July 29, 2020 – Wellbeing and wellness offerings may significantly boost hotel revenues and profits, but developers and investors must carefully assess the tangible impacts of these activities on real estate to achieve targeted returns, according to a new report published by Resources for Leisure Assets (RLA).
The actual value of wellbeing and wellness on the future financial performance of the property is one of the most important factors to consider before starting new projects. Investors and developers must measure the effects of these investments in advance, with a focus on future profit and managed expectations.
The Wellness Real Estate Report, a new industry study by RLA, finds that resorts and hotels with major wellness operations, where annual wellness revenues are totaling more than $1mn and accounting for over 10% of overall property revenue, generated 43% higher TrevPAR in 2019 than their peers with no wellness offerings.
However, simply adding wellbeing or wellness features doesn’t necessarily translate into higher hotel and resort revenues, the report reveals. Last year’s average TrevPAR at properties with minor wellness operations (generating revenue below the thresholds above) was actually 5.8% lower than at hotels with no wellness offerings. The report also highlights that running large wellness operations doesn’t automatically lead to better bottom-line performance as associated expenses may eat away at profits. Data show that hotels with significant wellness offerings achieved lower operating profit conversion than those with minor or no wellness operations in 2019.
“There is great growth potential from the sector, but investors face challenges in assessing the overall value of the wellness offering and a transparent internal rate of return. Wellness and wellbeing investments particularly in the hospitality industry require the same scrutiny as any other real estate transaction,” Roger A. Allen, Group CEO at RLA said.
Evaluating financial impacts is key partially as investors and developers are exploring ways to satisfy new customer expectations and boost operational efficiency in a post-Covid era. Demand for webenabled wellness products and remote healthcare solutions jumped, which may increasingly affect how real estate space is used more efficiently for wellness and fitness activities.
It is also essential for developers and investors to determine what portion of the property will be dedicated to wellbeing and wellness, whereby the location of the asset is also a crucial factor, according to the report. It says resorts and hotels located at healing destinations need a much more specific wellbeing proposition to define and differentiate the property.
Wellbeing hotels are increasingly differentiated from spa hotels and resorts as operators are rolling out new offerings to tap demand for a wider range of health improving experiences. Such experiences are offered through the entire property rather than focusing only on the spa area.
Corresponding the wellness and wellbeing activities to the specific characteristics of the property is important, whilst understanding the direct internal rate of return on investments related to wellbeing remains fundamental, according to the Wellness Real Estate Report.
The report uses market data from P&L benchmarking company HotStats on the financial performance of 3,200 hotels of all classes worldwide to provide actionable insights on how wellbeing and wellness may contribute to the existing business or planned project of investors and developers on the revenue and profit levels.
The full report can be downloaded at www.wellnessrealestatereport.com
For more information, please contact Roger A. Allen, ISHC Group CEO, Resources for Leisure Assets (RLA) Tel: +36 1 920 1025; E-mail: email@example.com
RLA is a recognized global advisory to investors, owners, developers and management companies. Specialized in hospitality, leisure, recreation, wellbeing and health tourism related to hotels, resorts, residential, mixed-use, healthcare, active living communities and destination tourism developments. RLA works closely with the public and private sector in the Americas, Europe, Middle East and Africa to provide conceptual planning, feasibility and financial analysis and asset management of complex properties such as resorts, retreats, destination assets and wellness & spa related operations. Our advisory practice addresses the evolving landscape of the Resort & Hotel sector, Leisure experiential, Spa consulting and Health-Wellness-Medical Tourism & Life Enhancing Destinations. For more information, visit www.RLAglobal.com