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Sunday, November 28, 2021

XpresSpa Sees A New Future In Integrated Travel Healthcare

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XpresSpa Group says that by the early fall it will launch a new brand in the travel health and wellness sector to deliver on-demand access to integrated healthcare through technology and personalized services.

The move was announced on Wednesday when the airport spa company revealed the extent of its 2020 revenue collapse: from $48.5 million in 2019 to just $8.4 million, with an operating loss ballooning to $40.1 million. The company had a cash balance of approximately $90 million at the end of 2020. Shares in XpresSpa were down 13% this morning.

The decreases were due to forced closures of its spa locations, mainly in U.S. airports, because they were deemed non-essential services. Early on in the pandemic, XpresSpa was quick-witted enough to shift away from spa services towards Covid-19 testing under the XpresCheck brand (through a subsidiary called XpresTest).

Today the company offers Covid-19 screening and testing at 11 locations in nine airports: Boston Logan (2), Denver International, Dulles International, Houston George Bush with United Airlines, JFK, Newark Liberty (2), Phoenix Sky Harbor, Reagan National, and Salt Lake City.

Investors are worried that XpresSpa has not moved quickly enough with its XpresTest business. Last year approximately 84% of the group’s total revenue was generated by XpresSpa services, with retail products and travel accessories accounting for another 12%. The remaining 4% came from product placement arrangements in XpresSpa spas and from management fees earned by XpresTest.

Profit potential is there

The company is hopeful that those fees will make a more significant impact this year. The subsidiary’s pro forma ‘patient services revenue’ for the three months ended January 31 was $3.3 million. Gross profit was $1.2 million, representing a sizable 36.5% margin. Patient numbers topped 22,000, with 15,000 taking higher-margin rapid tests. During the first 12 weeks of 2021, average revenue per patient was $150.

According to XpresSpa Group CEO Doug Satzman, XpresCheck’s estimated gross profit margin “for recent periods” is higher than XpresSpa’s peak business performance during the pre-pandemic era.

In a statement on Wednesday Satzman said: “Over the past few weeks, we have been encouraged by rising patient testing volumes and increased average revenue per patient. We attribute this primarily to the rollout of Covid-19 rapid testing which has become the preferred option of over 73% of all patients.

“Although overall airport traffic remains significantly below 2019 levels, we are seeing increasing passenger flow as people resume personal and leisure travel in a safe manner which, in our opinion, will lead to a strong recovery during the second half of 2021.”

Questions marks still persist over the strength of that recovery despite upbeat forecasts from airline bosses. For XpresSpa, the possibility of Covid-19 testing before domestic air travel, raised by the U.S. Centers for Disease Control and Prevention, could have been both good and bad news—good because it would have led to a rise in testing demand from travelers, but bad because the move would have deterred travel altogether for many. In the end the CDC backed away from making Covid-19 testing compulsory on domestic flights.

Nevertheless, XpresSpa is banking on testing becoming normalized when traveling. It is also optimistic on costs. Each of the company’s first three XpresCheck airport sites came in at $540,000 on average, while the subsequent eight centers averaged $158,000 as the process was optimized.

On the new project, Satzman said: “We are developing a brand that can transform the way people access travel healthcare through technology and personalized services (to) reach travelers at all phases of their journey, including planning.”

The brand—whose name is yet to be announced—is designed to capitalize on passengers’ need for testing and general peace of mind. Travel wellness was already a trend prior to the pandemic, attested to by the increasing number of airport spas around the world. “Adding health to that combination will enable it to rise again,” believes XpresSpa.

A one-stop health shop

The company says the three pillars of travel, health and wellness in its new concept will leverage its existing airport retail expertise and real estate, while app-led access to integrated care and travel health documentation in one place offers convenience.

While Covid-19 testing will be available as part of the offer, other services are under discussion. They go from pre-travel health planning, on-site medical services such as metabolic panel testing and anxiety care, to virtual chat and video care, and even guided meditation and yoga.

Over time, XpresSpa intends to turn some of its legacy XpresSpa store units into the new concept, and open additional ones. At the end of 2020, XpresSpa Group operated 45 XpresSpa locations in airports (40 domestic and 5 international).

Satzman said: “We look forward to bringing the concept to market and introducing the digital assets that will be integral to this brand this summer through a new website and social media platforms. We will then follow up with the opening of our first two integrated health and wellness airport locations in late summer/early fall 2021.”

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