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Great Wolf Resorts Inc. Raises $238 million with Successful
 Initial Public Offering; Plans to Open 10 Resorts
 Over Next Five Years
By Tom Daykin, Milwaukee Journal Sentinel
Knight Ridder/Tribune Business News

Dec. 16, 2004 - Madison-based Great Wolf Resorts Inc., which operates hotels with indoor water parks throughout the Midwest, made a big splash with its first day of trading Wednesday.

Great Wolf, which raised $238 million through an initial public offering, saw its stock close at $21 on the Nasdaq exchange, up $4 from its offering price. The company, which owns five resorts in Wisconsin, Michigan, Ohio and Kansas, will use $42 million from the offering's net proceeds to expand its operations beyond the Midwest, said John Emery, chief executive officer.

Great Wolf plans to open 10 resorts over the next five years, Emery said.

Two of those resorts are under construction and will open next year in Williamsburg, Va., and Tannersville, Pa., in the Pocono Mountains. Emery said Great Wolf is scouting additional locations in the Northeast, mid-Atlantic and Pacific Northwest regions. Great Wolf also will manage a resort in Niagara Falls, Ontario, that a licensee will open in 2006.

Great Wolf's resorts, including Great Wolf Lodge in Wisconsin Dells and Blue Harbor Resort in Sheboygan, feature indoor water parks and other family-oriented entertainment. The water parks help separate Great Wolf's properties from competing resorts and hotels, Emery said.

Greg Hanis, a Waukesha hotel industry consultant, said Great Wolf's expansion beyond Wisconsin is a smart move.

"This state does not need another water park," said Hanis, who operates Hospitality Marketers Inc.

Hanis said locations such as Williamsburg are traditionally strong tourist destinations that have not had hotels with indoor water parks.

"They're going to make some very good money quick, because they're going to bring a new concept to those areas," Hanis said.

However, Great Wolf could face challenges if other major hotel operators open water parks in those markets, Hanis said. That additional competition could dilute Great Wolf's revenue stream, he said.

Through its initial public offering, Great Wolf sold 14 million shares of its common stock at $17 a share. Great Wolf in August disclosed plans with an original offering range of $15 to $17. The stock's trading symbol is WOLF.

Net proceeds from the stock offering are expected to total $216.3 million, according to the company's prospectus filed with the Securities and Exchange Commission.

Great Wolf will use $67.1 million to pay the various investors in the resorts that have become part of the new public company, according to the filing.

An additional $31 million will go to affiliates of AIG Sun-America for their interests in the Great Wolf resorts in Wisconsin Dells and Sandusky, Ohio.

And $76 million will be used to retire debt connected to those resorts.

Great Wolf has granted the underwriters an option to purchase up to 2.1 million additional shares to cover any over-allotments. With over-allotments, Great Wolf's proceeds would be $249.5 million, with that additional cash used to fund future resort development.

Citigroup Global Markets Inc. is the offering's lead manager, with A.G. Edwards & Sons Inc., Raymond James & Associates Inc., Calyon Securities (USA) Inc., Societe Generale and ThinkEquity Partners LLC acting as co-managers for the offering.

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