|By Jeff Coy and Bill Haralson
September 26, 2006 --- When you start with a hotel
and add a convention center, you become a convention hotel. When
you add a golf course, you become a golf resort conference center.
But when you convert rooms to pre-sold condominiums and add indoor waterparks,
indoor snow skiing, arcades, theaters, entertainment plazas, village retail,
residential units and offices --- it’s called a mixed-use development.
Mix-use real estate projects are hot
Mixed-use has come of age and is exploding.
It’s the hottest product type in real estate. Almost every new project
includes several components that create a destination for meeting, shopping,
recreation and entertainment --- and in many cases, you can live there.
Remember when hotel owners wanted nothing to do with
food & beverage, and we saw a decade of building limited service hotels
with rooms only? Times have changed. Hotel owners are no longer
content to have lodging demand generators nearby. They are designing
and integrating these demand generators into destination projects that
act as a strong magnet in the region.
Mixed-use projects are like a salad
Want to build your own mixed-use destination project?
Here are the ingredients and recipe for mixing them into your next real
Lodging --- high-tech hotel rooms
for business travelers, family suites for leisure travelers and hotel units
designed as condominiums that are sold to individual owners and placed
in a rental pool for nightly rental. There are many different types
of lodging components to consider --- timeshare, 1/12th, 1/6th, quarter-share
and whole ownership. Get a feasibility study to make sure there’s
demand for what you want to do. Be sure to design the right kind
of lodging for the type of customers you want to attract.
Why are mixed-use hotel real estate projects so popular?
Recreation --- fitness centers, spas, golf
courses, climbing walls, bike trails, outdoor waterparks, indoor waterparks,
surfing parks, whitewater river courses and a host of adventure sporting
activities are now being added to mixed-use developments. There’s
even artificial snow-skiing outside in summer and real snow-skiing indoors
all year long. If well designed and integrated into the overall project,
hotels now enrich and enhance mixed-use projects more than ever.
And the indoor waterpark attached to lodging has become a critical and
important amenity that brings it all together and adds significant asset
value to the overall project.
Entertainment --- arcades, amusements, family
entertainment centers, urban entertainment districts with restaurants and
nightclubs are all being added to mixed-use projects.
Retail --- recreation and entertainment are
being blended with retail shopping plazas, village squares and small town
centers where people can gather and socialize.
Residential --- once you create an attractive
destination for visitors, there may be demand for people who want to live
there or buy a second home or vacation home. You can add single-family
homes that are wholly-owned by permanent residents or you can add villas
and condos that are fractionally-owned and may be placed in the hotel rental
Office --- if you create a place where people
can stay, meet, recreate, shop and find entertainment, wouldn’t it be great
to work there? In many recreational resort projects with retail and
residential components, you will also find offices for sale or lease.
Predictions On Future Resort Development
Almost two years ago, we made these predictions on the
future of resort development, ski resorts and hotel waterpark resorts.
Increasingly, we see evidence that those predictions are coming true faster
than ever --- the future is here now.
Predictions On the Future of Ski Resorts
Predictions About the Future of Hotel Waterpark Resorts
There is a long list of reasons that support the
growing trend of vacationing closer to home. Fear of flying, avoiding
airport hassles, terrorism threats, emergence of regional resorts, growth
in Indian gaming, popularity of adventure sports and the success of hotels
with indoor waterparks.
Lodging, recreation and entertainment concepts are
merging. As a result, resorts will grow faster than other types of
More resorts will become part of mixed-use developments.
In urban and suburban areas, we now see themed resorts and large-scale
attractions being designed into regional shopping complexes (Waterpark
of America at Mall of America in Bloomington MN), mixed-use waterfront
developments, downtown convention centers (Milwaukee and Dubuque) and even
some renovated old railroad depots (Marriott Deport Hotel & Waterpark
in downtown Minneapolis). In more rural settings, resorts are being
designed into casinos, medical centers, conference centers, golf courses,
ski hills, residential projects as well as second home, vacation home and
Seasonal resorts will become year round operations.
Traditionally, resorts have been highly seasonal, which meant that profits
were dependent upon the weather. Ski resorts thrived when it was
cold. Beach resorts did well when it was hot. Resort owners
and developers will increasingly try to eliminate the seasonality and weather
factors by designing resorts to capture year round revenues.
Resorts will build more and more indoor recreation
facilities. Any recreation or sporting activity you normally do outdoors
will have an indoor version. Yes, golfing outdoors is superior to
golfing indoors. But, on rainy days during a vacation, indoor golf
is great! Swimming in an outdoor pool on a hot, sunny day is ideal.
But, during inclement weather while on vacation, an indoor waterpark saves
the day! Future resort designs will incorporate indoor-outdoor combinations
using new technology structures, domed enclosures and moveable glass walls.
Regional resort destinations with a history of attracting
families will expand to include hotel waterpark resorts. Destinations,
such as the White Mountains of New Hampshire, the Berkshires in western
Massachusetts, the Poconos of Pennsylvania, the Smoky Mountains of Tennessee
and the Finger Lakes Region of upstate New York are all target locations
for hotel waterpark resort development.
Almost all future hotel waterpark resorts will be
designed as indoor-outdoor combinations. Facilities will combine
both indoor and outdoor spaces that open up and blend together --- using
clear domed structures and moveable glass walls. Many large outdoor
entertainment venues, such as amusement parks and waterparks, will be covered
with dome structures that control the temperature and weather inside while
letting in a maximum amount of daylight from the outside.
Indoor waterparks are now part of almost every
new hotel mixed-use project
Three hotel waterpark resorts in Wisconsin Dells
have expanded their recreation to include bigger waterparks, golf, convention
facilities and condominium sales.
Wilderness Resort & Golf mixes golf with three indoor
waterparks, an outdoor waterpark and detached villas that you can purchase
or rent by the night.
Kalahari Resort has the largest (125,000 sf) indoor
waterpark in the USA. Several years ago, the resort added 167 three-bedroom
condominiums that were sold to individual owners, bringing the total rentable
units to 738. The resort also built a 60,000 sf outdoor waterpark
and a 125,000 sf convention center on site --- creating the largest residential
resort and convention destination in the state of Wisconsin. Recently,
the resort purchased nearby golf course, Trapper’s Turn, extending the
Hotel Indoor Waterparks Create Strong Magnets for
Chula Vista Resort is opening its 80,000 sf indoor waterpark
in August 2006, which is part of the resort’s $200 million expansion plan.
“When the four-year project is completed, the 300-room Chula Vista will
be about triple its current size,” said owner Mike Kaminski. Much
of the resort’s expansion will include condominium units available for
purchase or rent. When the expansion is completed in 2009, Chula
Vista will have about 1000 condos and hotel rooms, 100,000 sf of waterpark
and 200,000 sf of convention space.
The owners of Boyne Mountain Ski Resort in northwest
Michigan built a new 220-unit condo-hotel and 83,000 sf indoor waterpark
to complement its ski, golf & conference business and help the resort
regain its footing as the No. 1 ski resort in the Midwest. These
new facilities, which opened in May 2005, are the first time a hotel indoor
waterpark has been mixed with a major ski resort and vacation home community.
Massanutten Resort in McGaheysville VA opened a 42,000
sf indoor waterpark as part of its thriving four season resort and community
of over 600 single-family homes, 900 timeshare units and a multi-million
dollar ski business. Massanutten is the second ski resort in the
nation to build an indoor waterpark. When the waterpark project was
announced, timeshare and condo sales increased dramatically.
In May 2006, Jeff Wirth of the Wirth Companies opened
his Grand Lodge & Waterpark of America near the Mall of America in
Bloomington MN. With 403 rooms, 70,000 sf of indoor waterpark and
a 10-story waterslide tower, the facility is an excellent example of a
hotel indoor waterpark mixed with a major regional shopping mall.
In June 2006, Schlitterbahn Galveston Island Waterpark
opened Wasserfest, the world’s first indoor-outdoor convertible waterpark.
Wasserfest is a 70,000 sf area that is covered by a retractable roof, which
allows the park to remain open year round and function as an indoor waterpark
during the colder months --- and the inclement weather in warmer months.
No more worries of a passing thunderstorm ruining your fun. The translucent
roof keeps the rain out and lets the light in. It’s not attached
to a hotel, but Moody Gardens Hotel, Spa & Convention Center are right
next door with 428 rooms, 100,000 sf of meeting space, 242 acre botanical
gardens, an aquarium and I-MAX theater. Schlitterbahn will also construct
an array of three tubing rivers that connect all sections of the 26-acre
park together. This is almost the ultimate example of an indoor waterpark
as part of a mixed-use recreational resort, convention center and tourist
Holiday Inn Express in Dundee MI is scheduled to add
another 100 rooms to its existing 76 rooms and open a 53,000 sf River Run
indoor waterpark in September 2006. The hotel indoor waterpark is
adjacent to Cabella’s Outfitters, which boasts six million visitors a year.
The mixed-use project blends lodging, recreation, entertainment and retail.
Ramada DFW & Big Splash Waterpark in Irving TX is
converting 150 hotel rooms into 70 condo units that will be sold to private
owners. The renovation, scheduled for completion in September 2006,
includes a Deseo Spa, Oceano Restaurant and Big Splash Waterpark --- mixing
health, fitness, food and water fun in a residential resort environment.
Great Wolf Lodge in Cincinnati OH expects to open its
401 suites, 40,000 sf conference center and 78,000 sf indoor waterpark
in October 2006. The hotel waterpark resort is situated adjacent
to Kings Island, one of the nation’s busiest summertime attractions with
3.5 million visitors annually. Kings Island is expecting Great Wolf
Lodge to make the theme park a year round tourist destination. This
mixed-use project blends a hotel indoor waterpark with a major attraction
to create a stronger recreation-entertainment magnet in the region.
Surfparks LLC, Ron Jon Surf Shop and a shopping mall
owner (Belz) broke ground on a $8.5 million Ron Jon Indoor Surfpark at
Festival Bay Mall on International Drive in Orlando. The indoor surfpark,
first of its kind in the world, is expected to open in October 2006.
The surfpark is being built as the world’s first and finest wave riding
facilities utilizing new technology to create the perfect surf in a pool.
Using the pool’s shape and adjustable floor system to configure a variety
of waves, the surfpark will generate up to 6 waves per minute and wave
heights from 5 to 8 feet and ride lengths from 60 to 100 yards for all
skill levels from beginner to the experienced surfer. This facility
is another example of an indoor waterpark mixed with a major retail shopping
Jellystone RV & Outdoor Waterpark in Warrens-Tomah
WI is under construction with a 48,000 sf indoor waterpark scheduled to
open in November 2006. Hotel rooms are planned in the future.
This is the first known example of an indoor waterpark mixed with an RV
Famous Dave Anderson, owner of the nationwide barbeque
restaurant chain, announced his 611-room W Hotel, 80,000 sf indoor waterpark,
3 restaurants, spa and 12,000 sf conference center to be built near Six
Flags Great America theme park in Gurnee IL --- just north of Chicago.
The proximity of the two facilities will, in fact, create a stronger recreational
resort destination that will compete with Wisconsin Dells.
Grand Sierra Resort & Casino in Reno NV has started
its renovation and expansion of the 1995-room former Reno Hilton.
The property sits on 148 acres with a 30-acre lake. Plans include
converting 824 hotel rooms to condominiums, developing 2000 residential
condos and remodeling the entire hotel. New additions include a 50,000
sf outdoor waterpark and a 150,000 sf indoor waterpark, which will become
one of the largest hotel waterpark resorts in the USA. The casino
will be relocated and reduced in size. The Grand Sierra Resort &
Casino is an excellent example of adding indoor-outdoor waterparks to a
mixed-use project that includes a casino in a recreational-entertainment
residential resort environment.
In August 2006, the owners of the Alabama Adventure
Outdoor Waterpark in Birmingham AL announced plans to build a 280-room
hotel with 77,000 sf indoor waterpark on site. This is the first
example of an outdoor waterpark owner creating a mixed-use project that
includes a hotel with indoor waterpark.
Hotel indoor waterparks: are they growing?
Richard Mladick and Jerry Hug of Waveyard Development
LLC in Scottsdale AZ recently announced their plan to build the world’s
largest adventure park and resort destination to include a 320-room resort
hotel, 150 resort villas, 30,000 sf conference center, spa & wellness
center, a massive sand beach, numerous restaurants, a 55,000 sf indoor
waterpark, 150,000 sf of sports & entertainment retail, 30,000 sf of
office space, an amphitheater and numerous residential communities.
Waveyard’s surfing pool will be the largest, most revolutionary wave pool
constructed in the USA, featuring over 150,000 sf of water surface.
The pool’s unique design and technology will be capable of producing waves
up to 12-feet high but will provide wave configurations suitable for all
riders. Another feature of the resort will be the world’s largest,
multi-channel whitewater river course, designed by the team that designed,
engineered and manages the US Whitewater Center in Charlotte NC.
The proposed whitewater river course in Arizona will offer a convenient
destination for whitewater rafters and kayakers without the time and expense
of traveling to the back country. Other key features of Waveyard
Resort includes a skatepark, diving & snorkeling lagoon, a climbing
center, a ropes course, a series of fly fishing ponds and a mountain bike
course. This mixed use recreational resort destination represents
the ultimate in mixed use development.
Hotels with indoor waterparks will grow to a forecast
of 144 by year end 2006, up 33% from 108 in 2005. Seventy-three (73)
new hotel waterpark additions and expansion projects are under construction
or will break ground during 2006. Thirteen (13) have already opened
during the first half of the year. A total of 36 hotel indoor waterparks
with 6,004 rooms and 1,095,440 square feet of waterpark are expected to
open before year end 2006. Another 37 are under construction and
scheduled to open in 2007.
Hotel indoor waterparks: are they a good investment?
Hotels with indoor waterparks achieve higher occupancy,
increased room rates and higher room revenues than hotels without indoor
waterparks. We surveyed a group of upscale hotel waterpark resorts
to compare their total project costs with the amount of cash they generated.
Due to running higher occupancies, capturing the waterpark premiums and
achieving higher levels of spending for food & beverage compared to
properties without indoor waterparks, these properties more than offset
the cost of building and operating the waterpark. This group of upscale
hotel waterpark resorts generated a cash-on-cost return from 14% to 24%
--- compared to returns of 10% to 12% for comparable properties without
Based on the higher occupancies, higher room rates
and higher room revenues of hotel waterpark resorts compared to traditional
hotels combined with the geometric increase in new construction and development
activity each year, it is clear to us that waterpark resorts generate higher
returns compared to costs. But that’s our opinion, based on our research.
Lodging, recreation and entertainment concepts are
merging. Almost every hotel waterpark resort project includes the
condo-hotel concept. And more and more hotel waterparks are part
of mixed-use developments that include lodging, recreation, entertainment,
retail, residential and office components.
Hotel indoor waterparks: are they part of your
next mixed-use project?
Jeff Coy is president of JLC Hospitality Consulting
based in Cave Creek AZ.
You can reach him at 480-488-8050 or
email him at email@example.com
go to www.jeffcoy.com.
Bill Haralson is president of William L. Haralson
& Associates of Ruidoso NM.
You can contact him at 505-258-1522
or email firstname.lastname@example.org
go to www.wlha-inc.com.