Monday, December 21, 2009

On the closure of hotel spas

Two spa businesses suffered sudden closures in Singapore recently, leaving their customers stranded with useless packages that have already been expensively paid for. These two businesses, Wellness Village Spa and Simply Spa International, operated outlets in good, well-known hotels, being the Pan Pacific Hotel and the Parkroyal Hotel respectively.

The aggrieved customers are now fighting to get their money back through the aid of the Consumers Association of Singapore and the Small Claims Tribunal, although it is not certain that these spa businesses even have any money left to refund their customers.

What can be done to prevent such incidents from happening again in future?

One suggestion has been made regarding chargeback schemes for credit card users, where consumers can reverse a credit card transaction if they do not receive goods or services that have been purchased from merchants.

But it seems to this author, that hotels should also play an important role in preventing such incidents. After all, any business (including spa businesses) which sets up shop in a good hotel will be relying on the name, goodwill and reputation of the hotel to attract customers. Most customers do not associate shady, fly-by-night businesses with shops that are found in a good hotel. Moreover, hotels have a vested interest in preventing such incidents from happening, because if hotel shops falter and leave customers in the lurch, they will also tarnish the name of the hotel.

There is, in fact, something that the hotels can do. And that is to require the businesses which set up shop in the hotels to maintain a certain minimum capital in their companies. In a way, the capital can serve as an assurance that the company will be able to meet its debts and obligations as and when they fall due. If this had been done in the case of Wellness Village Spa and Simply Spa International, the affected customers may have some assurance that there is money in the companies from which to get their refunds.

Now this is not a new idea, and there are some shopping malls in Singapore that require their shop tenants to maintain adequate capital, so as to protect the mall landlords as well as the customers.

If a business cannot afford to maintain an adequate capital, then the hotel should not bother with allowing such business to run in the hotel. As seen from the case of the two failed spa businesses, there is just too much risk in allowing one dollar companies to operate one day and disappear the next, leaving hundreds of customers stranded.

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