Skift Take
Less talk, more data. Here’s how hotels with wellness offerings are doing, according to RLA Global, HotStats, and Truist Securities. Plus, the latest wellness concept: Ballers.
Hotels increasingly consider wellness investments as travelers’ expectations evolve, but what trends are rising, and which services are the most profitable after accounting for everything?
Hotels with wellness offerings saw healthy growth in 2023, according to the Wellness Real Estate Report 2024 by RLA Global, with statistical support from HotStats. Skift got an exclusive first look at the report, which provides a rare quantification of hotel wellness.
For context, Skift also reviewed a Wednesday report by Gregory Miller, a vice president at Truist Securities, and the leading investment banking analyst covering the intersection of wellness and hotels.
We also spoke to David Gutstadt, who was recruited by Equinox Fitness and the Related Companies to oversee the development of Equinox Hotels. We asked him and his business partner, Amanda Potter, about what they see as opportunities for hotels in wellness.
Latest Wellness and Hotels Data
Here are key takeaways from RLA’s Wellness Real Estate Report 2024, which defines wellness as encompassing hotel gyms and resort spas as well as meditation, yoga classes, adventure activities, healthful food offerings, and cosmetic or medical care.
The biggest gainers last year were hotels with minor wellness plays, generating less than $1 million or 10% of revenue from wellness. These stood out with an impressive 26% increase in average total revenue per available room, or TRevPAR. That performance was partly driven by higher prices and partly by a 10 percentage point jump in occupancy.
Upper Upscale Hotels Shine
For the first time, the report did an asset class comparison. It found that “upper upscale” hotels performed best in wellness last year, compared with luxury and upscale segments
While luxury hotels with major wellness offerings may have brought in three times more TRevPAR overall, it was the upper upscale category that delivered the best performance in terms of the average daily rate and TRevPAR growth across all wellness designations.
“If it’s to generate a return, the report clearly highlights that most [investors] would be better off having an upper upscale property with some wellness amenities rather than going completely to the high-end of the spectrum,” said Rachael Rothman, head of hotels research at CBRE.
Bigger wasn’t necessarily better. The top five best-performing hotels with minor wellness offerings had higher average daily rates (nearly triple) the top five best-performing major wellness resorts.
They also had better profit conversion (more than 6 percentage points) than major wellness resorts.
Food and Beverage Trends
The report also uncovers some intriguing trends in guest behavior. Food and beverage revenues saw a slight uptick across the board last year, driven mainly by restaurant spend.
However, hotels surveyed experienced a decline in beverage sales and room service revenue — possibly reflecting a shift towards healthier habits and the rise of food delivery apps.
Hotel Spa Performance
Here are some notable points from the Truist report.
- Spa treatment revenue per occupied room was up mid-to-upper 30% relative to 2019 levels, based on an analysis of HotStats data for April.
- “Ultra-luxury hotel profits for the health club/spa on a gross operating profit per occupied room basis has fallen to 24.6% from 26.8% over the last year despite total revenue growth of about 5%,” Miller wrote.
- Spa retail revenue growth was modestly above 2019 levels. However, signs suggest that hotel spa revenue may not keep pace with inflationary product costs.
- Miller noted wellness trends that are emerging across the U.S., including IV therapy, cryotherapy, and medical-themed services.
Fitness Exec Insights
David Gutstadt and Amanda Potter know wellness better than most. They played key roles at wellness brands Equinox and Fitler Club. Their firm, Good City Studio, is about to debut its latest branded wellness concept.
Skift asked Gutstadt and Potter for their take on the opportunities for hotels and wellness. Here are the key points.
- “There is this kind of land rush towards these social sports like pickleball,” Gutstadt said. “They’re operationally efficient, too. You can get a lot more people per square foot into these spaces than on tennis and squash courts.”
- They said they drew from their Equinox experience the value of integrating elements like health, wellness, private clubs, and workspaces into a unified concept. Many resorts fail to do that.
- “Character is missing from a lot of these wellness concepts,” Potter said. “Many take a nice clean column grid new space and fireproof the steel on the top and paint it black and do good lighting and maybe good music, but you know, there’s a little bit of sameness to it.”
New Brand: Ballers
- Gutstadt and Potter told Skift exclusively that they’re about to unveil Ballers, a first-of-its-kind social sports club in Philadelphia’s historic Turbine Hall at the Battery Project in the Fishtown neighborhood.
- Ballers will be a hospitality-driven social sports club. The flagship 45,000 square foot, $10 million project will open this winter with Philly’s first indoor padel courts alongside the ever-popular pickleball, squash courts, a multipurpose turf field, and an indoor golf center, etc.
- “The impetus for the brand was really kind of bringing preppy country clubs with full-service amenities and kind of dirtying them up so to speak,” Potter said. “It’s taking tennis and squash and golf and injecting it with the new trendy sports with the pickle and paddle and layering them on a surprising urban industrial site like the Battery or another venue with character.”
- The company is backed by celebrity athletes Andre Agassi, Tyrese Maxey, and Kim Clijsters. It’s in talks for prime locations in New York City, Boston, DC, and San Francisco. It aims to open 60 venues in the next five years. A few hotel operators have talked to them about a spin-off brand for smaller spaces.
Accommodations Sector Stock Index Performance Year-to-Date
What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.
The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more hotels and short-term rental financial sector performance.