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Report: Leisure shift drives wellness real estate during the pandemic

24 Sep 2021
Hotels with wellness revenues exceeding US$1m (€852,700, £731,700) generated nearly 75 per cent more in total revenue per available room (TRevPAR) in 2020, compared to locations with wellness revenues of less than US$1m.

The figure was revealed in the latest Wellness Real Estate Report from Resources for Leisure Assets Global (RLA Global) – an international consultancy specialising in leisure and wellbeing in real estate.

Findings showed hotels with significant wellness offerings were able to harness pent-up leisure demand to drive both revenues and 65 per cent higher average daily rate (ADR), despite restrictions to travel.

The pandemic cut revenues and profits in 2020 due to lockdowns and restricted air travel, but also led to an increased demand for wellbeing and wellness offerings as guests focused more on health.

Roger Allen, group CEO of RLA Global, said: “Uncertainty and restrictions have meant that tourism now has a domestic leaning, with money being saved on flights and transfers, and reallocated to local hotel, leisure and wellness experiences.

“This meant hotels with major wellness offerings were better positioned, allowing them to drive revenue by attracting local guests to use their spa, F&B, leisure and sport facilities, pools and beaches.”

Demand for wellness is on the rise
“One positive outcome we’ve seen from the pandemic has been an increase in demand for hotels with major wellness offerings,” Allen told Spa Business.

“Those assets in the position to meet this demand, have seen 17 per cent or US$88.70 (€75.6, £64.7) more revenue per occupied room than those with minor wellness propositions.

“It’s a trend we expect to see continue for the foreseeable future as guests who’ve been forced to stay at home are looking to treat themselves with transformational holidays.”

RLA Global cautioned that more extensive wellness offerings typically had higher operating costs because of increased energy, maintenance, utility and payroll expenses – operating costs which meant that close attention must be paid to ensure profitability.

Allen said: “Those considering investing in wellness must take a long-term approach to understand if the wellness offering will provide a competitive advantage and whether the revenue generated will provide a reasonable rate of return.”

The latest trends in wellness
The pandemic has accelerated a number of trends in the wellness and wellbeing space, among them demand for secluded privacy, with guests seeking villa-style resorts and hotels that offer a design with a clear Covid-safe environment and larger common areas.

The report indicated that branded residences met the demand for stays in less crowded, non-urban environments, with the additional ability to work away from the office attracting potential owners as well as hospitality companies looking to add an additional string to their bows.

Riyan Itani, MRICS director of international development consultancy at Savills, said: “The concept of branded residences, from its inception, has been based on the provision of services and facilities that one would typically find in a hotel.

“Wellness and wellbeing amenities have therefore been a prerequisite of any competitive branded project. As the global markets mature, the provision of a pool, a gym and concierge services in a building is no longer seen as competitively differentiated.

“We’re now seeing more experiential aspects being added as standard. A number of operators are exploring more medicalised and diagnostic services and facilities either on-site or in partnership with nearby medical centres.”

Medical wellness also saw a boost from the pandemic, with centres combining best practices from eastern and western medical disciplines.

While the hybrid medical wellness traveller typically stayed longer and spent more than the average wellness-only tourist, the costs involved in the facility set-up were generally higher as well.

A further trend that was accelerated by the pandemic and has implications across all hotel operations, not solely wellness, was the use of technology.

Consumers have become adept at using wellness apps to maintain physical and mental health in their own homes and this, alongside the expansion of wellness and fitness apps, will present hotel operators with the dilemma of how to integrate and personalise suitable technology with the bricks and mortar of the hotel wellness experience.

To access the Wellness Real Estate Report in full, head to this link.

About the report
Conducted by RLA Global, 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.

The publication is designed 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.

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