Dissecting the fragmented wellness market

INTERNATIONAL REPORT — Wellness hotels need to do a better job of fitting longevity needs into their guest’s daily health routines, according to the 2024 RLA Global “Wellness Real Estate Report.”

The report said wellness-oriented hotels need to be more aware of health-improving habits and biohacking rituals that their guests fit into their daily lifestyles. This may mean operators need to look beyond traditional amenities, including how F&B menus are put together and what type of exercise equipment or sleep amenities are offered in guest rooms.

The study also found that wellness facilities now form a core element of the value proposition for branded residence developments worldwide, especially in the global hotspot of Dubai. Some wellness amenities are obvious (gym, outdoor or indoor pools, sauna or spa treatment rooms), while others are more trendy (relax lounges or vitality pools).

The RLA Global study also said that integrating artificial intelligence in wellness hospitality holds a significant promise for enhancing the guest experience, optimizing operations, and personalizing services.

The report evaluated average hotel performance based on data from HotStats for over 11,000 hotels worldwide. It puts hotels in three categories, depending on the revenue level that comes from wellness and leisure: major wellness, minor wellness or no wellness. The study focused on hotels on the luxury, upper upscale, and upscale chain scales. Click here for a copy of the report.

Wellness performance

The report found that in 2023, major wellness hotels had the highest ADR at $210 and a 65% higher TRevPAR than their minor wellness counterparts. However, major wellness hotels only saw a modest 6% year-over-year increase in TRevPAR and a 1% decline in ADR.

Minor wellness hotels were able to drive a 29% year-over-year increase in RevPAR and a 26% increase in TRevPAR.

Major wellness hotels also drove significantly higher leisure revenue per occupied room ($90.05) than their minor wellness counterparts. Major wellness properties showed a 7% increase in leisure revenue per occupied room, while minor wellness growth was stagnant.

In terms of general operating profit, major wellness properties have a 21% higher GOPPAR than minor wellness facilities and 34% higher than hotels with no wellness component. GOPPAR was down for major wellness hotels compared to 2022 because of a 2% higher payroll, while GOPPAR increased for the minor wellness properties.

According to the report, minor wellness hotels’ 26% TRevPAR growth and 41% GOPPAR growth underline the category’s appeal for investors and operators. When considering investment in wellness, it’s important to remember that higher conversion doesn’t necessarily result in increased cash returns. Although profit might be higher for major wellness properties, they also need more resources and have higher costs, which would mean a lower return on investment and longer payback.

Not surprisingly, luxury properties had higher GOPPAR numbers in all three wellness categories, and luxury with major wellness had GOPPAR 164% higher than upper upscale. However, upper upscale properties tend to outperform luxury properties, with higher profit performance in all three categories.

Upper upscale properties with major wellness had a profit conversion five points higher than luxury and upscale in the same wellness category, and upper upscale with minor wellness is also ahead of luxury and upscale in the same category in terms of GOP.