There’s 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
– Roger Allen

Wellness offerings can significantly boost hotel revenues and profits, but developers and investors must carefully assess their impacts on real estate to achieve targeted returns, according to a recent industry study.

Conducted by Resources for Leisure Assets, (RLA), The Wellness Real Estate Report uses market data from P&L benchmarking company, HotStats, on the financial performance of 3,200 international hotels of all classes, to provide insights on how wellbeing and wellness may contribute to the existing business or planned projects of investors and developers on the revenue and profit levels.

“There’s 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," said Roger Allen, Group CEO at RLA.

Data showed that resorts and hotels with major wellness operations generated 43 per cent higher total revenues per available room (TrevPAR) in 2019, than their peers with no wellness offerings.

However, it also indicated that simply adding wellness or wellbeing features doesn't necessarily translate into higher TrevPAR, as hotels and resorts with minor wellness offerings recorded almost 6 per cent less TRevPAR compared to those with no wellness facilities at all.

Furthermore, the paper highlights that running large wellness operations doesn’t automatically lead to better bottom-line performance, as associated expenses may eat away at profits.

The data indicated that hotels with significant wellness offerings achieved lower operating profit conversion than those with minor or no wellness operations in 2019.

According to Allen, the main takeaways from the paper for potential investors and developers in wellness real estate are as follows:

• Make sure to select the right business model for wellness facilities and services
• Determine how much of the real estate should be dedicated to wellness
• Don’t underestimate the importance of location
• Ensure there is a wellbeing or wellness proposition that differentiates the property

The paper outlines that real estate markets were greatly affected by new customer expectations and socio-economic factors in recent years, including increasing health-consciousness, which led to more spa visits and higher spend at wellness facilities.

In particular, thermal and mineral springs grew in popularity due to rising demand for authentic and natural spa experiences, and wellbeing offerings became integrated throughout the property rather than focusing only on the spa area.

Widespread concerns relating to the pandemic also further strengthened customer focus on health, which translated into increased demand for wellbeing services.

To read the full report, click here.

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