Indoor Waterparks Supply and Demand Growth in ‘07

Indoor Waterparks Supply and Demand Growth in ‘07 by David Sangree Indoor waterpark resorts continue to expand throughout North America since their inception in the early 1980s, with 95 open facilities in the U.S. and an additional 13 open facilities in Canada, as of August 2007. There are 3,632,100 aquatic square feet and 27,250 hotel rooms associated with indoor waterparks. This family-oriented resort segment has established itself as a viable player in the travel industry and has grown well beyond its original Wisconsin base. By the end of 2007, 23 states and five Canadian provinces will have at least one indoor waterpark resort.

Hotel & Leisure Advisors (H&LA) defines an indoor waterpark resort as a lodging establishment containing an aquatic facility with a minimum of 10,000 square feet of indoor waterpark space with amenities such as slides, tubes and a variety of indoor water play features. Between 1994 and 2006 in the U.S. and Canada, 97 indoor waterpark resorts opened as new construction properties or as additions to existing hotels.

Currently, 16 hotels located in Wisconsin Dells, which is known as the "Waterpark Capital of the World," have indoor waterparks with a total of 4,641 rooms and 748,500 square feet of space. The six largest indoor waterpark resorts in Wisconsin Dells outperformed the franchise Wisconsin Dells non-resort hotels' overall average occupancy by 17 occupancy points and the average daily rate of the non-resort hotels by $112 in 2006. The average daily rate for these properties includes usage of the waterpark.

According to its recent SEC filings, Great Wolf Lodge properties open in 2006 averaged an occupancy level of 63.5 percent with an average daily rate of $240.04. However, certain properties in Midwestern markets have shown a decline in performance due to expanded competition from additional indoor waterpark resorts.

Our research indicates that 25 new indoor waterpark resorts or expansions to resorts are projected to open in 2007 in the U.S. and Canada.

Of the U.S. 25, 18 are new waterpark additions to existing hotels or room additions to existing indoor waterpark resorts. Based on the number of projects that have recently been financed or begun construction, we project that the number of new construction indoor waterpark resorts will grow in 2008.

Because of the strong performance of indoor waterpark resorts in Wisconsin Dells and other locations, many properties are considering development of an indoor waterpark resort.

The number has increased from 190 properties as of June 2006 to 275 properties in August 2007, indicating substantial interest in developing an indoor waterpark project in North America.

The increased availability of indoor waterpark resorts has benefited both the investor and the consumer by providing additional opportunities for families to enjoy time together and by providing additional revenue opportunities for developers. In many U.S. markets there are few or no indoor waterpark resorts, and opportunities exist for new product. However, in some Midwestern markets the supply of product is beginning to outpace demand levels.

David J. Sangree, MAI, CPA, ISHC is President of Hotel & Leisure Advisors, a national hospitality consulting firm. He performs appraisals, feasibility studies, impact studies, and other consulting reports for hotels, resorts, waterparks, golf courses, amusement parks, conference centers, and other leisure properties. He has performed more than 1,000 hotel studies and more than 100 indoor waterpark resort market feasibility and/or appraisal studies across the United States and Canada.

He was formerly employed by US Realty Consultants in Cleveland and Columbus, Pannell Kerr Forster in Chicago, and Westin Hotels in Chicago, New York, Fort Lauderdale, and Cincinnati. Mr. Sangree received his Bachelor of Science degree from Cornell University School of Hotel Administration in 1984. He became a certified public accountant in 1989. He became an MAI member of the Appraisal Institute in 1995 and a member of the International Society of Hospitality Consultants in 1996.

Since 1987, Mr. Sangree has provided consulting services to banks, hotel companies, developers, management companies, and other parties involved in the lodging sector throughout the United States, Canada, and the Caribbean. He has spoken on various hospitality matters at seminars throughout the United States and on Good Morning America. He has written numerous articles for, and is frequently quoted in, magazines, television, and newspapers covering the hospitality field.

He can be reached via telephone at 216-228-7000 or via e-mail at [email protected].