During 2007, thirty-three (33) new hotel indoor waterparks opened. Eighty-three (83) hotel waterparks are under construction now or will break ground during 2008 --- including fifty-five (55) projects scheduled to open in 2008 and another twenty-three (23) that are slated to open in 2009-2010.

Hotels and resorts with indoor waterparks are a small but rapidly-growing segment of the lodging, recreation and entertainment business. Nationally, waterpark hotel rooms grew 20.9% in 2007 compared to ordinary hotel rooms at 1.4% growth. The following chart illustrates the growth over the last six years.

Nationally, these 169 properties have a total of 28,888 rooms, over 4.1 million square feet of indoor waterpark space and 511 meeting rooms covering 1.6 million square feet of meeting space. Today, about 48% of hotel waterparks are affiliated with a national franchise brand and 52% are independent.

Hotel waterparks are popular with families and hotel owners because they fill empty rooms at higher room rates than hotels without indoor waterparks.

Every year the construction pipeline gets bigger. And hotel waterpark projects keep getting bigger in size. Many are part of mixed-use resort destination developments that include conference centers, recreation, entertainment, retail shopping, offices and residential units.

• Recently, the Kalahari Resort & Convention Center in Sandusky OH completed its expansion to become the largest hotel waterpark resort in the USA --- with 884 rooms and 193,000 sf of indoor waterpark under one roof.

• Chula Vista Resort in Wisconsin Dells is in the midst of a 4-year $200 million expansion. It recently topped the charts of the Top 10 Hotel Meeting Facilities with indoor waterparks in the USA --- with 150,000 sf of domed meeting space and 110,000 sf of indoor waterparks. Kalahari Resort in the Dells dropped to second largest (125,000 sf) meeting place with an indoor waterpark.

Hotels and resorts have ups and downs. They are seasonal properties with high periods and low periods from month to month and from weekday to weekends. The indoor waterpark has an amazing ability to fill empty rooms with families and young children on weekends all year long and whenever kids are out of school. Yet a hotel waterpark resort is still just a hotel with a very expensive attraction, similar to having a golf course or conference center.

The indoor waterpark is a perfect component for the hotel owner that wants a balanced mix of customers --- individual business travelers, groups and individual leisure guests.

This Hotel Waterpark Resort Industry Report covers the following items:

• USA Hotel Industry Performance
• USA Resort Performance
• USA Hotel Waterpark Resort Performance
• Wisconsin Dells Hotel Performance
• USA Competitive Supply of Hotel Waterpark Resorts
• List of Hotel Waterparks That Opened in 2007
• Major Transactions of 2007
• Top 25 Largest Hotel Waterpark Resorts in the USA
• Top 15 Largest Meeting Facilities with Indoor Waterparks in the USA
• Emerging Multi-Unit Owners
• Emerging Management Companies
• Independent Vs Branding
• Recent Transaction
• List of Hotel Waterparks Scheduled to Open in 2008

The USA hotel industry occupancy reach 63.2% for 2007, just slightly under the 63.3% recorded for 2006 --- up from a low of 59.0% in 2002 and almost even with benchmark Year 2000.

Nationwide, hotel room rates reached an average of $103.64 in 2007, up from $97.89 in 2006, a low of $83.19 in 2002 and up from $86.04 in benchmark Year 2000.

In 2007, airport, urban and resort hotels ran the highest occupancies. Occupancy growth slowed for all hotels while resort occupancy declined one-half of one percent in 2007. Urban hotels and resorts recorded the highest average room rates at $148 and $143 respectively. Room rate growth remained strong for all hotels, with urban hotels achieving the biggest gains.

Recap of 2007

In the first half of 2007, hotel room supply grew 1.1% and accelerated to 1.5% during summer and 1.8% in the last three months compared to the same periods in 2006. Hotel projects that were funded in 2007 will continue to break ground during 2008.

Demand for hotel rooms grew 0.9% during the first half of 2007, accelerated to 2.5% during summer and then slowed to 1.3% in the last three months compared to the same periods in 2006.

Hotel occupancy was down 0.2% during the first half of 2007 compared to the first half of 2006. Summer 2007 occupancy was up 1.0% higher than Summer 2006. However, occupancy started to dwindle during the last three months of 2007 amidst news of a slowing economy.

While hotel occupancy softened, hotel average room rates remained strong throughout the year --- up 5.9% in 2007 over 2006. As a result, revenues per available room were up 5.5% during the first half of 2007, up 6.6% during Summer 2007 and up 5.7% for the Year 2007.

Most families in the USA bit the bullet on higher gasoline prices and refused to abandon their vacation plans. Many vacationed closer to home, ate fewer meals in restaurants and escaped for weekends to nearby regional resorts --- a growing number of which offered indoor waterparks and family entertainment centers.

Most Lucrative States for Hotel Investment

Currently, the most lucrative states for hotel investment are Hawaii, New York, Massachusetts, California and Alaska where hotel revenues are the highest in the nation.

New York, Alaska and Colorado had the biggest gains in revenues per available room.

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.

Most Desirable Hotel Markets

In 2007, the most desirable hotel markets, in terms of their ability to generate the highest revenues per available room were New York City, Oahu, Miami and San Francisco.

The biggest gains were made by New York City, San Francisco and Miami, which recorded double-digit hotel revenue growth.

USA Resort Performance

Hawaii is the leading resort destination with 75.3% occupancy (down 5.3% from last year) and $199 average room rate (up 6.8% over last year). This compares to occupancy of 66.1% and average room rate of $136 for all resorts in the USA.

Nevada, California and Arizona trail closely behind with occupancies of 71.2%, 69.3% and 66.3% respectively. Colorado recorded the biggest gain in occupancy at 3.6% while Hawaii recorded the biggest decline in occupancy versus last year. The highest resort room prices were found in Hawaii at $199, All USA Resorts at $136, California at $118, Florida at $117 and Nevada at $109. Hawaii, Colorado, California and Arizona all recorded price jumps of more than 6% in 2007 compared to 2006.

Florida, Colorado, Minnesota and Wisconsin achieved statewide occupancy under the national average for all USA Resorts. However, trends are shifting. Wisconsin and Minnesota have the highest number of hotel indoor waterpark resorts in the country, and a growing number of ski resorts are considering indoor waterpark projects to achieve year round revenues. Many of the top hotel waterpark resort properties record occupancies and room rates far above the national averages and equal to many of the Sunbelt resort destination states.

USA Hotel Waterpark Resort Performance

On January 1, 2007, there were 136 hotels in the USA with indoor waterparks --- from the smallest water features to the largest waterpark resorts.

During 2007, thirty-three (33) new additions opened, bringing the total to 169 hotel waterpark resorts open and operating in the USA at the end of 2007.

Another fifty-five (55) projects are under construction now or will break ground during 2008 which are scheduled to open in 2008. Realistically, some projects may slide into 2009.
 

The waterpark sector of the resort industry has experienced annual growth ranging from 22% to over 30% in each of the last seven years. Clearly, hotel waterpark resorts are not a fad but here to stay.

About 166 hotel waterpark projects were in the development pipeline at the end of 2007 compared to 108 in 2006, 121 in 2005, 69 in 2004, 46 in 2003 and 19 in 2002. In 2008, more than 200 projects are in the planning stages.

It is difficult to know how well hotel waterpark resorts perform financially as a group. Many of the larger independent properties do not report statistics to Smith Travel Research. Even the Wisconsin Dells Convention & Visitors Bureau collects little in the way of way of hotel waterpark resort performance data. The hotel owners keep their operating data fairly close to the vest. Great Wolf Resorts Inc is a public company and their operating data is available for all to see online in various SEC filings. Yet, two years ago, Great Wolf Resorts stopped reporting individual property data in favor of reporting same store comparisons, which effectively makes it more difficult for shareholders and other observers to determine how well individual hotels are performing. Regardless, Great Wolf Resorts performance is not necessarily the industry benchmark because they are being out-performed in several markets --- although they lead the industry in terms of multiple locations.

As a result, the best operating performance data is in proprietary databases of a few consultants, appraisers and emerging management companies with multiple locations. In 2001 Hotel Waterpark Resort Research & Consulting was formed for the purpose of collecting, analyzing and publishing data regarding this growing segment of the resort industry. HWRRC is a collaborative effort of Jeff Coy of JLC Hospitality Consulting of Cave Creek AZ and Bill Haralson of William L. Haralson & Associates of Alto NM. Together the two consultants produce an Annual Industry Report, a Construction Report and several developer workshops, where they present their latest research and a variety of expert speakers.
 
 

Wisconsin Dells Hotel Performance

In 1990, before indoor waterparks, Wisconsin Dells ran a 40% annually hotel occupancy and had a 100-day peak season. Today, it has 21 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.

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 2007, the top two hotel waterpark resorts achieved average room rates above $200. Hotels WITH indoor waterparks recorded average room rates that are 2X that of hotels WITHOUT indoor waterparks. And the average room rate trend over the last three years is getting higher for the haves and lower for the have-nots! The biggest properties are gaining market share while the smaller properties continue to lose market share.
 
 

USA Competitive Supply of Hotel Waterparks

One hundred and sixty-nine (169) hotel indoor waterparks are open and operating in the USA at the end of 2007. Here is a list of hotel waterpark resorts that opened in the following states since 2001:

Wisconsin and Minnesota continue to lead the nation in terms of the number of hotels with indoor waterparks with 55 and 22 respectively. Most hotel waterpark resorts are clustered in the upper Midwest while new construction is moving into the Ohio Valley, Middle-Atlantic and New England states as well as the northwest portion of the US. Gradually, growth is moving into the Sunbelt states. Texas already has 5 hotel waterpark properties.

Here is a list of the hotel waterpark resorts added to the supply in 2007:
 

Chula Vista Resort owner Mike Kaminski embarked on a 4-year $200 million expansion plan that started in 2005. When the expansion is completed in 2009, Chula Vista Resort in Wisconsin Dells WI will have about 1000 condos and hotel rooms, 100,000 sf of waterpark and 200,000 sf of convention space. In 2007, Kaminski opened 150 new condos and an 80,000 sf sports dome that can handle conventions and major sporting events. Future plans call for a 150,000 sf conference center, a second 80,000 sf sports dome and major additions to his existing 80,000 sf indoor waterpark. Chula Vista is now positioned among the top three largest hotel waterpark resorts in the nation along with Kalahari Resort and Wilderness Hotel & Golf Resort. You can reach Mike at 608-254-8366.

In August 2007, Sinbad Patel and Henry Desai opened their 22,000 sf Indoor Dome Waterpark connected to their 106-room Holiday Inn in Toledo-Maumee OH. This is the first indoor waterpark using the thin-shell concrete dome concept offered by Dome Technology Inc of Idaho Falls ID --- a company that has built domed storage, domed centers, churches, schools and homes for years. You can reach Dan South at Dome Technology by calling 208-529-0833 or email dan@dometech.com.

In September 2007, Wave Development Inc opened its 60,000 sf Coco Key indoor waterpark at the Holiday Inn Omaha Central, a hotel it purchased earlier. Coco Key is designed as a 1930s-style Key West with two body slides, two raft slides, three smaller slides, a lazy river, hot tub, climbing structure, tipping water bucket, kiddie pool and arcade. The hotel has 383 rooms and features 29 meeting rooms totaling 46,318 sf of meeting space. The property is managed by Wave Development’s partner, Sage Hospitality Resources of Denver CO. You can reach Tiffany Woodward at 414-226-1950 or email tiffany@wavedevelopment.net.

Focus Enterprises of Valparaiso IN opened its 154-room Splash Universe Resort and 25,000 sf indoor waterpark in Shipshewana IN in October. The $35 million project includes a Town Center and auto museum where Eldon Hostetler’s $5 million car collection is housed. This is another example of a hotel indoor waterpark as part of a mixed-use project including town center and a tourist attraction. Dean Morgan is vice president of Splash Universe Waterpark Resorts, a division of Focus Enterprises. You can talk to him at 219-531-2500 ext 2 or email dmorgan@focushotels.com.

In September 2007, Mike Gallegos, a New Mexico native and president of San Diego-based American Property Management Inc reopened the former Park Plaza as a new 314-room Radisson Resort & Waterpark in Albuquerque NM. Gallegos spent $20 million on the renovation, new 23,000 sf indoor waterpark and separate 6,000 sf building which houses a two-person surfing simulator called a Flowrider. This cutting-edge waterpark will utilize music, lights and video to entertain its guests. The waterpark features two waterslides that go outside the building then reenter it. A mezzanine offers pizza, ice cream and a video arcade. Ramaker & Associates of Sauk City WI provided the waterpark design, mechanical, electrical and plumbing design. In addition, there’s 30,000 sf of convention space. You can reach Mike Gallegos at 858-964-5500 or email info@apmc.net.

In December 2007, Todd Nelson more than doubled the size of his Kalahari Resort in Sandusky OH --- making it the nation’s largest hotel indoor waterpark. Nelson added 288 new rooms, bringing the total to 884 and making it the largest hotel in Ohio. The indoor waterpark more than doubled in size from 80,000 sf to its current 173,000 sf. Features include 12,000 sf wave pool, a 4-lane Mat Racer slide where racers can compete with fellow racers, a bowl funnel slide and a second FlowRider, where surfers can ride a sheet of water flowing under them. Kalahari Resort Sandusky OH is the site of a Developer’s Workshop, called Developing & Financing Hotel Waterpark Resorts, scheduled for February 28 & 29, 2008. To register, go to www.hotelwaterparkworkshop.com. Kalahari owner Todd Nelson recently announced the construction of his third waterpark resort in Fredericksburg VA. You can reach Todd at 608-254-3750.

In December 2007, Great Wolf Resorts Inc opened its 402-room Great Wolf Lodge and 80,000 sf indoor waterpark in Grapevine TX. Called Bear Track Landing, the indoor waterpark features 6 pools, 9 waterslides, a 12-level climbing structure, a 1000-gallon tipping water bucket and an enclosed 6-story Howlin Tornado extreme funnel ride. For the first time, Great Wolf will offer its teenage guest a dedicated tech center with a Tech Jockey concierge to help with internet stations, karaoke staging, movies and musical entertainment. The resort also offers an 84,000 sf outdoor waterpark. Great Wolf Resorts Inc will open its next property at Grand Mound WA in March 2008 in partnership with the Chehalis Tribe of Indians. Future projects have been announced for Charlotte NC, Bloomington MN, Mashantucket CT and Lake Lanier GA. Talk to John Emery, ceo of Great Wolf Resorts Inc, at 608-251-6400.
 

Major Transactions in 2007

• The Courtyard by Marriott at The Depot in downtown Minneapolis MN underwent a multi-million dollar renovation, after which it converted to Marriott’s more upscale Renaissance brand. The hotel draws business travelers during the week, while the indoor skating rink and waterpark attracts families on the weekend, according to Robb Hall, managing director with CSM Lodging, owner of the property.

• Jeff Wirth, president of the Wirth Companies, hired Radisson Hotels Inc to manage his 403-room Grand Hotel & 70,000 sf Waterpark of America in Bloomington MN near the Mall of America.

• The Ghermezian brothers, principals in Triple 5 Group, own the 5.3 million sf West Edmonton Mall in Alberta, which encompasses the 217,000 sf indoor World Waterpark --- the largest shopping mall and largest indoor waterpark in North America. In 1992, the Ghermezians opened the 4.0 million sf Mall of America in Bloomington MN, then largest mall in the USA and second largest behind West Edmonton globally. The Mall of America is the most visited shopping mall in the world with more than 40 million visitors annually. For years, expansion plans were postponed due to lawsuits among the partners. In November 2006, a court allowed the Ghermezians to gain full control of Mall of America, spending US$1 billion to do so. The ruling cleared the way for Triple 5 to begin work on what is being called Phase 2, the planned expansion of Mall of America. Phase 2, in current form, integrates an IKEA store built on a portion of the land with new facilities that include a dinner theater, ice rink, three hotels and a waterpark --- similar in design to the West Edmonton Mall. Current estimates will double the mall’s size with a 5.2 million sf expansion at a cost of $1.9 billion. The developers requested $234 million in state and local subsidies but the request was vetoed by the governor in 2007. Bloomington city officials question whether the Ghermezians have the financial ability to finish Phase 2.

• In 2007, Mall of America obtained a signed letter of intent from Great Wolf Resorts Inc to build a Great Wolf Lodge and indoor waterpark as part of the mall’s expansion program. It also has agreements with Bass Pro Shops and a Kimpton Hotel.

• In addition, Mall of America said goodbye to Snoopy and said hello to SpongeBob SquarePants when it struck a branding rights deal with Nickelodeon for the megamall’s indoor amusement park. The park used to be called Camp Snoopy but the mall’s 13-year agreement with Peanuts ended. Under the new agreement with Nickelodeon, plans for a 70-foot free fall tower for teens and adults are underway. New designs, new rides, live shows and characters, such as Dora the Explorer and Jimmy Neutron, will appear in Spring 2008.

• Nickelodeon has signed another deal with Marriott to co-develop a new brand of resorts for families seeking fun and adventure. Twenty (20) Nickelodeon Resorts by Marriott are planned. The first resort, with 650 rooms and 100,000 sf waterpark, is about to break ground at Liberty Station in San Diego CA.

• Ripley’s Believe It or Not, a Jim Pattison company and owner of the Great Wolf Lodge in Niagara Falls ON, announced it will add a Ripley’s Aquarium in 2008.

• Knuckleheads Bowling & Indoor Family Entertainment Center opened in Wisconsin Dells, next to Great Wolf Lodge and the Tanger Outlet Mall. Knuckleheads features 24 lanes of bowling, go-karts, 4-D theater ride, bumper cars, a family coaster and 7 other amusement rides all under one roof 24/7. There’s also Buffalo Phil’s Grille for western dining and its 5,726 sf Crystal Room for parties and banquets. Knuckleheads and Buffalo Phil’s are owned by the Watermans, the same family that built and sold the original Great Wolf Lodge to the company now known as Great Wolf Resorts Inc. While the GWL has no room to expand, the Watermans continue to own and develop the adjacent parcels into successful enterprises. Guests of Great Wolf Lodge love playing at Knuckleheads and eating at Buffalo Phils. Could lightning strike twice? You can reach Megan Waterman at 608-254-7332 or email info@DellsKnucklehead.com.

• While there is no hotel in the project (yet), Sea World unveiled Aquatica, a major 59-acre outdoor waterpark resort that will open in 2008 --- unlike anything that now exists. Aquatica features 36 waterslides, a high-speed river ride with rapids aimed at competing with other theme park rides. The signature ride is a slide that takes people underwater in clear tubes. The other anchor attraction is a twin wave pool that splashes onto an 80,000 sf beach. "Aquatica will be a waterpark you would never expect, unless it was built by Sea World," according to general manager Jim Atchison. Aquatica will give Sea World (Busch) three theme parks in central Florida, including Sea World and Discovery Cove.

• The Columbus Zoo & Aquarium, long neighbors with Wyandotte Lake outdoor waterpark, acquired the waterpark from Six Flags Inc in 2006 and spent about $53 million in 2007, doubling its size and putting in new rides. While there is no hotel (yet), the zoo and expanded waterpark are turning into one big destination. "I think they are on the cutting edge," said Scott Dring of the Dublin Convention & Visitors Bureau. "They’re rewriting the book here and I think they’re going to wake up a lot of other zoos."

• In our last report dated July 2, 2007, we reported H2otels USA as the likely buyer of the under-performing Tundra Lodge Resort & Waterpark in Green Bay WI, but that deal later fell through. Multimillionaire redeveloper John Bays of Bays Investment Corp of Joliet IL received an OK from the Green Bay Redevelopment Authority to acquire the property, which opened in 2003. Bays proposed to pay off the bonds for the project, which are paid by tax increment tax district collections, so that he has complete ownership of the property. The city would, in turn, reimburse him with TIF collections as they come due. "I make things happen," he said. "I think I have a few ideas that will bring in a lot more business. I’m great at bringing in tourism business. Everything I have ever been involved in has been a success."

The Wilderness Hotel & Golf Resort in Wisconsin Dells WI is number one in terms of the most indoor waterpark space, but their 229,000 sf is divided among four separate waterparks they have on site.

Kalahari Resort Sandusky OH is number one in terms of the largest (173,000 sf) indoor waterpark under one roof.