The USA hotel industry reached 64.3% for the first eight months of 2005, up almost two points over a year ago and nearly one point higher than benchmark Year 2000. Hotel room rates averaged $90.59, which is more than $4 higher than the last several years. 

USA Hotel Industry Performance

Revenues, supply and demand all showed positive growth for YTD August 2005 compared to a year ago. Revenues per available hotel room were up 7.8% over 2004. New hotel construction rose only 0.7% while demand for lodging increased 2.8% --- allowing both occupancies and room prices to rise.

Summer of 2005 was better than last summer for the hotel industry despite $3.00 per gallon gasoline prices and the impact of several hurricanes. In August 2005, occupancy reached 68.5% --- up 2.1% from 67.1% in 2004. Hotel room revenues were up 8.6% over 2004. 

In the first eight months of 2005, luxury and midscale hotels showed the most improvement in occupancy while luxury, upscale and midscale hotels among the chains showed equal improvement in average room rates compared to a year ago. Upper upscale hotels ran the highest occupancy at 72.2% among the price tiers followed by upscale-priced hotels at 71.5% compared to a year ago. 

Resorts and airport hotels ran higher occupancies in 2005 than 2004 and achieved higher occupancies than all other types of lodging --- urban, suburban interstate and small towns. USA Resorts achieved 69.6% occupancy for 2005 through August, up from 69.1% during the same period a year ago while airport hotels reached 69.8%, urban hotels reached 68,6%, suburban hotels ran 64.8% and interstate and small towns hotels peaked near 58%. Resorts produced average room rates of $129 for 2005 through August, which is higher than all other types of lodging. 

Families in the USA bit the bullet on higher gasoline prices and refused to abandon their vacation plans. Many vacationed closer to home and escaped for weekends at nearby regional resorts --- a growing number of which now offer indoor waterparks and family entertainment centers. The leisure traveler segment continues to breathe life into the hotel and travel industries. In addition, business travelers have now returned to hotels in greater numbers. 

Currently, the most lucrative states for hotel investment are Hawaii, New York and Florida where the revenues and their growth rates are the highest in the nation. Nevada, Rhode Island and Alaska, while posting high revenues per available room, slipped a bit from last year. Hotel revenue per available room (RevPAR) is the key indicator that takes into account supply, demand, occupancy, scarcity and pricing. 

RevPAR is a measure of asset productivity that often points developers to the most attractive locations for new construction, although many of these desirable locations also have high barriers to entry. 

In 2005, the most desirable hotel markets, in terms of their ability to generate the highest revenues per available room as well as double-digit growth rates, are New York City, Oahu, Miami, Washington DC and Los Angeles. Some of the leisure destinations like Tampa, Anaheim, Denver and Phoenix recorded 12% to 13% improvement in revpar compared to last year. 

In sum, the USA Lodging Outlook reveals:

• Hotel room revenues supply & demand all showing positive growth over last year.
• Room revenue up 8.1% over last year.
• Summer 2005 better than Summer 2004.
• Industry near pre-9/11 levels of Year 2000.
• Resorts did better than last year and better than other types of lodging.

Hawaii is the leading resort destination with 82.9% occupancy (up 4.0%) and $166 average room rate, up 8.0% over last year. This compares to the national hotel occupancy of 64.3% and average room rate of $90 in the USA. 

Florida and Nevada are trailing close behind with 72.7% and 72.5% occupancies, respectively. Arizona and Florida recorded the biggest gains in occupancy improvement over last year. 

The highest resort room prices were found in Hawaii at $166, Nevada and Florida at $103 and California at $102. Hawaii and Florida recorded price jumps of more than 8% in 2005 compared to last year. 
 

Wisconsin and Minnesota achieved statewide occupancy under the national average in both occupancy and average room rates. However, these two states have the highest number of hotel indoor waterpark resorts, and the top hotel waterpark resort properties recorded occupancies and room rates far above the national averages and equal to many of the Sunbelt resort destination states. 

In fact, due to the double-digit growth of indoor waterparks over the last several years, Coy and Haralson formulated 17 predictions on the future of resort development. 

• Regional drive-to resorts will attract more guests than national fly-to resorts.
• Business travel will become more an elective and less a requirement. 
• More Americans will telecommute. 
• Mixing business & leisure 24/7 will lead to greater stress.
• Never disconnecting will cause greater stress.
• Lodging and entertainment concepts will continue to merge.
• Resorts will become more like theme parks.
• Resorts will grow faster than other types of lodging.
• More resorts will become part of mixed-use developments.
• Future resorts will focus more on guest participation and interaction.
• Theme parks and resorts will use more simulators to create virtual reality.
• Resorts will increasingly become a teacher.
• Seasonal resorts will become year round operations.
• Resorts will build more and more indoor recreation facilities.
• Resorts will increasingly incorporate water into their designs.

USA Hotel Waterpark Resort Performance

In 1994, Stan Anderson, owner of the Polynesian Resort in Wisconsin Dells WI and pioneer of the hotel indoor waterpark resort installed some water gizmo in his indoor pool and weekend occupancy skyrocketed. That started the 11-year trend of building more than 100 hotel waterpark resorts that extend from the Midwest to the Northeast and Pacific Northwest. During 2005, twenty-three (23) new additions and expansion projects are expected to open by year end, bringing the total to 104 hotel waterpark resorts open and operating in the USA. Fifty-two (52) projects are under construction or will break ground during 2005. 

Clearly, hotel waterpark resorts are not a fad but here to stay. About 121 projects are in the development pipeline, up from 69 in 2004, 46 in 2003 and only 19 in 2002. The waterpark sector of the resort industry has experienced rapid growth in the last several years. 

Jeff Coy and Bill Haralson formed Hotel Waterpark Resort Research & Consulting, a collaborative effort of JLC Hospitality Consulting of Rochester MN and William L. Haralson & Associates of Richardson TX. Coy, a hotel consultant, and Haralson, an attractions consultant, joined forces for the purpose of building an industry database for this product sector. Both chair the Resort Committee of the World Waterpark Association and produce the annual Waterpark Development & Expansion Workshop, where they present their latest research and a variety of expert speakers. Go to www.waterparks.org. This Fourth Annual Industry Report includes supply trends, sizing components, construction costs and operating expense ratios with a focus on Wisconsin Dells where the concept originated and numerous hotel waterpark resorts are clustered in one market. 

In 1990, before indoor waterparks, Wisconsin Dells ran a 40% annually hotel occupancy and had a 100-day peak season. Today, it has 18 hotels with indoor waterparks and has a 365-day peak season. The largest hotel waterpark resorts are running occupancies in the high 70s and low 80s --- 15 to 20 points above the national hotel average.

Wisconsin Dells Hotel Performance

In 2002, hotels WITH indoor waterparks achieved 26 points higher occupancy and $69 higher average room rates than hotels WITHOUT indoor waterparks in Wisconsin Dells. 

In 2004, we updated that research survey to determine the impact of 9/11, the economic recovery and what happened to the haves and have-nots in Wisconsin Dells over the last three years. Eighteen (18) hotels WITH indoor waterparks captured 85% of the total market hotel revenue in Wisconsin Dells while forty-four (44) hotels WITHOUT indoor waterparks were left with only 15% of the total market hotel revenue. As a result, we referred to Wisconsin Dells as "the land of haves and have-nots."

In 2005, the top two hotel waterpark resorts achieved average room rates above $200. 

The 18 haves achieved average room rates of $130, while the 44 have-nots achieved $65. Hotels WITH indoor waterparks recorded ADRs that are 2X that of hotels WITHOUT indoor waterparks. And the ADR trend over the last three years is getting higher for the haves and lower for the have-nots! This trend begs the question, "How long can you succeed in Wisconsin Dells as a hotel without an indoor waterpark?" The biggest properties are getting bigger while the smaller properties continue to lose market share. 

USA Competitive Supply of Hotel Waterparks

One hundred and four (104) hotel indoor waterparks are open and operating in the USA, including six properties scheduled to open in the final months of 2005. Hotel waterpark resorts opened over the last three years in the following states:

These properties have a total of 17,574 rooms, nearly 2.4 million square feet of indoor waterpark space and 397 meeting rooms covering 935,000 square feet of meeting space. The following chart illustrates the growth over the last three years.
 

Independent Versus National Branding

Of these 104 hotels, 60 are independent while 44 are affiliated with a national hotel brand. We counted the six Great Wolf Lodges and two Kalahari Resorts as independents, although these familiar names are two emerging national brands. Properties in resort locations tend to be independent while properties in urban, suburban and highway locations tend to be franchised. 

Brand names include AmericInn, Baymont, Best Western, Comfort Suites, Country Inn & Suites, Days Inn Hawthorn Suites, Hilton, Hojo, Holiday Inn, Marriott, Microtel, Nickelodeon, Quality Inn, Ramada, Sleep Inn, Super 8 and Wingate. 

Whether or not to affiliate with a brand is a major issue in this product sector of the hotel industry. Two companies, Great Lakes Companies and Kalahari Resort, are reproducing their prototypes in multiple locations --- in effect, starting their own brand. Great Lakes Companies signed a license agreement with Ripley’s Entertainment for its Great Wolf Lodge in Niagara Falls, Ontario --- which is a first step in becoming a franchisor in the hotel waterpark resort industry. 

While several hotel chains, like Marriott and Holiday Inn, are creating indoor waterpark prototypes, two entertainment companies, Six Flags Inc and Nickelodeon have recently opened hotels. 

Top 25 Largest Hotel Waterpark Resorts in the USA

Hotels with the largest indoor waterparks are concentrated in Wisconsin Dells WI where 18 waterpark resorts now exist. The Polynesian Resort in Wisconsin Dells is generally acknowledged as the first hotel indoor waterpark in 1994. 
 

Other hotels with indoor waterparks are concentrated in Wisconsin, Minnesota, Michigan, South Dakota, North Dakota, Ohio, Iowa and Pennsylvania. In Wisconsin, other hotel waterparks are located in Wisconsin Dells, Lake Geneva, Milwaukee, Green Bay, Tomah, Minocqua, Madison, Prairie du Chien, Waupaca, Neenah, Ashland and Lac du Flambeau. In Minnesota, other hotel waterparks are located in Otsego, Baxter, Duluth, Shoreview, Owatonna, Ottertail, Minneapolis, Detroit Lakes, Nisswa, Moorhead, Rochester, St Cloud, Thief River Falls and Orr. In Michigan, other hotel waterparks are located in Frankenmuth, Grand Rapids and Mackinaw City. In South Dakota: Watertown, Aberdeen and Sioux Falls. In North Dakota: Minot, Fargo, Grand Forks and Bismarck. In Ohio: Belleville-Mansfield. In Iowa: Dubuque, Burlington and Amana. In Pennsylvania: Butler. 

Profile of USA Hotel Waterpark Resorts by Number of Rooms

Among the Top 5 largest resorts by room count, the average number of hotel rooms is 651 with an indoor waterpark of 95,200 sf or 146 sf per guest room. The Top 5 resorts have an average of 6.8 waterslides, 2.0 pools and 1.6 hot tubs. All of them have one or more lazy rivers, 60% have a wave pool and 40% have a water coaster. The Top 5 resorts average 43,760 sf of meeting space and 20.4 meeting rooms. The Top 5 hotel waterpark resorts in 2005 have more rooms, bigger waterparks, more water features and more meeting space than the Top 5 resorts in 2004 --- and the race to be the biggest continues! 
 

Among the next ten largest (Top 6-15) hotel waterpark resorts, the average number of rooms is 308 with an indoor waterpark of 38,200 sf or 124 sf per guest room. Among the top resorts ranked 16-25 by room count, the average number of rooms is 245 with an indoor waterpark of 31,697 sf or 129 sf per guest room. Using the chart above, the waterpark developer can estimate the size of his hotel, indoor waterpark and its components. Depending upon size, all hotel waterpark resorts average from 2-7 waterslides, 2-3 pools and 1-2 hot tubs. 

Almost all of the Top 25 Largest Hotel Waterpark Resorts have a lazy river while less than 30% of the smaller resorts have them. 

About 60% of the Top 5 Largest Hotel Waterpark Resorts have a wave pool and less than 10% of the smaller resorts have them. Wave pools, while very attractive to surfers, take up a lot of space for the smaller number of guests who can use them. However, they generate a lot of entertainment value for spectators, and ski resorts seem to love them.

The Top 25 Largest Hotel Waterpark Resorts are clearly in the meetings & convention business to balance their seasonal and weekend-weekday mix of business.

Profile of USA Hotel Waterpark Resorts by Size of Waterpark

Feasibility consultants face the difficult task of sizing their client’s hotel waterpark projects. Hotels with the highest number of rooms don’t always have the largest waterparks. And vice versa. While there are many factors that determine sizing, a rule of thumb is the rooms to waterpark ratio. A direct relationship exists between the number of hotel rooms and the size of the indoor waterparks. 
 

Hotels with indoor waterparks more than 50,000 square feet average 354 rooms and 87,600 square feet of indoor waterpark --- a ratio of 247 sf of waterpark per guest room. That ratio decelerates as waterparks get smaller.

To illustrate, hotels with waterparks 40,000 to 49,999 sf average 175 rooms and 42,000 sf of indoor waterpark --- a ratio of 240 sf per guest room. Notice that hotels with about 100 rooms and 10,000 sf of indoor waterpark tend to vary widely in their sizing. 

Hotel owners and developers can use the chart above to help size their projects.

Top Hotel Meeting Facilities with Indoor Waterparks in the USA

Among the Top 15 Hotel Meeting Facilities with an indoor waterpark, the number of rooms varies from 98 to 738 and the meeting facilities vary from 15,000 to 125,000 square feet.

Several of the largest hotel waterpark resorts are in the meetings & convention business. The 738-room Kalahari Resort & Convention Center in Wisconsin Dells WI is clearly the largest meeting facility (125,000 sf) with the largest indoor waterpark (125,000 sf). The 194-room Grand Harbor Resort in Dubuque IA, with 25,000 sf indoor waterpark, is connected to a 120,000 sf convention center that it operates for the city. 
 

Hotel waterpark resorts obviously target the individual leisure traveler segment. But these properties have the advantage of targeting another customer segment --- the group market --- to fill in hotel low periods and weekdays when kids are in school. Hotel waterpark resorts with substantial amounts of meeting space run higher annual occupancies than those with little or no meeting space. 
 

The Top 5 Largest Meeting Facilities with an indoor waterpark average 396 guest rooms, 87,000 sf of meeting space, 44 meeting rooms and a 52,600 sf waterpark. Components average 4.4 waterslides, 2.3 pools and 1.8 hot tubs. Eighty percent of these properties have a lazy river, 30% have a wave pool and 40% have a water coaster.

Among the meeting facilities ranked 6 through 10 in size, these properties averaged 231 guest rooms, 34,600 sf of meeting space, 15 meeting rooms and a 25,600 sf indoor waterpark. Among those ranked 11 through 15, the number of guest rooms averaged 230 with 18,781 sf of meeting space, 10.5 meeting rooms and an 24,954 sf indoor waterpark. 

This is only one of several methods a developer and his consultant should use to estimate the size of meeting facilities in a hotel waterpark resort.

Hotel Waterpark Resorts Under Construction in USA

Hotels with indoor waterparks are growing from 28% to 36% annually while the overall hotel industry expects new supply to grow less than 1.0% in 2005 and 2006. In 2000, there were only 18 hotel waterpark resorts. Today, over 100 are open nationwide. Twenty-three new additions and expansion projects are expected to open by year end. Hotel waterpark projects under construction have grown from 8 in 2000 to 52 that are under construction or will break ground during 2005. 
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