All in on wellness

Hotels will need to adapt their wellness offerings, as guests look to a broader offering than just pampering. And if hotel owners make a commitment to major wellness facilities, they will need a significant investment, and patience to wait for the returns.  

The latest report from consultants RLA Global points out that wellness hotels performed relatively well through the pandemic. But, warns group CEO Roger Allen, it’s necessary to take close account of the detailed numbers, when considering how well a resort property actually performs.  

The report notes that the pandemic strengthened consumers’ focus on physical and mental health, and that translated into an increased demand for wellbeing and wellness offerings.  

“Our data mining revealed some interesting performance observations,” said Allen, whose annual survey splits hotels into three types: those with a major wellness offering, those with a minor offering, and properties with no wellness facilities.  

Chief among these is that hotels with major wellness offerings generated close to 144% more trevpar in 2020, compared to those without such facilities. This is in large part down to a higher ADR that hotels with facilities can charge, with RLA reckoning the advantage at 65%.  

Major wellness hotels also created significantly higher f&b revenues, calculated at an average USD1.022m per outlet, compared with USD0.862m for minor wellness properties, and USD0.726m at hotels without a wellness offering.  

“When we look at the GOP level, it can be revealing,” Allen told Hotel Analyst. “Look at the topline performance of major wellness hotels and they look to be outperforming. But minor wellness outperforms in profit conversion.”  

The report notes “simply adding wellbeing or wellness features doesn’t necessarily translate into higher revenues per room” – it needs to be done right, and with a commitment to quality.  

Two key features have enabled wellness hotels to weather the pandemic environment better than initially expected. Local tourism and staycations have been a feature, due to reduced long distance travel, with leisure travellers reallocating travel spend to pampering. And urban hotels with wellness often attract a significant local clientele from the local community – who were largely able to continue visiting.  

RLA notes that, in order to achieve the results recorded, investors need to be prepared to play the long game, honing an investment in wellness so that the significant increased running costs of labour, energy etc can be offset by a targeted approach towards marketing the location, setting room rates at appropriate levels and deftly selling ancillary services such as f&b, in order to capture the higher returns.  

The pandemic saw wellness operations continue to drive profits, such that hotels with significant wellness operations performed relatively strongly. “Luxury hotels saw an increase in their average spending due to less price-sensitive guests and leveraged leisure and wellness streams,” notes the report. “Meanwhile, hotels with no wellness had little room for adaptability… and had significantly lower levels of GOP during 2020.”  

“Certainly the pandemic has accelerated trends in the wellness industry that are now expected to become major considerations when developing real estate assets,” said Allen. “However, stakeholders must measure the concrete effects of wellness investments in advance, with a focus on managing expectations of future profit.” 

The pandemic has also broadened consumer expectations of wellness. No longer is it just about physical pampering, as mental and spiritual health have become more significant. And sustainability has come into the mix more significantly, with an expectation that “travel serves to better both the natural environment and the local community”.  

These trends mean hotel developers need to consider designing on a more holistic basis, so that wellness is woven into a property. A guest will be looking for cues around the use of natural materials, greener air and water management, and considered indoor and outdoor spaces.  

Villas and homes grabbing the attention of consumers during the pandemic, as the desire for a safe private space was enhanced. This phenomenon could also impact the branded residences market, says RLA in its report, as these combine both the safety element, as well as the hotel-style service support that a hotel brand offers. And many branded residence projects are able to provide a wellness offering too.  

RLA notes that branded residences have been looked at by brands outside the hotel space such as Porsche, Armani and Nobu, and “it may only be a matter of time before consumer wellness brands join as well”. For example, Swiss skincare brand La Prairie opened its first branded residence during 2020, in Hong Kong.  

Looking further ahead, trends on the horizon include the concept of the wellness community, and medical wellness developments. As the report notes, the former taps into older age groups, who “have different perspectives on ageing than previous generations”, and look for places to live that focus not on maintaining health in retirement, but on a broader wellness lifestyle. Such developments are already being market tested, with live projects in the USA. “We believe that with a heightened interest in wellness living, the concept of dedicated wellness residential communities is a real estate trend whose time has come.” 

Allen is also speaking to developers looking at medical opportunities, and he says one project in Switzerland will include an oncology unit, designed to support guests both pre- and post-treatment. “I think there’s going to be a massive trend in medical wellness – and we’re seeing a number of these, backed by major funds.” But, he points out, there are so far no major medical brands resonating with consumers, that have actually moved outside their home markets.  

HA Perspective [by Andrew Sangster]: It is tempting to read the key findings of the report we mention above and think that you just need to stick in a spa and all will be well, so to speak. But it’s a little more complex than that. 

The main takeaway for me is that wellness need not be the black hole that most operators I talk to believe it is. Ask the average hotelier who operates a swimming pool what they think the ROI on it is and you are not likely to get a positive answer. 

Wellness is a niche business but with the right focus it can be a very profitable niche. What is unlikely to happen, however, is a mass conversion to full fat (that should be low fat I guess) wellness offers. A more pragmatic approach is to incorporate an awareness of wellness into the overall brand architecture of the biggest brands. 

 

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