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

Delayed by Delta or Southwest? Feeling weary? An investment firm sees growth ahead for spa treatments at the airport.

The varied tortures of air travel—the delays, the security gantlet, the surging crowds, and minuscule seats. 

Isn’t it great?

It is if you’re in the relaxation business—note the prevalence of alcohol options at every U.S. airport of any size. A more sober choice 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 consumer base. But it may not be so easy to monetize. The New York company, in the midst of a reorganization, said Monday it had agreed to be acquired by Form Holdings Corp., a publicly traded investment company, in an all-stock deal valued at $40 million1, roughly equal to XpresSpa’s annual sales.

Security protocols imposed after the 2001 terror attacks have made 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 customers are bored, rushed, and stressed,” XpresSpa said in the presentation. 

XpresSpa grew from a single location established by two New York entrepreneurs, Moreton and Marisol Binn, in early 2004 at JFK International Airport’s Terminal 1. It has expanded to 47 locations in 20 U.S. airports, plus stores at Amsterdam’s 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 fits well with the wine bars and upscale restaurants they want. XpresSpa and a competitor, Be Relax, of Paris, are the industry’s two largest players. Be Relax has spa locations 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 leases 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 don’t typically confront, said 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 way to the gate without a massage, said 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 effort 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 don’t really stand for the services that we know are the lion’s 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 areas account for roughly 97 percent of sales. Most employees are independent contractors compensated with an hourly wage and a percentage of sales and tips, he said, with therapists’ incomes similar to those at urban spa locations.

Grooming and wellness are a logical choice for airport downtime, especially as U.S. airports look for more upscale retail options, Form’s Perlman said. “The model really functions the best with multiple locations in the same airport … because you can move staff,” he said. “This is really a labor-optimization business,” he said, because “the labor is really 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 areas and other services, such as hair styling and blowouts. XpresSpa sees capacity for about 120 U.S. locations over time, Perlman said.

Especially if airlines keep jamming us in.

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  1. 1 Includes the assumption of $6.5 million in debt.
  2. 2 Form Holdings (which changed its name from Vringo Inc. in May) has stakes in several U.S. and European companies that specialize in rugged computers and wireless charging devices. Mistral acquired its stake in XpresSpa in early 2012. It also owns a stake in privately held Vino Volo, an Oakland, Calif.-based chain of wine bars in more than two dozen airport locations. The sale is designed to help XpresSpa refashion its stores and expand.