OneSpaWorld to Go Public Pending Shareholder Vote March 6
OneSpaWorld (OSW), the dominant health and wellness company that operates spas aboard major cruise lines, is poised to begin trading pending shareholder approval on March 6. IPO Edge spoke to the company’s Executive Chairman, Leonard Fluxman, who explained his strategy of adding services to the steadily-expanding fleets of OSW’s cruise partners.
Ahead of the vote, investors can purchase shares of Haymaker Acquisition Corp (ticker: HYAC), a blank-check company or SPAC that raised money to find a target. HYAC shares will automatically turn into shares of OSW once the deal is officially done. IPO Edge also published a detailed financial analysis of the deal, which is available here.
IPO Edge: How did Haymaker and OSW come together?
Mr. Fluxman: Haymaker set out to find a consumer service business that was experience-based, that was differentiated and advantaged, that was non-seasonal, non-cyclical, highly predictable, with strong senior management, and asset-light.
OneSpaWorld operates at the intersection of two highly attractive trends: health and wellness and travel leisure. The Company has an economic model that’s truly unique. It enjoys cyclical growth, a dominant market share, a truly differentiated business model, long-term economic entrenched partnership agreements, very strong and unmatched revenue visibility, a variable cost structure with minimal marketing, and asset-light, and tax advantaged. Lastly, since it’s a physical product delivered, it’s un-Amazon-able.
Further, The Company has enjoyed decades of consistent performance in an industry that has grown consistently, and the management team was responsible for the design of the business, the operations of the business, and all have agreed to stay with Haymaker as the Company is taken public.
IPO Edge: OSW has over 80% market share in the outsourced maritime health and wellness market and you are 10x the size of your next closest competitor. Why can’t someone else come in and take share? What are the barriers to entry?
Mr. Fluxman: OneSpaWorld is the leader in the health and wellness category, with an 84 percent market share, and growing. The Company has been the market leader for more than 50 years and is ten times the size of the next competitor. OneSpaWorld dominates the industry in just about every single geography and across every single type of cruise experience that is offered out there.
We have incredible logistics, data, technology and training, unsurpassed even by the cruise industry itself, and we have created this incredible moat around this business which makes it not only very difficult, but almost impossible to replicate in its entirety. The investment required, with virtually no opportunity for return on investment, is the reason why nobody else has done it.
Staff training is what truly separates us from the competitors. We train over 17 different modalities, dozens of course curriculums from aesthetics to massage protocols, fitness boot camps, Medi-Spa physician training, management training, assistant management training, and we have wellness coaching and product knowledge. We spend over $5 million annually on training.
IPO Edge: What are the primary growth drivers for OSW?
Mr. Fluxman: OneSpaWorld’s growth comes through new vessel introductions with our current partners. With that, we will continue to drive onboard revenue as we continue to launch higher value-added services and products. For example, Medi-Spa continues to grow at a much higher average price point than most of our existing services.
New vessel introductions are a key growth driver of our model. We will provide services on 23 new builds just through 2020. Historically, over $4 billion of new capital was invested into new cruise ships each year by the cruise lines, and that number actually grows to $11 billion by 2022.
We will continue to expand on the recent successful collaboration that we’ve had with our cruise line partners as it relates to pre-booking, onboard marketing and post-cruise initiatives.
We also have the opportunity to start mining the under-exploited resorts spa opportunities.
IPO Edge: What makes your revenue stream highly dependable and visible?
Mr. Fluxman: Because of the incredible way that we deliver service to the cruise lines and work seamlessly and execute week in and week out to deliver a superior guest experience in all of our facilities, we have more than a 95 percent historical contract renewal rate, and the average length on the contracts is about five years on all the major banners.
Health and wellness trends have continually opened up new opportunities for us, and we consistently expand these offerings to address the demands of the current day, the consumer, and of course our cruise partners. But we don’t really just create services; we have been known to create and innovate categories.
Lastly, from 2019 to 2023, 35 new vessels are being introduced by our cruise line partners. That’s a 25 percent increase in our current base. We know that when new ships are introduced, we do the best on those ships. Passengers that sail on those ships pay the highest premium, they spend the most in our facilities, and we get the greatest revenue from that, and it also generally creates a halo effect for the cruise line.
IPO Edge: OSW was part of Steiner Leisure, which was a public company. Steiner Leisure was acquired by L Catterton, the largest and most global consumer-focused private equity firm in the world. What did L Catterton do to OSW while private?
Mr. Fluxman: Catterton was able to push us towards dynamic pricing that we’ve introduced with investments, as well as enhancing the technology that we deploy in our office and onboard making our pricing completely transparent to the guest. On any given day, they can look at what pricing is in port, or on a sea day. Today, we’ve grown that, with dynamic pricing, pre-booking to 30 percent. While owned by L Catterton we also exited non-spa businesses so that we enter the public markets as a pure play operator of Spas at Sea and on land.
IPO Edge: Do you have the right management team in place to achieve your goals?
Mr. Fluxman: We have a very strong senior management team with significant industry experience. Stephen Lazarus and I operated Steiner Leisure for approximately 20 years. During this time, Stephen, Glenn Fusfield and myself have assembled a talented management team possessing significant cruise industry experience.
The most important part about this team is they’re all skilled, they all know what they need to do, and we reach into every single department, onboard the ships with the hotel managers and the revenue managers, but also on shore-side. We are touching the cruise lines so that we can maximize the relationship, minimize the shortfalls, if any, and also maximize the opportunities to elevate the program and incrementally elevate revenue.
IPO Edge: Are any investments needed to achieve your long-range plans?
Mr. Fluxman: We have an incredible asset-light model. Where we need to invest a little bit of capital, the economics will be rearranged such as we get the same or similar or better returns than what we’ve done historically.
IPO Edge: When do you expect the deal to close? Please share next steps.
We have announced the shareholder vote date of March 6th.
Following closing, the common shares of OneSpaWorld Holdings Limited are expected to trade on the Nasdaq Stock Market under the symbol “OSW”.
John Jannarone, Editor-in-Chief