At first glance, Pegasus Capital Advisors’ decision to buy Six Senses Hotels Resorts Spas three years ago may have seemed surprising. After all, the US-based private equity firm had no a track record of investing in spa or hospitality, while the Asia-based development and management company had built its reputation on creating intimate, slightly quirky and highly localised (albeit highly luxurious) experiences of a kind not obviously compatible with the growth expectations of most investors.

You don’t have to delve too deeply, however, to understand what attracted Pegasus to the contract management business – then including 10 Six Senses- or Evason-branded resorts and spas plus 18 Six Senses Spas in other properties – which it purchased from founders Sonu and Eva Shivdasani and shareholders for an undisclosed sum in April 2012.

Since 1996 Pegasus, under the steerage of its founding partner, chair and president Craig Cogut, has made its name by specialising in sustainable and, more recently, wellness-related investments. With current assets under management of US$1.8bn (€1.6, £1.2), the firm actively seeks to partner companies “committed to overcoming global resource scarcity in the fields of health and wellness, sustainable communities, energy and zero waste”. Meanwhile, Six Senses, which turns 20 this year, has long been recognised as a pioneer of sustainability in hospitality, as well as one of the first resort brands to put spa at the heart of its offering.

“[We felt] the brand was uniquely positioned but hadn’t been fully fleshed out or grown,” explains Cogut, who co-founded Apollo Global Management prior to setting up Pegasus. “Our belief, which we’ve found reinforced, was this was an absolutely tremendous platform.”

In addition to Six Senses’ environmental and wellness credentials, Cogut cites its highly evocative name – “you couldn’t ask for a better name” – as well as the properties themselves as key factors in the decision to buy. “The existing properties were absolutely spectacular.”

He saw a real opportunity for the Asia-based company to become a global leader. Since then, the firm has further strengthened its spa and wellness portfolio with the acquisition in 2013 of Raison d’Etre Spas, the globally renowned, Stockholm-based spa consultancy and management company. But three years on from the Six Senses acquisition, how close is Pegasus to realising its goals? And as an equity company whose first obligation is to its investors, what will be its next move?

Global expansion
In contrast with many private equity firms, Pegasus “is focused on long-term business building and working with our management teams [to create] something of fundamental value, rather than just to have a play with the markets,” says Cogut. “If we’re making money, [we want it to be because] the company’s gone some place… a better place than where we started.”

With Six Senses, the first crucial step was to get the right people on board. Starting with Wolf Hengst, former president of Four Seasons, as new executive chair, a dream team was recruited. Appointments included Neil Jacobs, former president of Starwood Capital Hotels and senior vice president for Four Seasons in Asia, as CEO; Bernard Bohnenberger, previously the group’s managing director, as president; and Anna Bjurstam, the former owner and CEO of Raison d’Etre Spas, as vice president of spas. Bjurstam, who is still a managing partner of Raison d’Etre, divides her time between the two businesses.

Cogut says: “Neil is a visionary; he’s got tonnes of experience and he knows how to get stuff done. The people he’s brought in around him, and some of people we had before, are really superb.”

He adds that now the focus is firmly on refining the product and global expansion. “When we bought the business it was largely based [in south-east Asia]… but if you believe in doing things environmentally right, with tremendous service and an emphasis on wellness, that’s not geographically confined. Clearly part of our investment thesis was to expand geographically: Africa, South America, and selectively in North America and Europe, and we’re starting to do that.”

According to Cogut, Six Senses has “a very, very big development pipeline,” and while there’s a lot he can’t talk about, there are 15 resort openings confirmed for the next three years, including five in Bhutan, three in China and one each in Bali, Taiwan, France, Portugal, the Seychelles (its first African resort), Tunisia and St Lucia. The group also has seven spas in other properties in the pipeline: one each in Oman, Qatar, Greece, Spain and the US, and two in India.

Growth strategy
In such pristine rural settings, getting the architecture and design of the properties right is “absolutely crucial” says Cogut. In a previous interview with Spa Business in 2013 (see SB13/2 p30), Neil Jacobs said the Six Senses design philosophy would be evolving somewhat, “to lose a bit of the Robinson Crusoe feel and add some modernity.” Cogut confirms this, but stresses that the change will only involve a subtle shift of emphasis in a few select properties rather than a complete overhaul.

Another strategy under consideration is the development of Six Senses hotels in urban locations, both to help build the brand and to cater for the needs of its city-dwelling and visiting customer base. “I often look for an urban retreat and they’re hard to find,” says Cogut. “I think there’s a certain segment of guests who would welcome that – I think that’s incredibly appealing in the world we live in, where we’re so disconnected from nature, from our sixth sense.”

The company is also looking at investing in Six Senses-branded real estate. “We’re looking at owning or investing in certain properties through a number of structures,” he says.

A more immediate focus for Six Senses is to refine and expand its spa and wellness offering under Jacobs and Bjurstam’s leadership. “Neil and Anna can talk better about it than I can, but we’re trying to aggressively position the spa business to offer many new services, taking advantage of science and knowledge on the wellness side.”

In certain areas, such as sleep health and digestive disorders, Pegasus is able to help directly by contributing ideas and expertise from its other wellness-related companies – such as the Lighting Science Group, a firm developing LED lighting to aid sleep and improve health (see opposite), or PanTheryx, a medical nutrition company specialising in intestinal problems.

Alongside Six Senses, Pegasus is also focused on expanding and adding value to Raison d’Etre, particularly its educational platform (the company runs online spa management programmes) and its LivNordic brand, which combines Scandinavian design, fitness, bathing, treatments and products in a single concept (see p32). “The interest in Nordic wellness and the LivNordic brand has been incredible,” says Cogut. “In addition to the original LivNordic spa in Stockholm, we’ve now entered the cruise industry with a LivNordic Spa on the Viking Star; and we have another two cruise ship spas planned for next year, plus another five on land.”

Value creation
A spa-lover himself, Cogut refutes the belief that properly managed spas can’t make money. “My view of the spa business is that people really do care about how they look and how they feel and I think the future of the industry generally is a very bright one.

“In many properties, the spa can be a significant contributor, but it’s under-exploited. I’ve heard people say, ‘Yeah, we have to do it’, but I think [that the expectation that it won’t be profitable] becomes self-fulfilling… It’s why we often get spas from other people’s hotels: because we’re focused on it, it matters to the brand and we think it’s really important. Obviously, in a good hotel, the economics will be better than just the spa. But spas can and do make money, and we’re very excited about the spa business.”

Aside from making money, Cogut believes resort and spa operators have a fantastic opportunity to be thought-leaders and educators, imparting learning to guests who in turn impart it to others. An example might be an employer who experiences meditation at Six Senses and then implements a meditation programme for their staff. “In the resort industry, where we have people in a captive setting, we can really influence people so they come back changed. We have the capability of doing that at Six Senses.”

For now, Pegasus has no plans to acquire any other spa or hospitality businesses – “Six Senses and Raison d’Etre are our focus and our vehicles” – nor is it ready to let go of the investments any time soon. “We’re in no hurry to sell because we think there’s tremendous value creation happening… We think there’s a lot to do to build out both brands. Obviously we’re a fund and we have to sell for our investors, but certainly not in the short term.”

Such is Cogut’s enthusiasm for Six Senses, in particular, you get the impression that when the time does come to sell it will be with some regret. “I love Six Senses,” he admits. “I vacation there, and it’s because my family and I love what they do – whether it’s the spas, the wellness programmes, the beauty of the setting or the sense of place.”