Bathhouse Economics

Will the sauna chain end up like Soho House or Life Time?

Me (middle, not in bathing suit) and some Bathhouse models at the mega-sauna’s now-open Atlantic ave locations

I can never tell if Bathhouse is a great business or a terrible one.

On the one hand, a massive, steamy facility that’s filled with hundreds of profusely sweating people each day seems like a nightmare to keep clean¹. On the other, their locations are beautiful, it’s always bustling, and they’ve put a lot of money into expansion, so I figure the fundamentals of the model probably make some sense.

There’s a growing narrative² that health-focused “third spaces” like Bathhouse will displace traditional nightlife as people sour on alcohol and the societal siren song of wellness & longevity gets ever louder. Bathhouse is one of the most ambitious companies riding that narrative. Last week, I learned that it raised $35M in venture funding³, implying that it’s valued at north of $100M and aiming for a venture-sized outcome:

I learned of the raise via the inimitable Feed Me subscriber chat

In recent days I’ve been physically confronted with the company’s ambition to bring a luxurious communal sauna experience to the masses: they just opened their third location a few blocks from my apartment, marking the beginning of the After Bathhouse Era (A.B.E.) in Central Brooklyn. They’re aiming to expand to 10 locations across the US by 2028, including an enormous 85K sq.ft. location on Hollywood Boulevard in LA.

How does the business actually work?

Given the news about Bathhouse’s fundraise and expansion plans, I wanted to understand whether its land-grab to own this growing market in the US will work.

The overall bathhouse thesis is:

• High upfront fixed costs building out big, beautiful saunas in affluent areas

• Low variable costs: You don’t need many employees to actually deliver the service: just a couple of people to check you in, an aspiring actor to lead a ritualistic sauna experience called an Aufguss, and massage professionals for any add-ons. Every additional guest through the door is $50+ in profit.

• A repeatable playbook that can scale the model that’s worked in NYC to cities around the US and perhaps the world

If you’re good at this, each location generates enough cash to cover the maintenance of facilities and corporate overhead and you can borrow money or take on investors to keep expanding.

What its numbers might look like

Bathhouse told CNBC it “expects to hit around $120 million in run-rate revenue by the end of this year⁴.” That will be on 4 locations (3 in NYC, plus a new one in Philadelphia); let’s take an optimism discount and call it ~$25M in revenue per location per year.

From what I can tell, it seems like ~30% margins would be strong for a business like this, so ~$7M contribution from each location.

This would mean that when Bathhouse is opening a new location, its payback looks something like this:

Life Time & Soho House, two roads diverged

Two public examples were particularly useful in ballparking the numbers, and they represent starkly different outcomes for Bathhouse:

Soho House was taken private in 2026 after failing to generate a profit as a public company, while Life Time has flourished

• Life Time, a fancy gym chain which went public in 2021 and whose share price has since doubled. Its recent filing shows how big upfront buildouts can work, as it’s added ~10 new locations each year: We generally expect to have net invested capital… of $25-$30 million per new location on average. It makes back the money on expensive memberships and services, averaging $3,500 in revenue per member per year.

• Soho House, the luxury members’ club which also IPO’d in 2021 but struggled as a public company & was taken private this year: From its IPO filing: Our investment in our full-size Houses has historically approached, or in certain cases exceeded, $10 million. It made back the money on memberships and food & beverage, at ~$1,500 per member per year (surprisingly low as it globalized). The locations were supposedly profitable individually, but never generated enough cash to cover its corporate expenses, attracting the interest of short sellers:

  

  This colorful 2024 short thesis on Soho House by (aptly named) Glasshouse Research is a fun read, if you’re into that sort of thing

So, it seems like these heavy luxury buildouts can be a good business, but it’s difficult and Soho House’s management wasn’t disciplined enough to grow sustainably at a large scale. Whether Bathhouse can make it work will depend on their management’s ability to make each new location profitable while keeping corporate costs in check as they juggle an ever-more complex business.

Competition, Cults, and Community

Something that is tough to model is the impact of increased competition on Bathhouse’s profitabilty. As the “sauna wars” heat up, Bathhouse strikes me as the most visible (and perhaps most divisive) of the saunas in New York, but the market is getting crowded. These are the average google ratings of some of the key players over time:

Bathhouse has middle-of-the-pack ratings while scaling to be among the most-reviewed spas in the city. I expect its 2025 decline is a bit of a pile on from UTI-gate. World Spa had a disastrous opening in which several people were hospitalized, but seems to have rebounded.

Bathhouse has mostly hovered around 4.3 / 5 stars as it’s grown to thousands of reviews; newer entrants like Akari, Othership, and Lore (“a bathing club for serious bathers”) are smaller but have loyal followings.

Bathhouse is a third space in the way Starbucks is a third space

A particularly interesting vector of competition is community, as it’s a central part of the narrative around sauna. It’d be lovely if $60 spa days are the solution to the loneliness epidemic, and some of its competitors are doubling down on community, but Bathhouse is too big for that to be its main value proposition:

Based on Google reviews, Othership seems to be winning the sauna-as-community battle

Toronto-based Othership is a particularly interesting contrast, as it’s another venture-backed competitor to Bathhouse that seems to be doing a great job fostering a real community. The only negative I’ve heard about it is that it is cult-like, which should help lower their customer acquisition cost.

This effusive review (which continues for 5 more paragraphs) confirms that Othership is definitely not a cult

How will bathhouse grow its business?

Bathhouse can grow by packing more people into its saunas, opening new locations, or making more money per visitor.

It seems like it is probably near the limit on crowds:

Crowding is a common complaint in bathhouse reviews, although to be fair the new location just opened and should siphon off a lot of Brownstone Brooklyn Bathers

That leaves expansion and upsells as growth levers. Aside from the huge new LA location, Bathhouse’s expansion plans apparently include Chicago, Nashville, Philadelphia, Minneapolis and Stamford.

It will do absolute numbers in famed bachelor party city Nashville; you’ve got a recurring stream of hungover 28 year-old Big Ten grads in perpetuity, with sore quads from pushing the pace on the pedal-wagon, who will splash out 5% of a KPMG bonus on a package called the “Hero’s Journey” so that they’re ready for night 2 on Broadway celebrating Brendan’s Last Night of Freedom.

I thought that trial and hardship were important elements of the Hero’s Journey but I guess maybe that’s the paying for it part

There’s also a planned expansion to Minneapolis, where it is cold and there is an existing sauna culture. Bathhouse famously dabbles in bitcoin mining⁵ to heat their New York spas; perhaps they can pack in a full data center to heat the Minneapolis location and lease it to Elon in time for the ramp in Grok-generated deepfakes leading up to the 2028 election.

Where does that leave us?

I still don’t really know if I’d buy bathhouse’s sweat equity⁶.

There are lots of strong points to the business, particularly the fixed cost model and that they are riding lots of tailwinds around longevity, wellness, alcohol decline blah blah blah:

One just has to hope that American interest in sauna is more sustainable than say, float tanks, which I was excited about in 2015 and then never thought about again:

I did an hour in a sensory deprivation tank once; I remember it as weird and vaguely pleasant and a funny thing to tell people about

There is plenty of reason for skepticism, beyond the expensive buildouts:

• I doubt sauna will be more than a ~biannual activity for the vast majority of people, so they’ll have to continually acquire new customers in an increasingly competitive space

• Heating the saunas and pools takes a lot of energy, which seems like it’s going to be increasingly scarce as data centers gobble it up in our quixotic quest to build a digital God. This may mean their operating costs are higher than I realize.

• Not unrelatedly, my understanding is that the world is generally getting warmer, and there’s a reason saunas are big in Finland than they are in Italy

• It’s become clear to me when looking at airport lounge reviews or Sweetgreen’s struggles that it’s really hard to scale excellence in hospitality, particularly when it’s done very quickly

But Bathhouse has done a pretty good job so far, and being pessimistic is kind of boring, so I’m trying to do less of it. I wish them luck on their journey to becoming the Starbucks of communal bathing!

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Thanks for reading; as always these views are mine alone.

In other news, I’m really enjoying Ogilvy on Advertising, by the ad magnate David Ogilvy. He is direct and dense with insight into how to communicate effectively, and there are lots of fun examples of ads he worked on. I’m struck by how wordy magazine ads were in his era; this “Guinness Guide to Oysters” was high-performing magazine ad.

He’s adamant that long copy sells better than short copy, and that most advertisers care too much about being clever at the expense of actually selling things.

If you’re in New York, we’re entering peak people-watching season; you should go to some of these places and enjoy it. Or if you feel like a nice indoor date, my girlfriend and I just did a beignet-making class at Atelier Sucré, which was fun and delicious.

1. Bathhouse famously had a UTI scare in 2025 which lit the internet discourse tinderbox for a few days. My view on spas is basically that if you are choosing to go to a hot, wet room with a few hundred strangers, you’re accepting some risk that you might leave with something you didn’t arrive with. Ideally the spa should look clean so that you can pretend this isn’t true while you’re there (and bathhouse always has, in my experience). But I don’t think you can entirely separate communal bathing from the communicable.

2. There is even a charming substack called S.P.A. dedicated to the industry; follow it if you’re interested in the topic!

3. Interestingly, the round closed more than a year ago; I didn’t realize this but you can view the regulatory documents on the SEC’s web portal. I’m surprised the news didn’t break earlier. Imaginary Ventures led the round, who has an impressive portfolio, although if anything happens to the West Village they’ll be in trouble.

4. “Run rate revenue,” on a highly seasonal business like this, could mean a lot of things, so i’m inclined to discount it

5. People hate their bitcoin mining thing because the aesthetics of crypto are bad but I think it’s actually very clever and interesting, and if you’re going to use a bunch of energy to heat a giant hot tub you might as well verify some blockchains while doing it.

6. I probably should’ve titled this article Sweat Equity. Oh well.