BERLIN—Hotels with wellness offerings had strong TRevPAR growth in 2022 as markets benefited from a recovery in demand, hospitality advisor RLA Global said in its Wellness Real Estate Report 2023, released during this year’s International Hospitality Investment Forum (IHIF) in Berlin. Hotels with major wellness offerings outperformed those properties with minor wellness offerings in revenue and occupancy, but they recorded lower GOP-to-revenue ratios. Revenues at wellness hotels rose sharply in 2022 as demand rebounded despite economic and geopolitical difficulties, data from the Wellness Real Estate Report 2023 show.
Average TRevPAR rose by over 53 percent on the year in 2022 at hotels with “minor wellness” offerings—that is, those generating less than $1 million or 10 percent of total revenue from wellness and leisure. TRevPAR climbed by nearly 47 percent, at “major wellness” properties, where wellness and leisure account for over $1 million or 10 percent of total revenue. The Americas took the lead in global TRevPAR performance.
Guest spending in 2022 was the highest at hotels with major wellness, which outperformed minor wellness properties in absolute TRevPAR and occupancy. But major wellness hotels often face higher costs, which explains why properties with minor wellness had a 5 percentage point higher GOP-to-revenue ratio, and an 8 percentage point stronger total operating performance last year.
“Although the category of major wellness hotels takes all the plaudits for property-level top-line performance, it does come with higher operating costs, which results in lower GOP-to-revenue ratio and operating profit performance to total revenue,” said Roger A. Allen, Group CEO of RLA Global. “This is precisely where the minor wellness category indicates potentially better cash returns, [and this is also why] investors need to give a serious consideration to the overall wellness concept of the development at the planning stage.”
“Key hotel expense lines saw growth above and beyond inflation in most regions, making it vitally important that hoteliers were able to drive top line performance to offset. Energy costs, operational labor costs and guest supplies in particular challenged hoteliers to focus on efficiency and while this meant resorts and wellness offering became a lot more challenging to manage, experiential demand drove guest spend, resulting in what was an excellent year from a profitability point of view,” added Michael Grove, CEO of HotStats.
Wellness Industry Has Staying Power
Hotels with wellness offerings were in general supported by the overall recovery of the global hotel market in 2022, despite increased inflation, difficulties caused by the war in Ukraine and the disastrous effects of the Covid-19 pandemic. Although hospitality was still in recovery mode, the wellness industry was going from strength to strength, which may support a fairly positive market outlook.
“As a global operator of spas, it is enlightening to see the rebound growth post Covid of wellness,” said Michael J Newcombe, Vice President Wellness, Four Seasons Hotels and Resorts. “The Americas’ strong TRevPAR performance is also good for the global economy as the wellness criteria is influential on travel and ultimately customer destination preferences, so that could be one factor for the accelerated growth in the Americas. Indications are that wellness will continue to dominate industry growth trends for the foreseeable future.”
The Wellness Real Estate Report 2023 also discusses how the standout trends of branded residences, technology innovations, and community-based wellness as well as adventure activities will continue impacting wellness real estate and provide development and operational teams with experiences that can broaden the service offering, strengthen guest engagement and improve hotel performance.
The Wellness Real Estate Report 2023, now in its fourth year of publication, evaluates average hotel performance based on data from P&L benchmarking firm HotStats, covering about 2,600 major, minor and no-wellness hotels of all classes worldwide. Processing property-level KPI results, such as ADR, occupancy rates, TRevPAR, GOPPAR and GOP, the report presents how wellness contributes to hotel revenue flows and operating costs, and what effects it has on margins and overall profits.
