Health & wellness hotels are on the rise in hospitality, with more and more guests seeking experiences that promote well-being.
According to RLA Global’s fifth-annual Wellness Real Estate Report, wellness hotels showed a positive growth trend globally in 2023, although performances were uneven across different wellness categories and hotel asset classes.
The report analyzed 2023 hotel performances in different wellness categories based on data from more than 11,000 properties worldwide. It also compared results in selected hotel asset classes.
“Hotels with wellness offerings posted healthy total RevPAR [TRevPAR] growth, with minor Wellness properties (those generating less than $1 million, or 10% of total revenue from wellness and leisure) standing out with a 26% average increase in TRevPAR from 2022,” said Roger Allen, group CEO, RLA Global.
All main year-on-year key performance indicators, including ADR, RevPAR, TRevPAR and occupancy, showed positive growth, Allen noted, however, the market remains fragmented, requiring close attention from investors. He said this stems from the misalignment between growing consumer interest in well-being and the hotel industry’s ability to capture and serve that demand effectively.
“This trend, which emerged strongly post-COVID, encompasses a broad spectrum of concepts from health and fitness and spa to stress and sleep management,” he said. “The challenge lies in translating the demand for well-being experiences into appropriate hotel wellness supply, both current and planned. Wellness is a multifaceted category, and determining the right mix of amenities, services and overall product offerings for a hotel wellness product—while ensuring a justifiable internal rate of return [IRR]—is complex.”
Allen advises investors to proceed with caution and high-level scrutiny, noting that it’s crucial to: develop a data-driven business plan that aligns with return expectations, consider the specific market context and required investment for each wellness concept, ensure the wellness strategy fits the purpose and market demand, remember that less can sometimes be more in wellness offerings and avoid the trap of overly complex wellness offerings that may not fit the market or maximize returns.
“From the developer and investor perspective this can amount to a significant investment that requires prudent planning that is aligned with the guest profile and a hotel DNA,” he said
Allen also detailed the different chain scale performances as highlighted in the report.
“Luxury properties with major wellness offerings generated the highest TRevPAR, but upper-upscale properties delivered the best performance in terms of ADR and TRevPAR growth across all wellness categories,” the CEO said. “The strong performance can be attributed to growing consumer demand for wellness offerings and the ability of some properties, particularly in the upper-upscale segment, to optimize their operations and adapt to changing guest preferences.”
Major wellness continues to carry higher operating expenses, while minor wellness demonstrates flexibility to optimize these costs, he added.
“Luxury properties outperformed upper-upscale and upscale properties in GOPPAR in all three wellness categories,” Allen pointed out. “However, when we get to the vitally important bottom line, upper-upscale tends to outperform luxury with a stronger profit performance in all wellness categories.”
For the remainder of this year and heading into 2025, RLA Global expects wellness hotels to experience steady growth, driven by rapidly increasing consumer demand for health and well-being offerings.
“As the wellness hotel sector matures, we anticipate a stabilization of revenue streams coupled with more efficient cost management, which should lead to robust profit margins,” Allen explained. “This growth is likely to be supported by hotels expanding their health and fitness amenities and services to meet consumer preferences.”
As for consumer trends for the next few years, RLA Global highlighted a few that hoteliers should be taking advantage of. The first: fitting longevity needs into lifestyle.
“There is increasing demand from health-conscious guests who want to maintain their wellness routines while traveling,” Allen said. “Hotels need to accommodate health-improving habits and ‘biohacking’ rituals that guests integrate into their daily lives. This goes beyond traditional spa or gym offerings to encompass the overall hotel operation, including F&B menus, in-room exercise equipment and sleep amenities.”
F&B is an important area to note, with revenues showing an encouraging upward trend across all wellness categories in 2023.
“Major wellness properties had the highest F&B spend per occupied room at $142, which is more than three times that of no wellness properties,” the CEO said. “No wellness properties experienced the highest growth in F&B revenue at 8% year-over-year, while major wellness showed modest 2% growth.”
There are some concerns, however, when it comes to F&B. Beverage sales decreased by 1% at major wellness properties, led by a 3% drop at bars. Room service revenue fell by 13% and 12% at major and minor wellness hotels, respectively. Additionally, beverage sales at major wellness properties were down by 15%.
Looking ahead to the rest of this year, Allen thinks that F&B performance will largely depend on strategic management.
“F&B margins are tight and a bad combination of the wrong product with the incorrect space planning along with increased operating costs can spell a disaster for any restaurant,” he said.
Allen also anticipates some F&B trends such as a shift toward healthier options, organic and locally sourced foods and lower-calorie and alcohol alternatives.
The RLA Global report also highlights trends pertaining to AI, specifically with how it connects to personalization.
“Artificial intelligence can be leveraged to provide hyper-personalized experiences,” Allen said. “This includes using AI-powered guest profiling and data analytics to understand guest preferences and deliver customized wellness programs, treatments and dietary options.”
There’s also a rising trend of incorporating wellness facilities as core elements in branded residences. Amenities like outdoor pools, spa treatment rooms, saunas, gyms, yoga studios and relaxation lounges are becoming standard.
Lastly, optimizing operations with AI is a major trend, as AI can be used to streamline staff workflows and resource allocation, allowing wellness facilities to operate more efficiently while maintaining service quality.
“There are plenty of opportunities for hotels to grow with more comprehensive wellness offerings, but the world has moved on from the bygone era of simply adding a spa to become a spa hotel,” Allen pointed out. “Guests are more informed about their health than ever before, and wellness is now part of their lifestyle and therefore expect more well-thought-out wellness throughout the hotel.”
