The indoor hotel waterpark segment of the lodging business continues to grow, fueled by the increasing popularity of the product and the spread of the concept to new markets outside of the upper Midwest, the industry's birthplace. As the industry expands, some waterpark resort owners are asking hotel brands to get involved in the segment to help deliver reservations and provide other services.

By the end of this year, the number of hotels with indoor waterparks will grow to 144, up 33 percent from 108 in 2005, according to Jeff Coy and Bill Haralson of Hotel Waterpark Resort Research & Consulting. Seventy-three new hotel waterpark additions and expansion projects are under construction or will break ground this year.

Thirty-six hotel indoor waterparks with 6,004 rooms and 1.1 million square feet of waterpark facilities are expected to open before the end of this year, says Coy. Another 37 are under construction and scheduled to open in 2007.

Between 1994 and 2005, 80 indoor waterpark resorts opened or expanded in the U.S. and Canada, according to David Sangree, president of Hotel & Leisure Advisors, another consulting group in the segment. These resorts have more than 19,000 hotel rooms and 2.2 million square feet of waterpark facilities. An indoor waterpark resort, according to Sangree, is defined as having a minimum of 10,000 square feet of indoor waterpark space and including a variety of other recreational amenities.

Hotels with indoor waterparks achieve higher occupancy, higher revenue per available room and higher net operating income than comparable properties without indoor waterparks, according to Coy.


Hotel indoor waterpark resorts were born in the Wisconsin Dells, WI area and by mid-1990s spread into adjacent states across the upper Midwest. They have since expanded into Ohio, Pennsylvania, New York, Virginia, Kentucky, Kansas, Idaho and Washington. New facilities are scheduled to open in 2006 in Massachusetts, Texas and South Dakota.

The segment's growth is simple to explain, says Sangree: Waterparks drive hotel demand and create strong results for investors and owners.

Developers of hotels with indoor waterparks say locations near heavy population centers and easy interstate highway access are two of the most important considerations in planning a facility.

“Certainly the first critical element is location,” says Scott Somerville, president of Focus Lodging Group, a hotel management and development company that in May opened a 60,000-square-foot indoor waterpark attached to a 338-room Holiday Inn in Columbus, Ohio. “We look for sites that have a good degree of visibility, a good location and easy access. A close second is population density within a three-hour drive.”

“We look at locations close to major population destinations that are contiguous with other things families like to do,” says John Emery, chief executive officer of Great Wolf Resorts, which owns and operates eight hotel waterparks under the Great Wolf Lodge and Blue Harbor Resort brands.

Contiguous attractions are important factors for Emery because Great Wolf Resorts are destinations as opposed to commercial hotels with waterparks added on. Two of the company's waterparks offer more than 100,000 square feet of indoor entertainment.

“Lodging is a big element of what we do, but we're more than a lodging company,” Emery says. “We have the economics and real estate of a lodging company, but we focus on providing quality entertainment. The difference is we are a genuine destination. We create demand for a vacation.”

Analysts say much of the segment's growth is likely to occur in hotels in larger markets near population centers. Many developers are looking for large hotels with convention space that have room to add indoor waterparks.

That's the business plan being followed by Horizon, a developer, owner and manager of waterparks, according to Chuck Heath, president and chief executive officer of the firm and a managing partner of Wave Development, a sister company that develops hotel waterpark resorts.

The company purchased a Sheraton resort in Danvers, MA and plans to spend $30 million to renovate the hotel and build an 85,000-square-foot waterpark. It also acquired the 429-room Sheraton Chicago Northwest, where it is building a 46,000-square-foot indoor waterpark scheduled to open later this year. The project will be the first indoor waterpark in the immediate Chicago area.

“We are after a totally different market, a new market,” says Heath. “It is not a destination where you go for a week. You'll see a number of different sub-markets developed with indoor waterparks in the future. The destination resorts will continue to grow, but you will see many closer-to-home indoor waterpark projects that won't rely on a destination but will rely on larger suburban areas.”

He says 60 percent to 70 percent of the indoor waterpark business in Wisconsin Dells comes from the greater metropolitan Chicago area, which is a three- to five-hour drive.

“If guests can get a similar experience (to Wisconsin Dells) and only drive 30 minutes, more close-in development will happen,” he says. “These waterparks will not compete solely with the destination markets but will rely more on business that is close by, things like birthday parties and family reunions.”

Indoor waterparks are especially attractive amenities for larger hotels in metropolitan areas that already do a good corporate and group business, says Heath. “A waterpark can solidify their weekend business.”

Emery agrees about the potential for this segment but cautions against over-development.

“This approach will work in select locations but not across the board,” he says. “In fact, it won't work at most commercial hotels. People need to be careful because waterparks are expensive to build and operate. This is not an automatic positive cash return. They are very location- and customer-specific.”

Analysts say the indoor waterpark component of a project costs $200 to $500 per square foot to build and equip, depending on the level of amenities.

Somerville of Focus Lodging says indoor waterpark resorts need other activities nearby for guests when they are not using the waterpark. “We don't have a theme park next to us in Columbus, but for the nine months outside the summer, we offer well-rounded activities.”

He doesn't believe over-development is a problem in most markets. “Except for one or two areas, this industry is in its infancy,” says Somerville. “Think of the population on the East Coast and all the major metropolitan areas. There are only two or three waterparks in all of New England and 40 in the Dells.”

Focus Lodging Group is building a 40,000-square-foot indoor waterpark in Merrimac, NH, about 45 minutes from Boston. The company also plans to third-party manage a 70,000-square-foot indoor waterpark that is expected to be built in Hoffman Estates, IL near Chicago.


As existing hotels add indoor waterparks, branding will become more prevalent.

“We're very comfortable with brands in the projects we have,” says Somerville. “We want the support of the brand to get corporate-based business on Sunday through Thursday, especially when kids are in school. We have 338 rooms to fill in Columbus, and we can't rely on the waterpark to fill them all. The brand can help with its customary 30-percent contribution margin.”

In addition to its Columbus Holiday Inn hotel indoor waterpark, Focus plans to have a Marriott brand at its New Hampshire hotel waterpark.

“The indoor waterpark business started without any hotel brands and outperformed the brands in many markets,” says Heath of Horizon. “But now we want the branding to get the midweek business.”

Horizon is adding indoor waterparks to the Sheraton properties in Massachusetts and Chicago it recently purchased, and Heath believes waterparks can help differentiate branded hotels from their competitors.

“The waterpark drives roomnights for the brand,” says Heath. “It makes them different from anybody else in the market.”

Holiday Inn has the most hotels with waterparks, according to Sangree. “Marriott, Sheraton and Ramada are talking about them, but no other brand has jumped in full force like Holiday Inn,” he says.

“About two-thirds of indoor waterparks built outside the Dells are branded,” says Coy. “That ratio is moving to about three-fourths of all new projects carrying a brand.”

Franchisors initially did not know what indoor waterparks were, and then feared them due to high insurance risks, he says. “Now insurance premiums are more in line with risks, and franchisors have learned about indoor waterparks through their franchisees.”


While owners of waterpark properties that are resort destinations often offer condominiums for sale, non-destination resort waterparks have been cool to the idea.

“We have condo projects in Wisconsin Dells and in Sheboygan (WI),” says Emery, “but we're not using condo sales as a core to develop our resorts. We build off our own balance sheet. We make the project successful and then we sell the condos.”

“The condo model has been extremely successful in leisure markets, like the Dells,” says Heath, whose company hasn't developed any condos. “Our markets are more traditional.”

Unlike condos, conference space is important to virtually all indoor waterpark hotels and resorts.

“Waterparks must also cater to businesspeople,” says Coy. “If they ignore them, they won't achieve the occupancies they need. They need a combination of leisure, group and the individual business segment to get high occupancies.”

“Where there is corporate business, a waterpark should include a brand and a conference center,” says Sangree.

“If you want to sell corporate rooms, you need meeting space to do so,” says Somerville, who says Focus Lodging's New Hampshire and Chicago indoor waterparks each will have about 20,000 square feet of conference and meeting space.

“Conferences are part of group business, which you must have in this segment,” says Heath. “The waterpark is a good way to help sell conferences and meeting space. If two competing hotels each have 20,000 square feet of conference space, but one offers a waterpark and a discount if you bring the family, it helps drive occupancy and room rate.”

Visit www.LHonline.com for more information and related articles.


Some highlights of a recently released report by David Sangree on the indoor waterpark resort market:

  • Hotels in the segment have 2.2 million square feet of indoor waterpark facilities and more than 19,000 guestrooms.

  • Of 24 states and provinces with indoor waterpark resorts, Wisconsin has the most (30) followed by Minnesota (12) and Ontario (6). Sixteen of Wisconsin's properties are in Wisconsin Dells.

  • In the U.S., 39 percent of waterpark resorts are branded; in Canada, 69 percent carry a flag. Fourteen waterpark hotels are Holiday Inns, with 18 more under development.

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