OneSpaWorld Holdings Stock

OneSpaWorld Holdings Limited (OneSpaWorld) is a global services company.

The company is the market leader in the highly attractive outsourced maritime health and wellness market, with a market share the company estimates exceeds 90%. The company has built its leading market position on its depth of staff expertise; broad and innovative service and product offerings; expansive global recruitment, training and logistics platform; and decades-long relationships with cruise line and destination resort partners.

The company serves a critical role for its cruise line and destination resort partners, operating a complex and increasingly important aspect of their overall guest experience. The company has consistently expanded its onboard offerings with leading-edge service and product introductions, and developed a powerful back-end recruiting, training and logistics platform to manage the company's operational complexity, maintain the company's industry-leading quality standards and maximize revenue per center. The combination of the company's renowned recruiting and training platform, deep labor pool, global logistics and supply chain infrastructure and proven revenue management capabilities represents a significant competitive advantage that is not economically feasible to replicate.

The majority of the company's revenue and profits are earned through long-term revenue sharing agreements with cruise line partners that economically align both parties and contribute to the company's attractive asset-light financial profile. These agreements range from three to 9.4 years in duration and average approximately six years in length, providing the company with the exclusive right to offer health, fitness, beauty and wellness services and the ability to sell complementary products onboard the ships the company serves. Under these long-term agreements, cruise line partners retain a specified percentage of revenues from all the company's sales onboard. This inherent alignment encourages collaboration in all aspects of the company's operations, including facility design, product innovation, pre- and post-cruise sales opportunities, capacity utilization initiatives and other data-driven strategies to drive increased guest traffic and revenue growth. Most of the company's cruise line agreements encompass 100% of a partner cruise line's existing fleet and all new ships with spas introduced by the cruise line during the term of the agreement.

The company's cruise line relationships average over 20 years and encompass substantially all of the major global cruise lines, including Carnival Cruise Line, Royal Caribbean Cruises, Princess Cruises, Norwegian Cruise Line, Celebrity Cruises, Costa Cruises and Holland America, among many others, as well as recent additions to the industry, such as Virgin Voyages. These partnerships extend across contemporary, premium, luxury and budget cruise lines that operate ships regionally and globally. The company maintains an exceptional contract renewal rate with the company's cruise line partners, having renewed approximately 97% of the company's contracts based on ship count over the last 15 years, including 100% of the company's contracts with ships larger than 3,500 berths. The company has not only maintained relationships with existing cruise line partners. In August 2021, the company extended its agreement with Azamara through May 2026. In November 2022, the company extended its agreement with Norwegian Cruise Line through December 2029 for all ships across their three brands. In June 2023, the company entered into a new agreement with Crystal Cruises through May 2028. On land, the company has longstanding relationships with the world's leading destination hotel and resort operators, including Marriott, Hilton, Wyndham, Atlantis, ClubMed, Caesars Entertainment, Lotte, Loews, Four Seasons, and Mohegan Sun, among others.

The company's health and wellness centers served over 23 million guests in 2023, seeking a continuation and enhancement of their health, fitness, beauty and wellness activities, and to explore new service, product and experience innovations while traveling.

The company's health, fitness, beauty and wellness centers are designed and branded for each cruise line and destination resort to optimize the guest experience, align with the company's partners' overall hospitality atmosphere and maximize productivity. During the year ended December 31, 2023, centers employed up to 83 highly trained professionals and ranged in size up to over 30,000 square feet, depending on the cruise line or destination resort partner's needs.

The company is recognized by its cruise line and destination resort partners and the company's guests for its comprehensive suite of services and products. The company curates and delivers a broad range of offerings centered on providing specific health, fitness, beauty, and wellness solutions to meet the company's guests' lifestyle routines or objectives. These services include: (i) traditional body, salon, and skin care services and products; (ii) self-service fitness facilities, specialized fitness classes and personal fitness training; (iii) innovative pain management, detoxifying programs and body composition analyses; (iv) nutrition and weight management programs and products; and (v) advanced medi-spa services, among others. The company also offers its guests access to leading beauty and wellness brands, including ELEMIS , Grown Alchemist, Kérastase, Dysport , Restylane, Thermage, CoolSculpting, truSculpt 3D, truSculpt iD, Good Feet, and Hyperice, among others, with many brands offered exclusively by the company in the cruise market.

Growth Strategies

The company's strategies are to capture highly visible new ship growth with current cruise line partners; expand market share by adding new potential cruise line partners; continue launching innovative new value-added services and products; and focus on enhancing health and wellness center productivity.

Health and Wellness Services

The company curates and delivers an ever-innovating broad range of offerings for the company's cruise line and destination resort partners, centered around a holistic wellness approach, which includes:

Spa and Beauty. The company offers a specialized suite of massage and body care services and therapies, together with a broad range of beauty treatments, including facials, hair cutting and styling, manicures and pedicures, and teeth whitening services, among other services custom-designed for the company's cruise line and destination resort partners.

Medi-spa. The company offers medi-spa services on the majority of the company's ships. The company's service menu consists of the leading medi-spa brands, including Dysport, Restylane, CoolSculpting, Thermage, dermal fillers, and microneedling, among others. Medi-spa services are administered by medically licensed professionals. By the end of 2024, the company expects to offer medi-spa services on 148 ships.

Health. The company's health and pain management offerings present one of the company's largest and most profitable categories. The company's offerings include acupuncture, electro acupuncture, cupping, posture and gait analysis, GoodFeet Arch Supports, physical therapy, and NormaTec recovery. The company's services are enhanced by its retail sale of the company's product offerings associated with the services.

Fitness. The company offers guests use of premier fitness centers, featuring industry leading brands, programming and equipment, as well as personalized training services and expert consultation by the company's fitness professionals. These fitness centers offer guests use of strength equipment and cardiovascular equipment, such as treadmills, elliptical machines, exercise bicycles and rowing and stair machines featuring premier brands, including Technogym, Life Fitness, Peloton and TRX. Boutique fitness classes, including yoga, Pilates, F45 Training, certain Xponential Fitness brands, and indoor cycling are also available to guests for a fee or at no charge, depending on the class. The company's fitness instructors are available to provide paid services, such as body composition analysis and personal training.

Nutrition. The company offers guests paid personal nutritional and dietary consultation, weight management, nutrition coaching and detoxification. Guests can begin a program on the cruise or at certain of the company's land-based health and wellness centers and remain engaged with the company's professional coaches through the successful completion of their programs, generating ongoing purchases of nutritional and detoxification products via the company's e-commerce platform timetospa.com.

Mind-Body and Wellness. The company offers its guests yoga, Tai Chi and sound therapy in addition to meditation and biofeedback.

Thermal suites. The company offers guests the option to purchase passes for dedicated thermal suite areas on many of the ships where the company operates health and wellness centers. Thermal suites are typically located on higher decks and offer sweeping views of the ocean, enabling the company's guests to relax, recharge, and enjoy various hot and cold hydro-therapies and related amenities, such as thermal loungers, infrared saunas, snow rooms, laconiums (dry heat saunas), caldarium chambers (herbal steam rooms), and hammams (Turkish-style steam rooms). Certain thermal suites also offer cold plunge pools, large therapeutic jacuzzis, and rooms surrounding occupants with layers of body cleansing salt crystals.

Products

The company sells over 1,100 branded product SKUs sourced from over 75 vendors due to the company's scale, superior operations, industry longevity and attractive captive audience at sea and on land. The company sells products from leading brands, including ELEMIS, Thermage, Dysport, GoodFeet Arch Supports and GO SMILE Teeth Whitening. The company has an exclusive 10-year supply agreement with ELEMIS, which may be continued at the company's election for an additional five years. The company has a leading retail attachment rate based on the number of products purchased in conjunction with a service compared to the broader consumer personal care services and retail industry.

The company utilizes more than 71,000 square feet of warehouse space operated by a third party logistics provider in the Miami, FL metropolitan area to handle domestic cargo, bonded cargo, and Foreign Trade Zone international goods, enabling the company to provide fulfillment services for its cruise inventory, e-commerce, and Shop & Ship program.

Health and Wellness Centers

As of December 31, 2023, the company operated health and wellness centers on 193 ships, including substantially all of the major cruise lines globally, and 51 land-based destination resorts, principally in the United States, the Caribbean and Asia. Health and wellness centers are designed and branded for each cruise and destination resort partner to optimize the guest experience, maximize revenues and align with the company's partners' brands and hospitality environment. Health and wellness centers can range in size to more than 30,000 square feet and generally provide fitness areas, treatment rooms and salons, as well as elaborate thermal suites and/or saunas. Onboard health and wellness centers are generally located on higher ship decks, which encourages increased passenger interest and guest traffic.

Facility Design

The company's cruise line and destination resort partners each seek differentiated health and wellness experiences for their guests. As such, the company provides design capabilities for its cruise line and destination resort partners, creating bespoke branding and design consulting to optimize guest experiences and maximize revenues. The company operates health and wellness centers under proprietary brands of Mandara and Chavana, as well as brands curated specifically for each cruise line, complete with cruise line and/or ship-specific service menus. As of December 31, 2023, the company had 36 health and wellness centers under the Mandara brand, 11 centers under the Chavana brand, and one center under the company's destination resort health and wellness brand, 'Glow, a Mandara Spa'.

Principal Cruise Line Partners

A significant portion of the company's revenue is generated from operating health and wellness centers under long-term contracts with the following cruise line partners, each of which accounted for more than 10% of the company's total revenues in 2023: Carnival (including Carnival, Carnival Australia, Costa, Cunard, Holland America, P&O, Princess, and Seabourn cruise lines): 41.1%, Royal Caribbean (including Royal Caribbean, Celebrity Cruises, Azamara and Silversea cruise lines): 27.9%, and Norwegian Cruise Line (including Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises): 16.4%. These companies, combined, accounted for 168 of the 193 ships served by OneSpaWorld as of December 31, 2023. The company's contracts average six years in duration.

Cruise Line and Destination Resort Agreements

Through the company's cruise line and destination resort agreements, the company has the exclusive right to offer health, fitness, beauty and wellness services and the ability to sell complementary products onboard the ships and at the destination resorts the company serves.

Marketing and Promotion

The company markets and promotes its services and products to cruise passengers and destination resort guests through targeted marketing, including pre-and post-cruise emails, website advertising, on-site demonstrations and seminars, video presentations shown on in-cabin/in-room television, ship newsletters, tours of the company's centers, and dedicated signage around the ship. The company also encourages its employees to cross-sell, as cross-promotional activities frequently result in the company's customers purchasing services and/or products in addition to those they initially contemplated buying. For example, the company cross-sells its fitness body assessment with detox programs, vitamins, and seaweed wraps. The company also maintains a dedicated sales desk to facilitate pre-cruise health and wellness services booking and to disseminate health and wellness information for charters and other groups of cruise passengers.

Seasonality

A significant portion of the company's revenues are generated onboard cruise ships and are subject to specific individual cruise itineraries as to time of year and geographic location, among other factors. As a result, the company experiences varying degrees of seasonality as the demand for cruises is stronger in the Northern Hemisphere during the summer months and during holidays. Accordingly, the third quarter and holiday periods generally result in the highest revenue yields for the company.

Trademarks

The company holds or controls numerous trademarks in the United States and a number of other countries. The company's most recognized health and wellness products and services trademarks are for Mandara and Chavana.

Registrations for the OneSpaWorld, Mandara and Chavana trademarks, among others, have been obtained in a number of countries throughout the world. The company continues to apply for other trademark registrations in various countries.

While a number of the trademarks the company uses have been registered in the United States and other countries, the registrations of other trademarks that the company uses are pending. Recently, the company has adopted the mark 'OneSpaWorld' as the trade name of the company's maritime health and wellness business to reflect the company's position as a global provider of shipboard products and services.

The company licenses 'Mandara' for use by luxury destination resorts in certain Asian countries.

Government Regulation

The company is subject to anti-corruption and bribery laws and government economic sanctions, including applicable regulations under the U.S. Treasury's Office of Foreign Asset Control and the U.S. Foreign Corrupt Practices Act ('FCPA').