{"id":897,"date":"2020-06-12T15:57:46","date_gmt":"2020-06-12T15:57:46","guid":{"rendered":"http:\/\/www.theparkdb.com\/blog\/?p=897"},"modified":"2024-08-21T20:41:52","modified_gmt":"2024-08-21T20:41:52","slug":"the-attraction-resort-model-part-i-how-a-waterpark-hotel-works","status":"publish","type":"post","link":"https:\/\/www.theparkdb.com\/blog\/the-attraction-resort-model-part-i-how-a-waterpark-hotel-works\/","title":{"rendered":"The Attraction Resort Model, Part I: How a Waterpark Hotel Works"},"content":{"rendered":"\r\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 ez-toc-wrap-left counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.theparkdb.com\/blog\/the-attraction-resort-model-part-i-how-a-waterpark-hotel-works\/#Definition_of_Terms\" title=\"Definition of Terms\">Definition of Terms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.theparkdb.com\/blog\/the-attraction-resort-model-part-i-how-a-waterpark-hotel-works\/#Bundling\" title=\"Bundling\">Bundling<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.theparkdb.com\/blog\/the-attraction-resort-model-part-i-how-a-waterpark-hotel-works\/#The_Waterpark_Hotel_Model\" title=\"The Waterpark Hotel Model\">The Waterpark Hotel Model<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.theparkdb.com\/blog\/the-attraction-resort-model-part-i-how-a-waterpark-hotel-works\/#Theoretically_it_Works_in_Theory\" title=\"Theoretically it Works in Theory\">Theoretically it Works in Theory<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.theparkdb.com\/blog\/the-attraction-resort-model-part-i-how-a-waterpark-hotel-works\/#Theoretical_Financials\" title=\"Theoretical Financials\">Theoretical Financials<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.theparkdb.com\/blog\/the-attraction-resort-model-part-i-how-a-waterpark-hotel-works\/#In_Summary\" title=\"In Summary\">In Summary<\/a><\/li><\/ul><\/nav><\/div>\n\r\n<p>In this series, we&#8217;ll examine the business model of <span style=\"text-decoration: underline;\">attraction or theme park resorts<\/span>.\u00a0 These resorts work, simply, by\u00a0<strong>the attraction raising the value of the land uses around them<\/strong>.<\/p>\r\n<p>\r\n\r\n<\/p>\r\n<p>\r\n\r\n<\/p>\r\n<p>In this post, we examine the business model of a waterpark hotel and propose a framework for decision-making.\u00a0 And although\u00a0this is mostly about waterpark hotels, the model is equally applicable to any leisure amenity-driven resort.<\/p>\r\n<h1><span class=\"ez-toc-section\" id=\"Definition_of_Terms\"><\/span><strong><span style=\"font-size: 56px; font-family: 'EB Garamond';\">Definition of Terms<\/span><\/strong><b><\/b><span class=\"ez-toc-section-end\"><\/span><\/h1>\r\n\r\n\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">What are waterpark hotels?\u00a0 A few examples you would find in the wild: Great Wolf Lodge, Centerparcs, Nickelodeon, and the Atlantis resorts.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">These are resorts with waterparks constructed as their primary amenity, with the defining feature <strong>that access to the waterpark is limited to those staying at the resort<\/strong>.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">As with any attraction type, these lay on an operational spectrum &#8211; a) some allow access to outside guests for a fee, while resort guests get in for free (Atlantis).\u00a0 Others simply b) do not allow outside guests (Great Wolf Lodge, Centerparcs).\u00a0 This latter model is what we&#8217;re exploring in this post, because their business model is distinct.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Also important to mention here are themed hotels or resort hotels such as those found at the Lego, Universal, or Disney Resorts.\u00a0 These are of the former category above (a).\u00a0 Guests staying here often enjoy discounted or bundled pricing to the theme park and waterparks, but a resort stay is <em>not a prerequisite<\/em> to park access.<\/span><\/p>\r\n\r\n\r\n\r\n<h1 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bundling\"><\/span><strong><span style=\"font-size: 56px; font-family: 'EB Garamond';\">Bundling<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Waterpark resorts work using the economic principle of bundling.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Bundling is a pricing decision by which a group of products are grouped together.\u00a0 A consumer pays one price for a group of products or services that is lower than the total price of each product or service, taken separately or a la carte.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">In the United States, our relationship with cable providers is exactly this.\u00a0 Bundling benefits <em><strong>both<\/strong><\/em>\u00a0cable providers and consumers because compared to an a la carte model, it provides more channels at a lower fixed price to consumers, and increases the size of the capturable &#8220;pie&#8221;; revenues from customers.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">If this concept sounds familiar in the theme park industry, your instincts are right.\u00a0 The concept of a modern theme park is exactly that of a bundle as well.<\/span><\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image aligncenter\"><a href=\"http:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Bundle1.png\"><img decoding=\"async\" class=\"wp-image-912\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Bundle1.png\" alt=\"\" \/><\/a><\/figure>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">When Disneyland first opened in 1955, the ticketing mechanism was an a la carte model (pay as you go).<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">One purchased a ticket book containing different tiers of access, and <a href=\"https:\/\/d23.com\/e-ticket-memories-five-favorite-facts-about-ticket-books\/\">exchanged the tickets for single rides or experiences<\/a>.\u00a0 This is where the concept of an E ticket ride comes from; E tickets were rolled out in 1959 as the most prestigious tier of tickets, reserved for the top attractions of the time &#8211; think Matterhorn Bobsleds, the Submarine Voyage, Pirates of the Caribbean, etc.<\/span><\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image aligncenter\"><a href=\"http:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/cf6a41f7e781e1100d14bd1856e4c2e6.jpg\"><img decoding=\"async\" class=\"wp-image-930\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/cf6a41f7e781e1100d14bd1856e4c2e6.jpg\" alt=\"\" \/><\/a><\/figure>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">This was a pay-as-you-go model that had its origins in carnivals and funfairs.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<div>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Over the next few decades, whether by evolution or intelligent design, the entire industry converged on bundle pricing.\u00a0 By 1982, Disneyland had abandoned the a la carte model in favor of a pay-one-price model.\u00a0 It took 2001 for Tokyo Disneyland to do the same, and nearly ten more years for the major parks in Korea, but as of today, there are no major theme parks that operate on an a la carte model.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">And what is the pay-one-price (POP) model?<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\"><span style=\"text-decoration: underline;\">It&#8217;s essentially a bundle<\/span>.\u00a0 One price allows access to all the rides and attractions, at a level lower than purchasing individual tickets to each ride and attraction on a pay-as-you-go basis.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">The POP model is now widely viewed as being more efficient, as decreasing wear and tear, increasing lengths of stay, but most importantly &#8211; it&#8217;s better for the topline.<\/span><\/p>\r\n<\/div>\r\n\r\n\r\n\r\n<h1 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Waterpark_Hotel_Model\"><\/span><strong><span style=\"font-size: 56px; font-family: 'EB Garamond';\">The Waterpark Hotel Model<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Now, how does all this apply to a waterpark hotel?<\/span><\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image aligncenter\"><img decoding=\"async\" class=\"wp-image-914\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Bundle2-1.png\" alt=\"\" \/><\/figure>\r\n\r\n\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Essentially, these resorts are the attraction industry&#8217;s next evolution in bundling.\u00a0 Here, <strong>the experience being bundled is a resort stay with a waterpark visit<\/strong>.\u00a0 Instead of paying for 3+ separate waterpark tickets, and a hotel stay somewhere offsite, the purchase of a single room provides all of the above.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">You could also make the case that many other experiences are also bundled or obviated altogether: such as transportation to\/from the waterpark, afterhours entertainment, overall time savings.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">But unlike in the cable industry, the delivery of physical experiences cannot be replicated at zero marginal cost.\u00a0 It is not a digital product.\u00a0\u00a0As a result, such resorts cannot just faithfully develop a typical hotel and a typical waterpark individually and combine them together.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Instead, both products are scaled down somewhat, but <span style=\"text-decoration: underline;\">emerge as compelling because they are combined<\/span>.\u00a0 On one side, what would be classified as a limited service hotel<strong> gains from being associated with an attraction<\/strong> or outfitted with a theme.\u00a0 On the other side, a scaled-down waterpark of 8,000 square meters in size (compared to a typical outdoor waterpark of 40,000-60,000 sqm) <strong>gains from its tight integration with the accommodations<\/strong>.\u00a0 This is the bundle.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">In so doing, the waterpark resort should see an increase in demand as compared to a typical resort without the amenity.\u00a0 This increased revenue should also more than offset the costs of constructing a resort with a larger-than-normal amenity contained in it.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">So does it work?<\/span><\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Theoretically_it_Works_in_Theory\"><\/span><strong>Theoretically it Works in Theory<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n\r\n\r\n\r\n<p class=\"has-text-align-left\"><span style=\"font-size: 20px; font-family: 'EB Garamond';\">How does a resort make money?<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\"><strong>In a hotel, the two drivers of revenue are its room rate (as measured by ADR or RevPAR) and its occupancy rate<\/strong>.\u00a0 Some hotels do make more money from peripheral operations, yes, but we&#8217;ll keep the example simple for now.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<div>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">To offset the increased cost of the combined resort, either of the two variables &#8211; or both &#8211; need to be higher for an attraction resort compared to a standalone resort operation.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Does this work in practice?\u00a0\u00a0Let&#8217;s take a look at Great Wolf Resorts and Centerparcs, as their financials were\/are public:<\/span><\/p>\r\n<ul>\r\n<li><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Great Wolf Resorts was taken private in 2012 by Apollo Global, but even its last public filing in 2012 revealed some astounding data: ADRs of over $300\/room and 70% occupancy.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Centerparcs&#8217; occupancy as of last year (2019) was even more impressive, at a mind-blowing 97% (virtually full capacity!).<\/span><\/li>\r\n<\/ul>\r\n<figure><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-909\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Metrics.jpg\" width=\"600\" height=\"345\" \/><\/figure>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Let&#8217;s compare these measures against some well-known hotel chains operating in North America and Europe, which are where Great Wolf Lodge and Centerparcs operate.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Great Wolf Lodge&#8217;s ADR <strong><em><span style=\"text-decoration: underline;\">in 2012<\/span>\u00a0<\/em><\/strong>is comparable to that of <span style=\"text-decoration: underline;\">luxury hotel levels<\/span> in 2019, while Centerparcs also holds its own against the Marriott, Hilton, Intercontinental brands, and demolishes everyone else on the occupancy front.<\/span><\/p>\r\n<figure><img decoding=\"async\" class=\"aligncenter wp-image-907\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Comps.jpg\" width=\"600\" height=\"344\" \/><\/figure>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">With primary demand measures outperforming those of their peers, <strong>we can safely say that in theory, the addition of a waterpark to the hotel &#8216;bundle&#8217; can indeed raise revenues<\/strong>.<\/span><\/p>\r\n<\/div>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Theoretical_Financials\"><\/span><strong>Theoretical Financials<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">So revenues may be higher than in a standalone resort, but what about profitability?\u00a0 After all, the development cost of a waterpark and other associated amenities would be substantial.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">First, let&#8217;s take a look at development costs for waterpark hotels and resorts.\u00a0 Of those built and announced in recent years, development costs per room have ranged from $300,000 to $500,000 (USD).\u00a0 These costs are squarely in the <strong><a href=\"https:\/\/www.hvs.com\/article\/8597-HVS-US-Hotel-Development-Cost-Survey-201819\">range of full-service and luxury h<\/a><\/strong><a href=\"https:\/\/www.hvs.com\/article\/8597-HVS-US-Hotel-Development-Cost-Survey-201819\"><strong>otels<\/strong>, according to HVS<\/a>.<\/span><\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image aligncenter\"><img decoding=\"async\" class=\"wp-image-908\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Costs.jpg\" alt=\"\" \/><\/figure>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">But what is the appropriate comp set to use for waterpark hotels?\u00a0 Is the comparison really against a full service\/luxury hotel, or something more economic?\u00a0 What is the hotel class level of a waterpark hotel&#8230;without the waterpark?<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">This is a difficult question to answer, and opinions vary widely.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">The attraction industry heuristic has been that waterpark or resort hotels are essentially motels;\u00a0economy, 3-star hotels with theming slapped on them.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">But we think this might be a little too simplistic, and underestimates the product.\u00a0 FF&amp;E standards have increased over the past decade.\u00a0 We would judge the rooms would at least pass for the limited service\/midscale extended-stay level,\u00a0by\u00a0HVS&#8217; standards &#8211; consider that the former Nickelodeon Hotel (with waterpark) in Orlando has been rebranded as a Holiday Inn Resort,\u00a0squarely in between the midscale and upscale extended stay categories.<\/span><\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image aligncenter\"><a href=\"http:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Pics.png\"><img decoding=\"async\" class=\"wp-image-923\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Pics.png\" alt=\"\" \/><\/a><\/figure>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">You can be the judge (see pictures below), but for the purposes of illustration, we&#8217;ll use the development cost of a <a href=\"https:\/\/www.hvs.com\/article\/8597-HVS-US-Hotel-Development-Cost-Survey-201819\">limited service\/extended stay hotel<\/a> ($150,000\/room) for the comparison.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">So given all of the above, what is the profitability?\u00a0 Let&#8217;s start with an example below.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">A waterpark hotel at the upper end of the development cost range ($500,000\/room) would presumably also generate revenues at the upper end.\u00a0 Great Wolf Lodge&#8217;s total revenues per available room were $430 in 2012, and adjusted for a theoretical 2-3% inflation rate yields $500 by today&#8217;s standards.\u00a0 A 30% margin gets us to a 7-8% return on the development cost.\u00a0 This is indeed a simplistic example.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">All else being equal, this example <span style=\"text-decoration: underline;\">would be equivalent in terms of return rates as developing a limited service hotel<\/span> achieving total revenues of $150\/room (we assume 50% peripheral revenues on top of a $100 ADR).<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">These are illustrated below.<\/span><\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image aligncenter\"><img decoding=\"async\" class=\"wp-image-911\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/Scenario.jpg\" alt=\"\" \/><\/figure>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Both models in the theoretical confines of this chart work beautifully, and you might argue that it&#8217;s too simplistic.\u00a0 But now we have a framework to illustrate the tradeoffs and decisions to be made, like:<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<ul class=\"wp-block-list\">\r\n<li><span style=\"font-size: 20px; font-family: 'EB Garamond';\">What are the relative probabilities\/risks of achieving those revenue &amp; occupancy numbers?\u00a0 Does it make one or the other scenario more probable?<\/span><\/li>\r\n\r\n\r\n\r\n<li><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Are you the 1st, 3rd, 25th limited service hotel in your market or the 1st?\u00a0 What is the likelihood of achieving the illustrated ADR and occupancy rates?<\/span><\/li>\r\n\r\n\r\n\r\n<li><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Are you the 1st waterpark hotel, or are you developing in Orlando, Wisconsin Dells, or Anaheim?\u00a0 If you&#8217;re developing in Orlando, the waterpark hotel scenario is probably less feasible and the project much more risky.\u00a0 By\u00a0contrast, in a less tourist-oriented market, you may have a higher probability of achieving rates at the upper end.<\/span><\/li>\r\n\r\n\r\n\r\n<li><span style=\"font-size: 20px; font-family: 'EB Garamond';\">As part of your waterpark hotel project, will your local municipality offer subsidies\/incentives?\u00a0 This has been a trend lately, especially in North America.\u00a0 Add in these subsidies and your development cost\/room will likely halve or more.<\/span><\/li>\r\n<\/ul>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Here&#8217;s a table to think through those scenarios.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<figure class=\"wp-block-image aligncenter\"><img decoding=\"async\" class=\"wp-image-910\" src=\"https:\/\/www.theparkdb.com\/blog\/wp-content\/uploads\/2020\/06\/ROI.jpg\" alt=\"\" \/><\/figure>\r\n\r\n\r\n\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">Ultimately, a waterpark hotel <strong>is not<\/strong> a magic pill.\u00a0 Through product bundling, <strong>it achieves higher unit revenues<\/strong> (per room) than standalone hotels of similar size and scale.\u00a0 However, these are <strong>offset by higher development costs<\/strong>.\u00a0 Its profitability depends on market characteristics and competition, and decisions about whether it is worth it depend on the potential alternatives.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">But a waterpark hotel is a differentiated product, and has the potential to stand out in a field of hotels.\u00a0 Moreover,\u00a0it has the potential to work well in partnership with governments or municipalities, who may be inclined to provide subsidies and incentives.<\/span><\/p>\r\n\r\n\r\n\r\n<h1 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_Summary\"><\/span><strong><span style=\"font-size: 56px; font-family: 'EB Garamond';\">In Summary<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\r\n\r\n\r\n\r\n<p class=\"has-text-align-left\"><span style=\"font-size: 20px; font-family: 'EB Garamond';\">To return to the initial point: waterpark hotel operations work because of the waterpark.\u00a0 <span style=\"text-decoration: underline;\">It raises the value of the hotel operations in which it is constructed<\/span>.\u00a0 This is the underlying principle of an attraction resort.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p class=\"has-text-align-left\"><span style=\"font-size: 20px; font-family: 'EB Garamond';\">A theme park is a bundle, and a resort another type of bundle.\u00a0\u00a0Bundling is an efficient means of pricing that optimizes revenues.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">This is all to say that in a resort, there are true synergies from the placement of land uses.\u00a0 More on this in Part II, to be continued.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">If you&#8217;re interested in resort planning tools, be sure to consider our <a href=\"https:\/\/store.theparkdb.com\/collections\/sizing-benchmark\/products\/attraction-resort-planning-sizing-detail\">Attraction Resort Sizing and Planning Tool<\/a>.\u00a0 It contains the world&#8217;s top attraction resorts, broken down by detailed size and component.<\/span><\/p>\r\n<p><span style=\"font-size: 20px; font-family: 'EB Garamond';\">\r\n\r\n<\/span><\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>In this series, we&#8217;ll examine the business model of attraction or theme park resorts.\u00a0 These resorts work, simply, by\u00a0the attraction raising the value of the land uses around them. In this post, we examine the business model of a waterpark hotel and propose a framework for decision-making.\u00a0 And although\u00a0this is mostly about waterpark hotels, the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1980,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7,44],"tags":[99,100,101,102,45],"class_list":["post-897","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guides-and-references","category-waterparks","tag-centerparcs","tag-great-wolf","tag-resorts","tag-waterpark-hotels","tag-waterparks"],"acf":{"":"","bfi_title":"","bfi_title_2":"","bfi_description":"","chart_image":"","chart_title":"","chart_description":"","bc_title":"","bc_sub_title":"","bc_content":"","bc_right_side_content":"","highlighted_image":"","highlighted_sub_title":"","highlighted_title":"","highlighted_bottom_text":"","highlighted_button_text":"","highlighted_button_link":"","below_highlighted_title":"","below_highlighted_sub_title":"","below_highlighted_content":"","below_highlighted_right_side_title":"","below_highlighted_list":""},"_links":{"self":[{"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/posts\/897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/comments?post=897"}],"version-history":[{"count":0,"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/posts\/897\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/media\/1980"}],"wp:attachment":[{"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/media?parent=897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/categories?post=897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.theparkdb.com\/blog\/wp-json\/wp\/v2\/tags?post=897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}