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Indoor Waterpark Resorts Expand Nationwide

by: David J. Sangree, MAI, CPA, ISHC
April 2004

The indoor waterpark resort concept is demonstrating its strength as a segment of the travel industry, expanding outside its traditional Wisconsin Dells base and spreading nationwide. The following table summarizes the results of our supply analysis of indoor waterpark resorts. We have defined an indoor waterpark resort as a hotel facility connected to an indoor waterpark with a minimum of 10,000 square feet of indoor waterpark space and inclusive of amenities such as slides and tubes. Many hotels with large swimming pools claim to have an indoor waterpark; however, our definition of a 10,000 square foot minimum waterpark space restricts the use of resort to those facilities which have a variety of slides, pools and tubes.

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chart
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The table indicates that there are currently 39 indoor waterpark resorts located in the United States with the vast majority located in Wisconsin. In addition, there are five indoor waterpark resorts located in Canada, although, many other hotels in Canada offer smaller indoor waterpark spaces with less than 10,000 square feet. Of the Wisconsin total, 16 are located in the Wisconsin Dells, which is a traditional summer destination in central Wisconsin. Historically, “The Dells” ran at very high occupancy between Memorial Day and Labor Day, with many of the attractions and hotels closed down for the rest of the year. Beginning in 1989 and especially in the mid 1990s, the resort city has achieved national recognition for its indoor waterparks and year-round activities.

Hotel companies, investors and developers have not fully explored the potentials and benefits of indoor waterpark resorts affiliated with a national hotel franchise. The above table shows that only 28% of indoor waterpark resorts are affiliated with a national hotel chain in the United States. Even though the non-franchise resort can benefit from offering a wider variety of indoor waterpark facility, it lacks the benefits of a central reservation system and franchise recognition. In a franchised resort, an indoor waterpark facility is normally considered an additional amenity for guests; which has lead to smaller waterpark facilities for the franchised properties. Even though the franchised resort can benefit from a central reservation system, franchise recognition and corporate marketing, smaller indoor waterpark facilities limit the potential improvement in occupancy and average daily rate.

New Construction

The following table indicates indoor waterpark resorts which opened in 2003 or will open in 2004.

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Indoor Waterpark Resorts Completed
in 2003 / to Open in 2004

Indoor Waterpark Resorts
Location
Rooms
Sq. Ft.
Opening
Splash Lagoon  Erie, PA  367  45,000  2003
Great Wolf Lodge  Kansas City, KS  281  38,000  2003
Great Wolf Lodge  Traverse City, MI  281  38,000 2003
Tundra Lodge  Green Bay, WI  160 20,000 2003
Arrowwood Resort Waterpark Addition  Alexandria, MN 200 38,000 2003
Tan-Tar-A Resort Waterpark Addition  Osage Beach, MO  915 20,000 2003
Wilderness on the Lake  Wisconsin Dells, WI  120 15,000 2003
Holiday Inn Select North Waterpark Addition  Indianapolis, IN  343 30,000 2004
Best Western Waterpark Expansion  Sterling Heights, MI  250 9,000 2004
Grand Rios Resort  Brooklyn Park, MN  225 45,000 2004
Radisson/Castaway Bay Waterpark Addition  Sandusky, OH  237 38,000 2004
Splash Lagoon Expansion  Erie, PA  0 22,500 2004
Blue Harbor Resort  Sheboygan, WI  247 40,000  2004
Cedar Creek Resort  Wausau, WI  140 50,000  2004
Kalahari Condominiums Expansion  Wisconsin Dells, WI  360 125,000  2004
Note: Resorts have a minimum of 10,000 square feet of indoor waterpark space
Source: US Realty Consultants (216-221-9191; April 2004)
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The table indicates that seven waterparks came on line within new resorts or expansions of existing resorts in 2003 in the United States, and that eight more will either open or expand in 2004, all of which are located in northern states. Three of the properties opening in 2004 are adding or expanding waterpark facilities to existing hotels. In the case of the Kalahari, the developers are adding additional sleeping facilities to supplement the existing 378-room, 125,000 square foot indoor waterpark resort.

In addition, there are a number of indoor waterpark resorts known to be in the planning stages in a variety of northern locations throughout the United States. The following table identifies projects currently under consideration.

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The table indicates that we are currently tracking 50 projects with an average of 47,010 square feet of indoor waterpark space. These include expansions of existing hotels and development of new resorts. If all of these facilities are constructed, this would result in over 2,300,000 square feet of new indoor waterpark space. The largest developer of new projects is the Great Lakes Companies out of Madison, Wisconsin with their branded Great Lodge resorts.

The Reward

Indoor waterpark resorts achieve strong success particularly during school vacations including winter and spring breaks, summer break and weekends. The resorts appeal to all children but particularly those up to age 14. The room rates at many of the larger indoor waterpark resorts range from $150 to $475 per night with the rate allowing access for four to six people to the indoor waterpark which otherwise would have an admission price of between $15 to $40 per person per day. Occupancy and ADR levels for the indoor waterpark resorts exceed their traditional hotel competitors due to their popularity during the winter. In the Wisconsin Dells, in 2003 the six largest indoor waterpark resorts had a premium of over 15 occupancy points and $110 ADR over the franchised non-waterpark hotels. The reasons for this premium performance include:

  • Year-round destination resorts
  • Elimination of weather-related vacation risks
  • Wide appeal of water-based recreation
  • Increasing demand for short drive-to getaway vacations
  • Themes with varying levels of appeal
  • Convenient location proximate to customer base within established family acation market
Conclusion

Indoor waterpark resorts have emerged as a leisure destination for families looking for a convenient and affordable weekend getaway or vacation. Historically, the indoor waterpark resorts were located in existing tourist destinations such as the Wisconsin Dells or Sandusky, Ohio. We project continued development of indoor waterpark resorts in the northern United States as they offer an attractive year round leisure opportunity for families and attractive investment returns for developers.

David J. Sangree, MAI, CPA, ISHC is President of Hotel & Leisure Advisors, a national hospitality consulting firm specializing in appraisals, feasibility studies, and impact analysis for hotels, resorts, waterparks, and other leisure real estate. When this article was published, David Sangree was Director of Hospitality Consulting with US Realty Consultants and a Principal in the Cleveland office. 

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Contact:

David J. Sangree, MAI, CPA, ISHC
Hotel & Leisure Advisors
14805 Detroit Avenue, Suite 420
Cleveland, OH 44107-3921
216-228-7000 Phone    216-228-7320 Fax
dsangree@hladvisors.com
www.hladvisors.com

US Realty Consultants
216-221-9191 Phone     216-221-9097 Fax 
www.usrc.com
 

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Also See: Hotel Capitalization Rates Drop Further / May 2005
Cleveland’s Lodging Market: A Slow Climb Back / David J. Sangree & Joseph Pierce/ February 2005
Indoor Waterpark Resorts Continue Impressive Growth in ‘05; a Viable Segment of the Travel / David J. Sangree / January 2005
Indoor Waterpark Resorts Expand Nationwide / David J. Sangree / April 2004
Cleveland Lodging Market at Bottom with Improvement Predicted / US Realty Consultants, Inc. / January 2004
Hotel Capitalization Rates Drop Again / David J. Sangree, MAI, CPA, ISHC / April 2004
Appraisal and Financing of Indoor Waterpark Resorts / David J. Sangree / October 2003
Hotel Capitalization Rates Drop / David J. Sangree, MAI, CPA, ISHC / February 2003


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