Major wellness hotels - that is, those with wellness-related income of more than US$1mn and 10% of overall revenue - generated 126% more in total revenue per available room (TRevPAR) than those with wellness revenues below these thresholds in 2021, according to the report. This lead was even more pronounced, at 204%, when compared to properties with no wellness income.
Notwithstanding the robust growth in 2021, average TRevPAR at major wellness hotels was still 35% below pre-Covid levels in 2019. But this gap was far wider at 44% and 55%, respectively, at hotels with minor and no wellness offerings, which confirms that major wellness properties were able to drive a stronger recovery performance when compared to minor and no-wellness properties.
Why did hotels with major wellness fare better? First off, the pandemic prompted most operators to come up with new revenue management strategies, often prioritizing average daily rates (ADR) over occupancy. Data from the report show that minor wellness hotels outperformed major wellness properties in terms of occupancy in 2021. But they saw a 12% drop in average ADR from 2019, while major wellness hotels increased ADR by 3% over the same period.
Another factor in the relative success of major wellness hotels was that they undoubtedly benefitted from the generally increased awareness of health following Covid-19, which likely inspired a number of guests to opt for hotels with a wider variety of wellness offerings after restrictions were finally eased. Also, many of these properties operate in natural settings and outside built-up urban areas, attracting customers who wish to avoid crowds in light of the pandemic.
But the stronger recovery of major wellness hotels didn't come down to wellness services only. These are typically upscale or luxury properties, driving higher levels of guest spending, which allowed them not only to boost ADR but to also increase total revenue by occupied room (TRevPOR) - an indicator covering all types of services, such as food & beverage and leisure - by 12% in 2021 from 2019. In this period, TRevPOR at minor wellness hotels fell by nearly 11% in average.
"The 2022 report data for major and minor wellness properties demonstrate the investors’ risk/reward dilemma", RLA Global chairman Marco P. Nijhof said. "Major wellness drives outstanding top line revenues, whilst minor wellness has shown to be stable and resilient with reduced risk".
The analysis of post-Covid revenues shows that major wellness properties have a strong competitive advantage, but it is important to also understand the costs attached to recovery. Major wellness hotels had lower gross operating profit (GOP) levels during the recent period of reduced occupancy, as the cost of delivering the product - even with strong resource management in place - was higher in comparison to minor or no wellness operations.
Managing costs without reducing the guest experience must be coupled with the revised product mix and renewed vigor for delivering this information and service to guests. Wellness investment is not a case of 'build it and they will come'. Selling the product requires a complex mix of blending the service, training the team for outstanding delivery and connecting with guests.
The Wellness Real Estate Report
The third edition of RLA Global’s annual Wellness Real Estate Report examines the financial performance of over 3,200 properties worldwide and comprehensively compares data from 2019 all the way through to 2021. The data were supplied by P&L benchmarking company HotStats and analysed by the RLA Global team to understand the real fiscal impact of wellness on real estate assets.
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About the author: Simon Lee Saunders, RLA Global, Strategic Health & Wellness Advisor
Simon Lee Saunders serves as RLA Global’s Strategic Health & Wellness Consultant. His multi-decade experience has been finely crafted through both professional and personal wellbeing experiences that distinguish his ability to connect with the most diverse projects.
