What Sauna Culture Is Teaching Boutique Hospitality — and Why We’re Watching 

Written by: Joe LeVine, Co-Founder & Managing Partner, Mercer Street Partners

Fifteen minutes in a sauna — 160, 180, sometimes 195 degrees, until you’re sweating and starting to question your decisions. Then, immediately, a cold plunge. Submerge to the neck in low-40’s water for one to three minutes, while everything in you says get out. Up to the neck is important; don’t ask me why. Climb out. Rest ten or fifteen minutes, preferably on heated lounge chairs. Then do it again — two or three rounds, always ending on the cold. The physical rush comes first. The dopamine kicks in. You’re alert, energized. Then a deep, almost drugged calm settles in, and you walk out feeling incredible. That’s the thermal cycle. And right now, an entire industry is being built on top of it.

For years, wellness in hospitality was an afterthought. A 400-square-foot fitness room with a lonely Peloton. A massage menu. A steam room that may or may not be working when you find it. Meanwhile, quietly, somebody was building the thing hotels chase with enormous marketing budgets and points programs: loyalty. Not the loyalty of a rewards tier, but the kind that brings the same person back every week, sometimes several times a week, with no room key required.

Last month, I moderated a panel on this movement at the Boutique Hotel Investment Conference, hosted by the Boutique & Luxury Lodging Association (“BLLA”). Four operators, each building some of the most compelling thermal and wellness spaces in the country: Robbie Bent of Othership, Rebecca Parekh of The Well, Andrew Lachlan of Sauna House, and Mauri Waneka of Schwet. I came in fascinated by the business model. I left a little evangelical — and with a few clear warnings for anyone thinking about putting money into the space. Consider what follows a note from the front row.

The product is the ritual, not the real estate

“Programming for us is everything,” Robbie Bent told the room. Othership runs comedy nights, live music in the sauna, classes built around gratitude and connection. Some of it deliberately polarizing. In his words, they’ve built “a product that people either really love or they really hate.” That’s not a problem to solve; it’s the whole point. Knowing exactly who your customer is, and leaning into it, is what generates a community strong enough to sustain a business on repeat visits rather than one-time traffic. Strip away the cold plunges and the branded residences, and what these operators are really selling is connection — a place where you show up in person and belong to something. For an investor, that translates into something we rarely find in leisure real estate: recurring, membership-like revenue with genuine switching costs.

Wellness pays rent

Here’s the part that should make you sit up, especially if you’ve ever penciled a spa in as a cost line. Done right, wellness doesn’t cost you money — it makes the building worth more. Rebecca Parekh has grown The Well from a single flagship in NYC into branded residential and mixed-use development, with roughly a billion dollars of real estate underway and about a dozen projects around the world. Her most striking data point: a branded-residential project in Miami commanded close to a 40% premium on price per square foot. Developers notice numbers like that. As she put it, they “get excited about that and they want to give you five more deals” — and suddenly they’re happy to fund the quality of operation the model actually needs. And this isn’t a niche: the Global Wellness Institute pegs wellness real estate at roughly $876 billion in 2025, on its way to $1.8 trillion by 2030, growing about 23% a year. Numbers like that don’t stay hidden for long.

Loyalty drives economics

Every great restaurant and hotel operator is quietly obsessed with the same person — the regular. These operators’ regulars averaged around four visits a month: a frequency, and share of wallet, that most restaurateurs and hotel GMs would kill for. Part of why I think it holds up is that the customer is getting something just as valuable back — good health. And there’s real science here. Regular sauna use is tied to documented cardiovascular and mental health benefits, with a growing body of research on cold exposure too. This isn’t pseudo-science. The more often you go — the ritual of it — the more those benefits compound. What’s good for the business turns out to be good for the customer too.

Not everyone’s a gym rat, and not everyone wants to dunk themselves in 40°F water. But the gym-goer is already served ten times over; the plunge customer isn’t — and most people walk out of that first three-minute plunge feeling better than they have in weeks. Andrew Lachlan of Sauna House had a sharp business insight. A bathhouse membership competes with your gym membership in your head — same wallet, same monthly guilt. But a monthly massage lives in a completely different budget, the one marked “treat yourself.” Stack incremental treatments, merchandise, and/or F&B alongside with a sauna club membership and they don’t cannibalize each other. The room to layer incremental revenue with complementary offerings is an added opportunity.

The unsexy stuff wins

These are operationally intensive businesses, and the unglamorous work is everything. Othership staffs roughly twenty cleaners and maintenance staff per location, with at least four on the floor at all times. It’s worth calling out that operationally intensive, in this case, does not mean high labor costs and low profit margins. Quite the contrary. But operational rigor is no less important. A hotel can limp along with a broken sauna because it’s still making money on rooms overnight; a standalone bathhouse that loses days to a broken pool or gets labeled as seedy or unclean is in real trouble. First impressions matter just as much — most of your guests have never taken an ice bath, and good onboarding is what turns a nervous first timer into a weekly regular. When we diligence an operator, we start with the boring stuff: rigor, uptime, cleanliness. Not the pretty pictures.

Location is a personality test

Here’s something that surprised me: the same product can be an immediate hit in one city and a slow burn in another. Sauna House deliberately targets underserved Southeast markets, and the results vary enormously by city. Asheville and Durham took to bathhouse culture immediately; nearby Charlotte and Greenville — more buttoned-up, less internationally traveled — were a much harder sell and needed real education and marketing. Same product, very different outcomes. I’m not suggesting one avoids secondary markets; we’ve built a good chunk of our own real estate portfolio in exactly those places, and we like the white space. I am suggesting one underwrite the cost and the time of teaching a market something it doesn’t yet know it wants. It’s also okay to say, “I don’t think THIS market is ready at THIS time,” or come at it from a different angle and find your niche that works.

Beware peak wellness

To their credit, nobody on stage tried to sell me the hype. More than one of them said out loud that we’re at “peak wellness” — an industry drifting toward the cold, the clinical, the transactional. Peptides, IV drips, and injections standing in for eating well, moving, and being decent to the people around you. The through-line of their pushback was that the durable version of this business isn’t the most austere one. It’s the one that’s sustainable, social, and even fun — the one that keeps you coming back. That also means hiring, training, treating employees well, and building a strong culture are all critical. A great operation will outperform a great space in the long run.

“I want a place where you can have a green juice one day and a great glass of wine the next.” – Mauri Waneka, SCHWET

While most of the panelists are committed to alcohol-free spaces, Mauri Waneka of Schwet is doing the opposite, blurring the line between social club, cocktail lounge, and wellness spa to reach a different crowd.¹ Mauri frames wellness as “living well,” and doesn’t buy that the teetotaling life is sustainable, or even desirable, for most of us. “I want a place where you can have a green juice one day and a great glass of wine the next,” Mauri comments. Both can live in the same room. Schwet’s tongue-in-cheek detox/retox therapy — with a splash of “sex, drugs, and rock ’n’ roll” DNA — is a step away from peak wellness and a step toward hospitality. If you have a cocktail with a friend after a sauna session, is that really any less healthy than meeting them at a bar? Authenticity and community are a lot harder to fake — and a lot harder to compete with — than another gleaming spa.

Why we’re watching

I’ve spent my career believing relationships matter more than any spreadsheet. This is that same idea, just a little straighter. At Mercer Street, we invest across boutique and lifestyle hospitality, and this is exactly the kind of shift we watch closely: a category moving from amenity to anchor, with real effects on loyalty, frequency, and value. The American consumer is only now warming up to something the rest of the world has known forever — from Japan’s onsen culture, thousands of years old, to the huge indoor-outdoor Nordic spas of Canada and northern Europe. The people on this panel aren’t chasing a trend. They’re building the infrastructure of a third space that people are choosing to organize their weeks around.

As I look across our existing portfolio of hotels and social club, we have a handful of wellness projects in varying stages of pre-development that excite us. Our eyes are open for new opportunities, whether it be investing alongside operators like these or partnering on new acquisitions and developments we underwrite as a firm. It’s a category we intend to help grow.

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Mercer Street is a real estate firm focused on disciplined capital deployment and active asset management. The firm manages a diversified portfolio across the United States.

The Mercer Street team has worked together for over a decade and during that time has acquired more than $1 billion of real estate across asset classes including hotels, social clubs, multifamily residential, office, industrial, and ground leases. The firm applies institutional investment analysis and asset management practices to middle-market opportunities, with the goal of creating better places to live, work, and stay.