Air Travel Is Hell on Your Neck and Back. Hence This Deal

The varied torturings of air travelthe delays, the security gantlet, the surging crowds, and minuscule seats.

Isnt it great?

It is if youre in the relaxation businessnote the prevalence of alcohol options at every U.S. airport of different sizes. A more sober option is the 15 -minute neck massage.

The largest U.S. chain of airport spas, XpresSpa, sees jet-side massage and manicures as a growth market with a captive, harried customer base. But it may not be so easy to monetize. The New York company, in the midst of a reorganization, told Monday it had agreed to be acquired by Form Holding Corp ., a publicly quoted investment company, in an all-stock bargain valued at $40 million 1 , approximately equal to XpresSpas annual sales.

Security protocols imposed after the 2001 terror attacks have stimulated U.S. airports far more lucrative shopping venues. After clearing security, travelers spend an average of 65 minutes at the airport before boarding, according to XpresSpa investor materials released on Monday. The materials cite New Market Research& Micro Market Monitor and forecast ambitious growth figures for airport retail spending of nearly $10 billion for North America in 2020, up from $4.2 billion last year. More than half of U.S. air travelers have annual household income above $75,000, leading to impulse buying because these affluent clients are bored, rushed, and stressed, XpresSpa said in the presentation.

XpresSpa grew from a single location to be defined by two New York entrepreneurs, Moreton and Marisol Binn, in early 2004 at JFK International Airports Terminal 1. It has expanded to 47 places in 20 U.S. airports, plus stores at Amsterdams Schiphol Airport and in Dubai. Form Holdings is buying the company from the New York private equity firm Mistral Equity Partners, the Binns, and minority holders. 2

The couple figured the new era in U.S. preflight security following the 2001 terror attacks would require travelers to arrive at airports earlier. They reckoned airports would routinely host travelers for far longer periods, creating additional opportunities to sell them food, drinks, and other goods and services.

Airports have gradually boosted luxury retail in recent years, and a spa experience is appropriate with the wine bars and upscale eateries they want. XpresSpa and a competitor, Be Relax, of Paris, are the industrys two largest players. Be Relax has spa places at eight U.S. and Canadian airports and in Europe, Dubai, and Singapore.

XpresSpa has struggled in some areas, particularly in staffing and navigating the often byzantine rules governing airport rentals and other restrictions. Hiring and retaining massage therapists, nail technicians, and cosmetologists remain the thorniest problems for the company, which is always in the market for these skilled laborers. Trekking to the airport and navigating security are burdens massage professionals dont typically confront, told Andrew Perlman, chief executive officer of Form Holdings.

The company is striving to eliminate wait times. Even a five-minute queue for a massage or manicure sends many would-customers on their style to the gate without a massage, told Ed Jankowski, a retail veteran who was named XPresSpa’s chief executive officer in early June after 14 months as a company director. Jankowski, a former merchandising executive at Godiva Chocolatier Inc. and Luxottica Group SpA, was hired as part of an attempt to revamp the stores and streamline a menu of more than two dozen services, including haircuts and Brazilian waxes at some locations.

When you look at our current menu, it sort of reads like a Cheesecake Factory menu, Jankowski said in an interview on Friday. There are so many services, and we dont genuinely stand for the services that we know are the lions share of our business.

The top sellers are 15 – and 20 -minute neck massages, which account for roughly 80 percent of the total business, followed by manicures and pedicures. Pillow and blanket sales are popular retail items, Jankowski said. Those four regions account for roughly 97 percent of marketings. Most employees are independent contractors compensated with an hourly wage and percentage points of sales and tips-off, he said, with therapists incomes similar to those at urban spa locations.

Grooming and wellness are a logical selection for airport downtime, especially as U.S. airports look for more upscale retail alternatives, Forms Perlman said. The model really functions the best with multiple locations in the same airport because you can move personnel, he said. This is really a labor-optimization business, he said, because the labor is actually the majority of the cost you can control.

The company will use capital from its new owner to remodel its stores for a greater delineation between the massage the regions and other services, such as hair styling and blowouts. XpresSpa insures capability for about 120 U.S. places over period, Perlman said.

Especially if airlines maintain jamming us in.

Read more: www.bloomberg.com

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