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What’ll Drive New Waterpark Hotels?

Written by: Dan Martin | View Author Bio

If you are just coming into the waterpark hotel business today or have been here awhile, it’s time to take a fresh look at the business model. The basic business model is adapting in ways we couldn’t have expected when it all began.

Back then it was to sell access to a great family amenity through high hotel rates. It’s already changed incrementally with more revenues from spas, food and beverage and upgraded rooms but more is coming. Waterpark Hotels are following the path of other ideas that were once simple but changed opportunistically.

Often it’s helpful to look at a changing situation through the eyes of a similar one that’s further along. Outlet malls, yes outlet malls, are a surprising, but useful analogy. They spread across the US in the 1980’s.

Their basic value proposition was that people would drive thirty or more miles out of town to shed-like buildings just off the interstate (where they wouldn’t offend department stores). The payoff was a really good deal and a slightly thrilling feel to the buying experience – like buying from the back of a truck next to a warehouse down at the docks.

Outlet center developers and Outlet retailers themselves wanted to get closer to their customers so they seized the opportunity to get closer to metro areas when department store power waned.

They crept closer to their customers reaching the suburbs about ten years ago and now there are outlet centers everywhere including many resort destinations. But they’re not all the same. The mix of tenants varies with location. Classy upscale centers, with tenants to match, were built in areas where there was the potential of a steady flow of upscale customers. Midscale facilities found even more spots to access their markets. In time virtually all clothing and accessories brands piled into this new distribution channel.

There were experiments. Off- price retailers mixed with outlets and entertainment in the more than a dozen Mills Malls with 1 to2 million square feet and a theatrical sense. Clusters of outlet centers became destinations like the million square feet around San Marcos, Texas (near Schlitterbahn). Some outlet retailers boldly followed customers home to traditional centers. Some stores stopped calling themselves outlets.

The most recent change shows the category nearing maturity – consolidation.
Once there were close to a hundred outlet center owners now there‘s just a handful of companies that own the overwhelming majority of all centers. Some older facilities, too far from customers, not attractive enough, or simply not well amenitized have been torn down or are shadows of their once profitable past – – Reading, PA and Kenosha, WI forexample. Outlets took about eight years to go through adolescence. Now we know that they work in many different settings.
Waterpark hotels are following a similar path– some of the original waterpark hotels are already gone. The hotel industry itself has consolidated into a handful of brand families with many investors. Also like outlets, waterpark hotels have followed their customers home with many new metro area locations. The water park’s role is changing too. It’s not always the lead economic dog. Increasingly it draws a flow of family business to what otherwise might be termed a business hotel.

As you contemplate new locations, you will have to determine what flows of business you will build your hotel business model on, what role the waterpark have in it, and what other amenities will you need.

It’s important to recognize that while all of those flows will pay to stay, they might not all use the waterpark. Young families who can afford $200 a night are likely to be your most profitable flows as they’ll pay the premium ADR for waterpark access but there have to be enough of them to make the waterpark worth it.

A checklist of available flows or markets:

  • business travelers,
  • non-family leisure travelers
  • extended stay patrons
  • young families, and
  • people coming for events, shows, or conventions

In short, there’s a new emphasis on the “Hotel” part of the phrase “waterpark hotel.”

This leads waterpark hotel feasibility analysis back to questions asked in standard hotel feasibility studies like which markets can we sell rooms to; at what price, in what usage pattern of days of week and weeks of year with what amenities and how many rooms can we justify for each market?
Here’s the short course on each of these potential new flows for waterpark hotels.
Business travelers are a great complement to the typical waterpark hotel client. They come during the week and all year – times when the waterpark families don’t come. The overlap comes during the spring break and summer seasons when business and waterpark patrons both show up on weekdays. Business travelers like hotels with standard business brands like Marriot, Sheraton, Hilton, Holiday Inn, and Hyatt or other brands in those hotel groups. They also tend to be drawn to a specific level of accommodation. While we don’t often think of it, some waterpark hotels already have rooms that look like budget hotel rooms while others are clearly four-star and may have to think more about this looking ahead.

Two specific business hotel categories, extended stay and all-suite hotels already have ideal accommodations waterpark patrons but extended stay properties typically have minimal services and many their patrons stay over weekends — family market prime time.

In feasibility studies there are approaches to quantifying demand from this group based on the number and types of nearby businesses. A look at existing hotel capacity and the positioning of existing competitors will help you decide if there’s a piece of this market for you.

Meeting facility users can have similar pattern of weekday use but sometimes come on weekends too. On many weekends, meeting space becomes event space for weddings, black tie dinners, and other events. While family and community users may not pay top dollar for the room, some clever couples may make the waterpark a part of the event – a kind of destination wedding without the flight.

For both business and meeting patrons it’ll be important to keep the bathing and business suits separate but don’t let that concern you, it’s been a solvable design issue since the Kalahari went down this path.

There are demand models that can help quantify demands for meeting and private event spaces while projecting the room night business they’ll generate. A survey of competing facilities and their utilization can help you determine whether this is a market to dive into.

Leisure guests are more diverse than business travelers. If you’re in a metro area, especially an older northern city, there are likely to be many guests coming to town to visit friends and relatives – often called VFR tourism. If these guests are young families, a waterpark hotel would be a great fit. Particularly as few hotels really target young families. Adult amenities like good restaurants, free breakfasts, and spas will help with adult only traveling parties.

Analyses of local tourism statistics can help you determine the size of this market while a survey of the success and quality of local competition will help you determine a likely market capture.

Metro locations also have large resident populations that the Dells properties never needed to address at all. Metro area waterpark hotels can target day users all year round – especially for special events. Location is key here. If it’s amidst the upper middle income communities that have typically fueled distant waterpark hotels, you should get a slice of the business.

Schlitterbahn, at its new locations, is aiming to have it both ways with a hotel next to a resident market outdoor waterpark. Part of the waterpark gets covered in the winter to keep families flowing in through the cold months. The bonus is that summer hotel guest get access to a full sized indoor and outdoor waterpark too.

Local market analysis of waterpark demand will help here but even if there’s a local outdoor waterpark, it’s likely to be open only 110 days a year.
The resort world understood the value and all age appeal of waterplay generations ago. Grand beach hotels were built along the coasts and on lakes. Sandusky, now a waterpark cluster, started as a beach resort. More contemporary examples are the grand pool complexes of some resorts in the Caribbean, Hawaii and even on the mainland in Arizona and Texas. Many of these new facilities use some of the same elements as indoor waterparks, with slides, lazy rivers, and splash pads. The twist over indoor waterpark hotels is that many manage to appeal to all ages and household types. New resorts and vacation villages (condo, fractional, and timeshare) now add great water complexes into the packages along with their golf courses, meeting facilities, spas, restaurants, and marketplaces.

Many metro areas already support regionally oriented resorts. In the near term most will add indoor and outdoor water features along to their typical mix that includes spas, meeting facilities, golf and other support facilities.

Case studies of the local competition will help you ascertain whether you can enter this market.

Adding adult appeal will also help with adult leisure traveler parties too and recognizes the demographic reality that only about 20% of all households have children 12 and under – and most of those households can’t afford a $200 ADR.
While we assume that business travelers won’t want to use the waterpark, I think we need to think of ways to attract them. If you truly compete for the business travelers with the other business hotels it’s shortsighted to leave your big gun in the holster.

I suggest you speak with your designer on this topic. There are many ideas that have been discussed ranging from adding adult oriented water features and lush landscaping to adding aquarium walls or even, where permitted, a swim up bar. Another way would be to reconceptualize the indoor waterpark as a kind of high-throughput spa.

Probably the best way to charge business travelers would be higher room rates. Separate admissions fees would be harder for them to expense.
In the end, review the potential market capture you have from these different market flows and assemble a business model that appeals to the ones you target.

Be sure the waterpark market is large enough to justify its investment. Broadening its appeal to adults may help.

You will also be more likely to have a brand affiliation which comes with standards, fees, and discipline in return for the referrals from the reservation system.Broader travel trends will impact you under this model more than ever. Travel trends are sure to impact one or more of the segments you serve.
Why do this? The likely payoff for all of this can be better occupancy, higher revenues, and a degree of insulation from the possibility that there may be too many standard waterpark hotels in your area. Most of all, investors will come to expect this.

Waterpark hotels have followed the outlets into the city and like outlets they’re spreading out across the country in so many ways. There’s a great line that sums this up nicely:

The future is already here, but it’s unevenly distributed.

Expect the business model to continue to shift on you. The designers are taking calls from many existing hotels.