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Come On In: The Water’s Always Fine

Written by: David Kiley | Business Week

Hotels are racing to build indoor water parks, which offer family fun whatever the weather

The beaches at the Lake Erie resort community of Sandusky, Ohio, are empty, the marina is closed, and the parks are covered in snow. But the Kalahari resort in town is packed.

One of three hotels in Sandusky that have built indoor water parks to lure off-season tourists, the Kalahari offers four acres of rides and one million gallons of water under a giant high-tech plastic roof designed to allow visitors to sunbathe. As infants splash in a wading pool, teens careen through a giant blue plastic tube that is longer than a football field. Adults raft down an artificial river past waterfalls and geysers—that is, the adults who aren’t treating themselves to tropical drinks at the African-themed restaurant.

One recent visitor was Cleveland attorney John Buchanan, who has traveled to Sandusky with his wife and two children twice over the past two months to go to the water parks at the Kalahari resort and Great Wolf Lodge. He plans to visit the town two more times before the winter is over. There are “a lot of weekends to kill between Thanksgiving and Easter for an 8- and 11-year-old,” says Buchanan.

Families like the Buchanans are driving the latest fad in the hotel industry: the construction of indoor water parks. Over the next two years, nearly 100 of these complexes are scheduled to be built, according to William L. Haralson Associates, a hotel industry consultancy based in Alto, N.M., that publishes an annual report on water parks. The building boom will boost the total number of indoor water parks in America by 55%, from 180 to 280.

Putting up an indoor water park costs about $20 million to $60 million besides the cost of the hotel, but it pays for itself fairly quickly. In June, Focus Hospitality Services, a Valparaiso (Ind.) company that owns 40 hotels, built a 25,000-square-foot water park at a Holiday Inn Express it owns in Dundee, Mich. At the time, Focus doubled the size of the hotel to 163 rooms. Before the addition of the water park, the hotel generated about $100 per room per night. The new, larger version of the hotel has the same occupancy rate but generates $188 per room, according to Dean Morgan, president of Focus Hospitality. At Wilderness Resorts in Wisconsin Dells, Wis., one of the most popular water parks in the country, room rates can reach as high as $700 per night. Day rates for non-guests run about $34.

Although most indoor water parks are in the snow belt, more are cropping up in warmer climates. Westgate Smoky Mountain Resort in Gatlinburg, Tenn. opened a 60,000 sq. ft. park last year. And The Great Wolf Resorts (WOLF), a chain of 11 hotels with indoor water parks based in Madison, Wis., opened up its southernmost location near Dallas last June. An increasing number of the complexes are also opening next to destination retailers, such as outdoor recreation store Cabela’s.

As indoor water parks become more popular, they are becoming more elaborate. A project that Kalahari Resorts is building in Fredericksburg, Va., next year will also have bowling alleys, a spa, and miniature golf. “Diversification is the next big thing. Eventually everyone has to get out of the water,” says Todd Nelson, CEO of Kalahari Resorts.

Fredericksburg officials are hoping the project will transform the economy of the Civil War battlefield town located between Washington, D.C., and Richmond, Va., along Interstate 95. The water park will be 125,000 sq. ft., adjacent to a 100,000-sq.-ft. conference center and hotel with 700 rooms. The town’s economic development director, Kevin M. Gullette, predicts that the water park will add 1,000 new service jobs. “From what we have seen in other parks, this turns us from being a place to get off the highway to a better destination for meetings and for families for weekend and day trips,” says Gullette.