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Indoor Waterpark Hotels and Resorts Show Impressive Growth
By: Rajesh Shah – U.S. Realty Consultants, Inc., May 2007

The U.S. and Canadian lodging markets have seen impressive growth of indoor waterpark hotels and resorts in the past few years. In 2006, 21 hotels and resorts added a total of 2,411 rooms and 955,260 square feet of indoor waterpark space. There are 33 hotels and resorts that have either opened in 2007 or are under construction. This will add an additional 4,086 rooms and 1,259,800 square feet of indoor waterpark space in the United States alone; which indicates many developers are still lured to the impressive profitability of these resorts. 

USRC defines an indoor waterpark as at least 10,000 square feet of indoor aquatic space with a variety of waterpark features. A hotel with an indoor waterpark is a hotel with an attached 10,000 through 30,000 square feet of indoor waterpark space where the waterpark serves as an amenity to the hotel. A lodging facility with more than 30,000 square feet of indoor waterpark space in which families visit primarily for the waterpark and secondarily for the other attractions in the area is defined as a destination resort. 

Growth of Indoor Waterpark Hotels and Resorts
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As seen in the preceding table, the number of rooms as well as the total square feet of indoor waterpark space have shown notable growth since 2000. While growth from 2001 to 2002 was only 13% in total square footage of indoor waterpark space, 2003 through 2006 experienced impressive annual growth rates ranging from 23% to 35%, averaging 31%. Since a typical guest of an indoor waterpark resort drives (not flies) from two to three hours distance, the impact of terrorists threats on the airline industry do not make a significant difference on indoor waterpark resorts. However, the economy plays a significant role in this business. A growing economy as well as people’s desire for shorter weekend get-a-ways have helped the growth of the indoor waterpark hotels and resorts. 

The following table depicts indoor waterpark hotels and resorts that opened in 2006, most of which are located in the Midwest. Ohio saw an addition of 461 rooms and 164,000 square feet of indoor waterpark space; Wisconsin saw an addition of 394 rooms and 183,000 square feet of  indoor waterpark space; and Minnesota saw an addition of 495 rooms and 124,000 square feet of indoor waterpark space. It should be noted that all of the newer additions in Wisconsin are located in Wisconsin Dells. Niagara Falls, Ontario, Canada added 406 rooms and 195,000 square feet of indoor waterpark space.  
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The following table depicts indoor waterpark hotels and resorts under construction. All of these hotels and resorts are anticipated to open in 2007 or early 2008. 
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Norms Have Been Changing

We have primarily seen changes in location, size, waterpark features and types (mixed-use) of indoor waterpark hotels and resorts in the recent years as further detailed below.

Location - Changing

Previously, the norm was to develop indoor waterpark hotels and resorts in the Midwest or colder regions: Currently, many developers are developing these hotels and resorts in other parts of the nation as well. For example, a 73,000 square-foot Great Wolf Lodge with 404 rooms and other amenities is under construction in Grapevine, Texas. Kingston Plantation at Myrtle Beach, South Carolina is anticipated to complete a standalone 50,000 square-foot indoor waterpark in 2007.

We are currently tracking over 21 hotels and resorts totaling 995,000 square feet of indoor waterpark space and 5,300 rooms that are either under construction or proposed in the South Central and Atlantic regions of the United States. Similarly, we have been tracking 36 hotels and resorts totaling 1,818,000 square feet of indoor waterpark space and 8,400 rooms that are either under construction or proposed in the Western and Mountain regions of the United States.

However, the Midwest still leads the market by far with over 210 hotels and resorts under construction or proposed with over 15,000 rooms and 3,448,000 square feet of indoor waterpark space. Based on our research, the Northeast has 44 indoor waterpark hotels and resorts with over 9,400 rooms and 2,000,000 square feet of indoor waterpark space either under construction or proposed. 

Size of Waterparks - Getting Bigger

As presented in the table below, the overall average size of indoor waterpark space has grown since 2004. 
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Our research indicates that more and more people desire to go to comparatively larger facilities with additional amenities. This has compelled developers to build larger waterparks. Over the course of years, we have also seen some of the smaller indoor waterpark hotels and resorts suffering as new and larger indoor waterpark hotels and resorts open in their markets. 

A good example of the trend is seen in increasing sizes of waterparks in the “capital” of indoor waterparks-Wisconsin Dells, Wisconsin. The Wilderness Resort Wisconsin Dells currently boasts over 240,000 square feet of indoor waterpark space and an additional 135,000 square feet of outdoor waterpark space. The most recent addition at this property was the 65,000 square foot Wildwater Dome indoor waterpark in April 2006. Chula Vista Resort Wisconsin Dells added approximately 80,000 square feet of indoor waterpark space to its existing 30,000 square feet. Its addition also included meeting space, condominiums and other amenities. 

The Great Wolf Lodge Wisconsin Dells added 38,000 square feet of indoor waterpark space in 2006 to its existing 40,000 square foot indoor waterpark, to provide 78,000 square feet of indoor waterpark space. Currently, Great Wolf Lodge is the largest indoor waterpark owner/operator in the nation with eight existing indoor waterpark resorts, seven of which are located in the U.S., and one in Canada. It currently has two indoor waterpark resorts under construction-one in Grapevine, Texas; and the other in Grand Mound, Washington. The Great Wolf Lodge originally started with resorts with indoor waterparks ranging from 30,000 square feet to 45,000 square feet, but later started building in a range from 50,000 square feet to 100,000 square feet. 

The Treasure Island Wisconsin Dells merged with Mt. Olympus in late 2004. In March, 2007, owners of Mt. Olympus purchased three adjacent lodging properties and two major attractions to create the largest entertainment resort complex in the Wisconsin Dells. The purchase included the Captain's Quarters, Pleasant View Motel, The Bay of Dreams Indoor Waterpark and the former Family Land Outdoor Waterpark properties. Mt. Olympus adds over 356 guest rooms, 30 vacation units and an additional 60 acres of real estate, bringing the total acreage to over 156 acres. The property is adding an indoor amusement park to its indoor waterpark, which will include a roller coaster, bumper cars, and kiddie rides. It also plans to add additional indoor waterpark area in the near future. 

Waterpark Features - Adding More Waterpark Features 

Not only have the waterpark sizes increased over the years, but many newer and existing indoor waterpark hotels and resorts have also seen the addition of waterpark features and amenities. A few years back, indoor waterpark features typically included body slides, tube slides, kiddie rides, lazy rivers and swimming pools. In addition to these features, many newer indoor waterparks have seen wave pools, hurricane & tornado rides, family raft rides, and flow riders to name a few. 

Types- More Mixed - Use Developments

Indoor waterparks have grown at various kinds of mixed-use developments ranging from retail malls, residential developments, to other commercial developments. A $1.2 billion groundbreaking, trend-setting retail entertainment destination comprised of multiple shopping, dining, lodging, and entertainment venues connected by a Transportainment® River System (transportation plus sport plus entertainment) is proposed in Kansas City, Kansas. This 376-acre project will include one of the largest indoor/outdoor (convertible) waterparks with miles of interconnected rivers and signature attractions such as the Master Blaster® uphill water coaster and Torrent River®. The project will also include 1,800 units of accommodations including a full-service hotel, waterfront cabins, condominiums, and the unique elevated tree pods - all integrated within waterpark attractions.

Wilderness Resort in Wisconsin Dells has added numerous leisure amenities over the years. It has become one of the largest indoor waterpark resorts in the country. Amenities at this resort include an indoor waterpark, outdoor waterpark, hotel, restaurants, meeting space, condominiums, cabins, villas, golf course, and spa. It plans to open  a 3-lane 700 feet long snow tubing slope in 2007. 

Many existing indoor waterpark resorts have added condominiums or timeshare units in recent years. These include Great Wolf Lodge Wisconsin Dells, Wilderness Resort Wisconsin Dells, Mountain Grand Lodge Boyne Falls, Blue Harbor Resort Sheboygan, Kalahari Resort Wisconsin Dells, and Massanutten Resort Harrisonburg. Prices for condominium units, which are then rented out by the management company, range from $200,000 to $500,000 for a two- to three-bedroom unit. Condominium buyers typically use the unit only one to two weeks per year. They hire the hotel management company to rent the unit out on a nightly basis and the management company typically receives between 40 and 50 percent of the room revenue. 

Another new trend is the use of convertible waterparks. For example, the Schlitterbahn Galveston Island Waterpark in Galveston, Texas opened with a 70,000-square foot indoor/outdoor convertible waterpark in 2006 with a retractable roof that allows the property to be open year-round. 

The Bottom Line

Based on numerous studies that USRC has performed, we have seen net operating revenue on indoor waterpark resorts to typically be between 15% through 35% depending on size, location, and management. Hotels with larger indoor waterparks typically have their net operating incomes in the upper end of this range. Net operating income percentages of  similar non-waterpark full-service hotels typically are in low 20% range. The more impressive return on indoor waterpark resorts also comes with comparatively higher investments than the similar non-indoor waterpark hotels or resorts. Typically, indoor waterpark hotels and resorts achieve considerably higher occupancies and average daily rates than other hotels without indoor waterparks. We have seen occupancy of indoor waterpark hotel and resorts ranging from 5% to 30% over non-waterpark hotels, and average daily rates ranging from $20 to $150 higher. With these spreads, indoor waterpark hotels and resorts are anticipated to continue to grow in the coming years. Mixed-use developments with the inclusions of indoor-waterparks are expected to emerge at a higher rate in ensuing years. 

Rajesh Shah is an associate at US Realty Consultants, Inc., (USRC). He is a 2004 graduate of Hotel Administration at Cornell University. He previously worked for various hospitality companies including Westin, Sheraton and Hyatt. He can be reached at 614-221-9494 (ext. 136) or at rshah@usrc.com

Jeffrey H. Walker, MAI, CHME is Principal and Managing Director at US Realty Consultants, Inc. He is a 1985 graduate of James Madison University and has been involved in the hotel and restaurant industry since the 1970’s, spent much of his career with Hyatt Hotels and Resorts, and has been a hotel consultant since 1992. He can be reached at 614-221-9494 (ext. 150) or at jwalker@usrc.com

USRC is a national hospitality consulting and real estate valuation firm with offices in Columbus, Chicago, and Miami. We have performed more than 2,300 hotel and 100 indoor waterpark market feasibility and appraisals in the United States, Canada and the Caribbean. USRC specializes in the hospitality industry including hotels, resorts, indoor waterparks, outdoor waterparks, timeshares, condominiums, ski resorts, golf resorts, mixed-use developments, and other income producing properties. 

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Contact:

US Realty Consultants
Jeffrey H. Walker, MAI, CHME
Principal and Managing Director
492 South High Street
Suite 200
Columbus, Ohio 43215
Phone: 614-221-9494 ext 150
Email: jwalker@usrc.com
www.usrc.com 
 

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Also See: Hotel Capitalization Rates Continue Record-Breaking Decline / USRC Winter 2007 Hotel Investor Survey / February 2007
Hotel Capitalization Rates Remain Aggressive But Demonstrate Some Moderation / USRC Mid Year 2006 Hotel Investor Survey / August 2006
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