Indoor Waterpark Resorts Continue Expansion

 by: David J. Sangree, MAI, CPA, ISHC

The growth in indoor waterpark resorts continues as the properties have spread from their initial base in the Wisconsin Dells to other states across the Midwest.  The following table summarizes the results of our supply analysis of indoor waterpark resorts.  We define an indoor waterpark resort as a hotel facility connected to an indoor waterpark with a minimum of 10,000 square feet of indoor waterpark space and inclusive of amenities such as slides and tubes.  Numerous hotels with large swimming pools are beginning to claim they have an indoor waterpark; however, our definition of a 10,000 square foot minimum waterpark space restricts the use of resort to those facilities which have a variety of slides, pools, and tubes. 

The table indicates that there are currently 24 indoor waterpark resorts located in the United States with the vast majority located in Wisconsin.  Of the Wisconsin total, 14 are located in the Wisconsin Dells, which is a traditional summer destination in central Wisconsin.  Historically, “The Dells” ran at very high capacity between Memorial Day and Labor Day, but many of the attractions and hotels closed down for the rest of the year.  Beginning in 1989 and especially in the mid 1990s, the resort city has achieved national recognition for its indoor waterparks and activities.

Each of the resort properties features an adventure theme and extensive indoor waterpark activities. Each has been very successful, as demand during weekends and school breaks has been very strong.  Bringing the waterpark indoors eliminates weather as a variable and extends a short peak season to year round. The resorts are very popular among families with children ages 14 and under. 

Occupancy levels for indoor waterpark resorts typically exceed the properties without indoor waterparks as these resorts achieve strong occupancy levels on weekends and during school breaks.  The average daily rates for the indoor waterpark resort properties exceed the rates for hotels without indoor waterpark resort amenities by $75 to $125 in the Wisconsin Dells.  The waterpark passes are included in the room rates for the resorts.  The rack rates for the indoor waterpark resorts in the Dells in the high season range from $159 to $475 while in the low season they range from $85 to $449.  The rack rates include between four and six indoor waterpark passes which range in value from $10 to $20 per person.  The resorts justify their higher room rates because the indoor waterpark passes can be utilized the day of arrival and the day of departure.  The reasons for this premium performance include:

• Year-round destination resorts
• Elimination of weather-related vacation risks
• Wide appeal of water-based recreation
• Increasing demand for short drive-to getaway vacations
• Themes with varying levels of appeal
• Convenient location proximate to customer base and within established family vacation market.

Development of indoor waterpark resorts continues with the Great Lakes Companies of Madison, Wisconsin planning the development of the largest number of full-service resorts.  Their existing resorts include the 308-room Great Wolf Lodge in Wisconsin Dells and the 271-room Great Bear Lodge in Sandusky, Ohio. They currently have projects under construction in Traverse City, Michigan and Kansas City, Kansas.  In addition, they have projects under development in Niagara Falls, Canada and the Pocono Mountains.  Other companies are developing indoor waterpark resorts in Erie, Pennsylvania; Dubuque, Iowa; Decatur, Illinois; Minot, North Dakota; and Eagan, Minnesota. 

Our analysis indicates that the larger the indoor waterpark, the higher the average daily rate and increased performance the property can achieve. However, the expenses for the indoor waterpark resort are higher in a number of categories particularly insurance, utilities, maintenance, and lifeguards.  Additionally, the inclusion of the waterpark in the hotel can add from $5 million to $15 million of development costs.  These additional costs are for items such as slides, tubes, air and water filtration equipment, theming, pools, forts and structures, giant buckets, and construction costs for the building.  Development of an indoor waterpark resort requires expertise in the operation of a waterpark in conjunction with expertise in hotel/resort operations.

Planning and feasibility analysis for an indoor waterpark resort is complex as successful properties require a strong demand base of families interested in the indoor waterpark concept.  Studies for these resorts analyze population, income, and employment levels in the surrounding market by utilizing ring studies and other demographic tools.  An analysis is performed of local hotel occupancy and average daily rates by day and by month to analyze the rate sensitivity in the market. Comparisons are made with existing indoor waterpark resorts to compare the demographics of the surrounding areas from which guests come, supply and demand levels, amenities, and various other factors.  Demand interviews are conducted in the market to determine potential interest in the project. A competent feasibility study is strongly recommended for an indoor waterpark resort due to the large investment required to develop the project.

We project continued development of indoor waterpark resorts in the northern United States as they offer an attractive year round leisure opportunity for families.  However, based upon the construction costs of the waterpark, we feel indoor waterpark resorts will be selectively developed in northern locations.