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Construction Report: Spring 2009
Bank crisis slows down travel, lodging and new construction

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By Jeff Coy and Amanda McDaniel, March 13, 2009

March 10, 2009 -- In 2008, fifty (50) hotel waterpark resort projects were under construction, down from 67 under construction in 2007.  Another thirty-one (31) projects expect to be under construction in 2009.  This compares with the construction slowdown of all hotels in the USA.  According to Smith Travel Research, in December 2008, 185,119 hotel rooms were under construction, down 12.6% from 211,694 rooms under construction in December 2007.  The lack of bank lending on new hotel construction pushed many of these projects, including hotel waterpark resorts, back into final planning, planning and pre-planning stages.  

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Twenty-four (24) hotel waterpark resort projects opened in 2008 which included 20 new properties and four expansion projects.  Thirty-four (34) hotel waterpark resort projects opened the year prior.  Construction growth of hotel waterpark resorts in the USA reached highs of over 30% in 2005 and 2006 before the bank crisis put a damper on this popular family recreation concept.  Hotels with indoor waterparks grew 13.7% in 2008 compared to growth of 2.7% for hotels without indoor waterparks.  By yearend 2009, another 18 hotel waterpark resort projects are expected to open, a 9.5% gain from 2008, despite a scarcity of construction lending --- bringing the total to 217 nationwide.  

Hotel Waterpark Resort Projects That Opened in 2008

Since the October 2008 Construction Report release, seven of the 2008 projected projects opened in 2008.  CoCo Key Water Resorts in particular finished the year strong by meeting their opening dates and adding three new indoor waterparks in concert with attached branded hotels.  Additionally, a previously unknown project was also completed in 2008.  A list of hotel waterpark resort projects that were completed in 2008 is shown in the following table.  
 

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Projects that opened the last quarter of 2008 include the following:

  • Holiday Inn & CoCo Key Indoor Waterpark
  • Marriott Resort & CoCo Key Indoor Waterpark
  • BW Royal Plaza & CoCo Key Indoor Waterpark
  • Split Rock Resort’s H2Ooooh! Indoor Waterpark Addition
  • Wilderness at the Smokies Hotel & Wild Waterdome Indoor Waterpark
  • Bluegreen Odyssey Dells at Mt Olympus Resort
  • Kalahari Resort Wisconsin Dells Indoor Amusement Facility Addition
  • Grand Traverse Resort & Spa Indoor Waterpark Conversion
Holiday Inn & CoCo Key Water Resort in Waterbury, CT (203) 706 1000, Marriott & CoCo Key Water Resort in Mt Laurel, NJ (877) 494-2626, and Best Western Royal Plaza & CoCo Key Water Resort in Fitchburg, MA (978) 342-7100 all opened in late 2008.  The CT and NJ hotel waterparks opened in October and the MA location opened in December.  Wave Development, LLC of Milwaukee, WI, in partnership with Sage Hospitality Resources of Denver, CO, Horizon Construction of Verona WI and Hexagon Investments, LLC of Milwaukee, embarked on a strategy of acquiring under-performing hotels in good markets, renovating them and constructing its own CoCo Key brand of indoor waterparks to balance the business-leisure customer mix and achieve higher occupancies and revenues.  The strategy appears to be working.  Each waterpark is similar in size and water features.  Information is available at http://www.cocokeywaterresort.com. 

Jack Kalins’ $19 million 53,000 square feet (ft2) H2Oooohh! Indoor Waterpark opened at the end of October 2008 in the Galleria at Split Rock Resort in Lake Harmony, PA.  The indoor waterpark features Pennsylvania’s first FlowRider surfing simulator, called the Komono Dragon.  In addition, there are the Viper, Piranha, and Amazon Blast waterslides dropping guests 40 feet to pools below.  The less adventurous can enjoy the hot tubs, a 3-story treehouse, tipping bucket, water cannons and a kiddie water play area with spouting geysers.  H2Oooohh! also features a food court and Tiki Bar, with all park amenities open to the general public.  For more information call (570) 722-9111 or go to www.splitrockresort.com.  

As mentioned in the October 2008 Construction report, Bridgemont is a 1,000-acre mixed-use resort destination in Sevierville, TN that offers everything; a village with 500,000 ft2 of shopping, dining, entertainment, attractions, hotels, condos, residential and 36-holes of championship golf.  Pete and Pat Helland, brothers and owners of the Wilderness Event Center Hotel (opened April 2008) in Sevierville were able to open Phase 2 of their project, The Wilderness at the Smokies Hotel, inclusive of the Wild WaterDome indoor waterpark, in December 2008.

The Wilderness at the Smokies Hotel provides 472 units of multi-room suites in the condo-hotel.  Wild WaterDome provides 60,000 ft2 of climate controlled fun and includes, among other features, a SurfRide, StormChaser tube slide, and a wave pool.  The clear overhead structure uses Foiltec-Texlon, letting the light in while maintaining a comfortable indoor environment.  Up next for the Helland brothers is Phase 3, an outdoor waterpark expected to open in the summer of 2009.  For more information on all these new and planned facilities visit www.wildernessatthesmokies.com or call (877) 324-9453.

Bluegreen Odyssey Dells at Mt. Olympus Resort – This project is a condo timeshare opportunity in conjunction with Mt. Olympus Resort.  The success that Wisconsin Dells is seeing as a year round destination center since adding indoor waterparks to already popular outdoor waterparks has spawned interest within the real estate business. In this case, Bluegreen Corporation, saw an opportunity with Mt. Olympus.  According to Bluegreen’s website, they are “… a leading provider of Colorful Places to Live and Play® through two principal operating divisions. With over 185,000 owners, Bluegreen Resorts markets a flexible, real-estate based vacation ownership plan that provides access to more than 40 resorts and an exchange network of over 3,700 resorts and other vacation experiences such as cruises and hotel stays.”  Timeshare condos are 750 ft2, two bedroom units.  Bluegreen owners and guests check in at the Mt. Olympus front desk.  Reservations include four wristbands at no charge to use at both indoor and outdoor (seasonal) facilities at Mt. Olympus.  Additional wristbands may also be purchased.  Bluegreen is marketing Wisconsin Dells not just for waterparks, but all the attractions the area has to offer, such as skiing, boating, rock climbing, parasailing, and golf.  Bluegreen was founded in 1966, and is headquartered in Boca Raton, FL.  For more information go to www.bluegreenonline.com or call (800) 456-0009. 

The Kalahari Resort in Wisconsin Dells completed a major addition in December 2008.  Now guest at the resort can enjoy a new 110,000 ft2 indoor theme park.  The park features a six-story Ferris wheel, a 28-foot-wide African-themed carrousel, an elevated go-cart track, and miniature golf.  Also included are 24 lanes of bowling, golf simulators, climbing walls, laser tag, and a 24-foot-high ropes course.  Kalahari owner Todd Nelson continues to think big and raise the bar within the industry.  Check it out at www.kalahariresort.com/wi or call (877) 525-2427.

A small project not on the radar was completed in 2008 at the Grand Traverse Resort and Spa near Traverse City, MI.  The resort converted its lap pool into a 15,000 ft2 “water playground.”  This small indoor waterpark includes a waterslide, removable water walkway, spray area, and zero depth pool.  The hotel is owned and operated by the Grand Traverse Band of Ottawa and Chippewa Indians and includes 238 rooms and 190 condos.  More information is available at www.grandtraverseresort.com or by calling (231) 668-4459 or (888) 335-7045.

Troubled Properties in 2008

We reported in the October 2008 Construction Report that the 306-suite Maui Sands Resort opened in Sandusky OH during March 2008.  We went on to say that 17 construction companies and subcontractors had filed nearly $4 million in liens against Maui Sands Resort for unpaid labor and material expenses since the project began in 2007.  Maui Sands closed it doors on November 27, 2008 while owner Scott Emerson planned to file Chapter 11 bankruptcy.  The resort laid-off about 100 employees, and guests with reservations had to find other accommodation.  The resort claims it will re-open in May 2009.  Meanwhile, construction remains unfinished on the Hawaiian Cabana Village portion of the property.  Emerson hopes to talk with the contractors about returning to the project.  A minimal staff has been retained for reservation and marketing activities.  The resort’s website is www.mauisandsresort.com.  

The Double JJ Ranch in Rothbury, MI has been on the market since prior to filing for Chapter 11 reorganization in the summer of 2008.  Initially, the ranch continued to operate, however operations ceased and the ranch closed on September 3, 2008.  On October 30, 2008 the property went to auction.  At the court-ordered auction, one of the owner’s creditors, BankFirst of Minnesota, agreed to pay $8.65 million for the property, excluding the golf course.  The lender was then going to resell the ranch to a company called Tia2K LLC.  A federal bankruptcy judge in Grand Rapids rejected the sale to BankFirst.  Judge Jeffrey Hughes said the owners have some say about who will buy their property, and that not enough was known about the Tia2K LLC.  The property continues to sit in limbo, but some websites are reporting that the Rothbury Music Festival is scheduled for July 2009 at the Double JJ Ranch.  Check the website for status updates http://www.doublejj.com. 

Michael Polsky was appointed as receiver for the Jellystone Park Campground, after a judge in Chicago dismissed a Chapter 11 bankruptcy case that had been filed by the campground’s owner.  A federal bankruptcy judge dismissed the case, a move that had been sought by the Bank of Mauston.  In September, the bank filed a mortgage foreclosure lawsuit against the various owners of parts of the Three Bears Resort in Warrens, which includes the campground, an indoor water park, and a 93-room hotel.  Michael Polsky had already been appointed as receiver to oversee the water park and hotel property.  The hotel and waterpark closed Sept. 15 and the campground closed for the season once the Warrens Cranberry Festival ended Sept. 28.  The hotel and water park have not reopened, however, reservations for the 2009 camping season are being accepted.  The website is www.jellystonewarrens.com. 

During the final three months of 2008, the sub-prime mortgage mess turned into an ever-deepening bank industry crisis and recession around the world.  Bank lending came to a halt, travel slowed, consumers reduced their spending, jobs were lost, negative news out-weighed positive and no one could predict the when the economic upswing would occur.  

What’s Ahead for 2009?

Hotels with indoor waterparks continue to have an advantage over hotels without indoor waterparks in terms of generating incremental occupancy, room rate, revenue and profits.  However, the economy continues to slump while financial systems struggle for repair.  Until a turn of the tide, all hotels and all industries suffer and the advantage of hotel indoor waterparks is lost or slight.  As of February 1, 2009 we project 18 construction projects to open in 2009, as shown in this table.  
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Great Wolf in Grapevine, TX completed its expansion in January 2009.  The resort added 203 rooms and 20,000 ft2 of meeting room conference space.  This follows a successful trend of providing meeting space to attract a broader clientele.  Not only can resorts attract families to their hotel waterpark, but also conferences and conventions. Go to http://www.greatwolf.com/grapevine/lodge or call (817) 488-6510.

Jerry and Carolyn Fuhs had a soft opening of their Valley of Springs Resort hotel on February 20, 2009.  They have been opening other amenities in the weeks that followed, such the Boatyard Restaurant, the Galley Grille, and the Treasure Chest Arcade.  The indoor waterpark, Big Splash Island, is scheduled to open on March 15.  The 40,000 ft2 waterpark includes a three story play structure, four 40-ft water slides, a lazy river, a splash pool for toddlers, an activity pool, a large whirlpool, and a redemption arcade.  The Fuhs are making a splash in the industry as they offer all these amenities while being “the greenest large waterpark project to date.”  

Big Splash Island is housed in a clear panel aluminum structure designed by OpenAire, Inc.  The building is a primary component of the energy efficient design.  The glass structure allows for natural light, offering a significant reduction in energy consumption.  The unique retractable roof and perimeter of windows promotes natural ventilation and air flow.  Big Splash Island does not use traditional sand filtration systems, instead it includes the latest technology, “The Defender” by Neptune-Benson.  This system allows for a substantial reduction in water usage and promotes superior water quality.  This in turn reduces the need for chemicals.  The efficient motor design uses less energy.  There are also Ultraviolet Disinfectant Systems and high efficiency boilers to round out the sustainable and energy efficient design of this green resort.  For more information go to www.valleyofthesprings.com or call (812) 936-3866.  You’ll want to check this one out - even the laundry and IT department have been greened.  Up next, Jerry and Carolyn shoot for LEED certification! 

KeyLime Cove Resort plans to complete Phase 2, the addition of 186 rooms to the hotel waterpark resort.  When complete this summer, the resort will boast a total of 600 rooms complementing the 65,000 ft2 indoor waterpark.  Visit www.keylimecove.com or call (224) 656-8685.

The Great Wolf Lodge in Concord, NC is a 475,000 ft2 square- foot complex, scheduled to open in March off Interstate 85’s Exit 49.  The massive four-story complex includes the 80,000 ft2 Bear Track Landing™ indoor waterpark with 11 waterslides and four pools; more than 400 guest suites with nine different configurations; 20,000 ft2 of meeting and banquet space; an outdoor pool area; Iron Horse™ Fitness Center; and Buckhorn Exchange™, a gift emporium and convenience store.  The resort general manager Phil Cunningham said the resort is already taking reservations for stays as early as April 15, and said he expects it to have a “soft opening” on March 26. That may mean opening part of the complex while other sections won’t quite be ready yet.  Charlotte-area leaders, professionals and media were invited to a hard hat tour of the $100 million+, 36-acre Great Wolf Lodge construction site in early December 2008.  Visit http://www.greatwolf.com/concord/lodge or call (866) 925-9653.

After more than a year of delays, construction is under way on a $15 million hotel complex across the street from the E Center in West Valley City, UT.  The project’s developer, Utah Hospitality LLC, expects construction on the venture that includes a 94-room Holiday Inn Express and a 97-unit Staybridge Suites hotel to be completed in early 2009.  Stavbridge Suites will have larger rooms than the Holiday Inn Express and is designed for guests expecting to stay five to 14 days.  The two hotel properties being built just north of the E Center on Decker Lake Drive will be linked by an 8,000- square-foot waterpark featuring a 165-foot-tall water slide.  “We’re excited,” said Jeff Stockert, president of Utah Hospitality. “The Salt Lake City area is a very family-oriented market, and we think this project will be really well received.  Waterparks have become increasingly popular in the hospitality business over the past five years, and to our knowledge, this will be the first indoor park on a hotel property in Utah.”  Only guests of the two hotels will have access to the water park, but Stockert believes families in the area will chose the hotel complex as a destination for something a little different.

What’s Ahead for 2010 & Beyond?

For 2010 and beyond, we expect 17 construction projects to open, with 12 of those expected in 2010.  The following table provides a list of the project openings predicted for 2010 & beyond.  Commercial mortgage lending has not picked up yet and credit markets continue to be tight.  Some of these projects may be delayed indefinitely.  
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US President Obama took office January 20, 2009 and immediately took action toward solving the banking industry crisis, stimulating the economy and restoring consumer confidence.  All the experts have an opinion, but no one knows when the recession will bottom out or when the economic upswing will occur.  Despite looking for a positive sign of recovery, negative news far outweighs any positive news.  

The American Institute of Architects (AIA) has warned the construction industry to brace for an 11% drop in business over the next six months, according to their latest Consensus Construction Forecast released in January 2009.  Historically, architect billing numbers are a predictor of what will happen to the construction industry about 9-12 months later.  And the current numbers don’t look good, according to a March 2 article by C. J. Hughes in Business Week.  The wild card is whether the $130 to $160 billion assigned to construction in the $838 billion economic stimulus plan can offset the downturn for builders.  

On the positive side, the recession has led to price reductions for materials used in construction projects, like steel, gypsum, lumber and cement, according to economists.  Copper, which is used for pipes and wiring, for example, has also grown cheaper from $3.50 per pound in July 2008 to $1.48 in January 2009.  

Bob Nagel of Architectural Design Consultants Inc (ADCI) of Lake Delton WI expects a small upswing in construction of indoor-outdoor waterparks, amusements and family entertainment centers in 2010 compared to current levels.  “The phone still rings with developers who are positively moving ahead with their plans.  By the time we help them finish with design-development and they are ready for funding, we expect the money will be more available,” according to Nagel, whose company has designed more hotel waterpark resorts than any other firm.  

Our advice: stay positive, work hard and do the right thing.

Jeff Coy is president and Amanda McDaniel is research director of JLC Hospitality Consulting based in Phoenix-Cave Creek AZ.  You can reach them at 480-488-3382 or email jeffcoy@jeffcoy.com or go to www.jeffcoy.com.  

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Contact:

Jeff Coy
JLC Hospitality Consulting
P.O. Box 4090, 39401 N. 67th Place
Cave Creek, AZ 85327
(480) 488-3382 tel
 jeffcoy@jeffcoy.com
www.jeffcoy.com

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Also See: Hotel Waterparks Construction Report 2008; 33 Hotel Waterparks Opened in 2007, 55 Scheduled for 2008 / February 2008
Hotel Waterpark Resort Industry Report 2007; 48 Hotel Waterparks Opening, 97 Under Construction / Jeff Coy and Bill Haralson / July 2007
Hotel Waterpark Resorts - Construction Report 2006; 73 Are Under Construction, Another 108 are planned / Jeff Coy and Bill Haralson / July 2006
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