MONTHLY BAROMETER - WELLNESS EDITION
By Thierry Malleret, economist
The global economy is growing at its fastest rate since 2011. However, a fast-expanding economy is not necessarily always good news for every segment of the wellness industry. On the one hand, it expands disposable income and demand – something supportive for a fast-rising industry like wellness. On the other hand, it makes the life of all companies whose cost structure is heavily dependent on labor costs much more difficult, putting them at a disadvantage over their competitors. Most non-tech wellness companies (spas, high-end resorts and hotels) have a high labor costs to total costs ratio, meaning that labour costs will rise as a percentage of revenues when the economy improves, squeezing their margins.
One example: The three industries in the U.S. where wages are growing across all occupations are tech, banking and hospitality (and hospitality, of course, has a large wellness component). This is shown in the data for December, when the hospitality and leisure industry posted a 3.6% increase in wage growth (year on year). With the fast-expanding economy, the hotel industry will be hit the hardest: its labor costs average almost 50% of total operating expenses. In hotel spas, it’s even higher: about 75% of total operating expenses.