes Amatrra different from many others is that it is a stand-alone product not linked with any other part of the hospitality business that usually make the money.

"Today, a spa is part of the project cost and you cannot have a top-end luxury resort without a spa," says Geeta Singh of East India Hotels, which has a tie-up with Thailand's Banyan Tree spa for all Oberoi hotels.

"A spa isn't built to make money; it's simply a requirement for a luxury hotel."

If that be so, is Amatrra a mistake? "We don't have a model yet, but we're not shy of accepting offers to run spas in hotels in India or overseas," Sud says.

"Whether the route will be as franchisees, destination spas or management consultants, we don't know yet. But it wouldn't make business sense unless we leverage the product to grow."

Ananda in the Himalayas was a Rs 55 crore (Rs 550 million) project, of which "maybe Rs 8-10 crore (Rs 80-100 billion) went into the spa component," says Ashok Khanna. Set up in 1999, it broke even for the first time last year.

"We provide the whole concept of wellness," argues Khanna, "where average stays are in excess of seven days, and recoveries on rooms are in excess of Rs 11,000." As much as 65 per cent of its clientele consists of repeats.

Sud insists that Amatrra is the only lifestyle (to use regularly) spa in the country, Khanna says his destination spa is distinctive while resorts that have spas attached are "just glorified health clubs", while Geeta Singh argues the Oberoi spas are "complete spas with extensive therapy menus and treatments, and Thailand-trained therapists".

Clearly, spas now occupy the exalted space that gyms did some years ago, even as they proliferate across all price points. Even chain beauty salons now have so-called spa facilities because they may provide a few massage and wellness programmes as part of their treatments.

Within a few years, the industry has shifted from body-building to fitness to wellness.

But Sud is not buying the argument that any massage is therapy. "A spa is mostly based on water treatments."

His facility is certainly the best there is, both in terms of the physical facility as well as its programmes that combine astrosciences and naturopathy with well-known spa programmes from around the world.

Because it is a facility that is on its own (the hotel has no contractual arrangement for its guests to use the facility, though they can be vetted and approved, and have to pay a fee of Rs 1,000 per day besides the therapy charges), Amatrra is selling part of its poolside space for members's parties (there's money in catering, and the facility includes a 80-cover vegetarian restaurant), and is considering a limited gym membership for its high-octave Technogym facility that uses personalised, smart-key machines that are in use in only one other hotel in Asia (in Dubai).

Membership is expensive -- Rs 4 lakh and Rs 1.75 lakh for couples (in the former, all therapies are on the house, in the latter there is a 50 per cent charge on therapies) with variations for singles and corporate memberships.

The screening is stringent, no discounts are offered, and of the 250-300 memberships the spa hopes to achieve, 46 members "with a high profile" have been approved.

But with a running cost of 53-54 lakh every month (and that's not counting interest on the equity) and the inventory cost of the 65 employees likely to rise, Sud has his hands full trying to make money from a niche segment of the spa business.

Maybe that will come when, like Banyan Tree, it can franchise the Amatrra brand for a fee. Till then, he's hopeful that building the brand will serve him in the long-term maalish market.

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