Investment analysts are looking at how hotels can profit from emerging consumer interest in wellness and wellness' evolution into a broader concept of well-being.
Editor’s Note: Skift Senior Hospitality Editor Sean O’Neill brings readers exclusive reporting and insights into hotel deals and development, and how those trends are making an impact across the travel industry.
Hotels are increasingly looking at wellness investments as travelers’ expectations have evolved.
- Miller’s pre-Wall Street career included the development, feasibility, and asset management of hotels — and also the development of destination resort spas and urban wellness facilities.
- Miller’s reports have been authoritative.
- I spoke with Miller to get his high-level insights on wellness and hotels.
“We’re in the early stage of watching the maturation of wellness as an increasing part of overall travel spend and an important ancillary revenue stream,” Miller said.
- Offerings have to be more than yoga and some Stairmasters. Cryotherapy, meditation, and other 360-practices are potential futures.
- “The biggest opportunity for the time being is probably in upscale and luxury full-service hotels rather than select-service,” Miller said.
- At the high end, opportunities for brand extensions with solid execution are “plentiful,” he said.
A handful of players have made notable investment moves in the space.
- Accor in January published a whitepaper saying it saw the rise of a “well-being culture.” The Paris-based hotel giant also said it would quadruple its all-inclusive brand that includes wellness offerings, Rixos Hotels, to 100 by 2027.
- Hilton has been installing Peloton Bikes in gyms across its U.S. hotels.
- Vici Properties said it had tapped a loan facility for up to $200 million to fund the development of Canyon Ranch Austin in Austin, Texas, slated to open in 2025. Canyon Ranch also plans to open urban wellness clubs, which would be partial-service facilities that help keep wellness top of mind for customers year-round.
- DiamondRock Hospitality, which owns hotels, bought the Lake Austin Spa Resort last year for about $75 million.
- Equinox, the high-end gym brand, has one branded hotel in New York City with plans to expand.
- OneSpaWorld, which commands about 90 percent of the market share of outsourced spa operations on cruise ships, has been adding offerings, such as for immunity, acupuncture, and pain management. OneSpaWorld also manages about 50 wellness facilities in destination resorts on land.
- IHG has been refreshing its Even brand of “wellness lifestyle hotels.”
- In 2017, Hyatt Hotels bought Miraval, owner of three U.S. wellness resorts, for $215 million. Relatedly, when Hyatt bought Apple Leisure Group in 2021, it gained the Zoëtry Wellness & Spa Resorts brand, which looks ripe for expansion, too. Hyatt last year said it planned to launch a new brand, Atona, that will distill the elements of traditional Japanese ryokans — including healthful hot springs — while adding some modern comforts.
- Launching in May 2023 at 1 Hotel Hanalei Bay is 1x Vitahealth Medi Spa, offering an integrated medicine program powered by a medical team on Kauai’s North Shore in Princeville, Hawaii.
One danger is that wellness might become an overhyped buzzword.
- “This may sound cynical, but it needs saying: The ‘W word’ is overused by many hoteliers, describing services as a buzzword without a connection to a legit wellness offering,” Miller said.
- But in other ways, a real long-term shift in customer demand may be in the works.
- “Wellness is still fairly new to the mass market, especially as you get outside major metro areas,” Miller said. “Yoga has gone mainstream, and trendy wellness offerings may follow.”
The branded residential trend may also lead to more creativity with wellness.
- Many hotels have been betting on branded residential, also known as integrated real estate, where a hotel typically sits alongside homes with some overlap in services and amenities. Accor, for example, said in January it would create Accor One Living, focused on mixed-use developments. It already has over 135 such projects operating or in development, up from 35 in operation in late 2021.
- The spa component in branded residential could become more interesting over time.
- “A lot of the real estate that I see is partial or whole-ownership condos/timeshare, often in the same building, not just single-family residential,” Miller said.
- Red Sea Global (RSG), the developer of tourism destinations in Saudi Arabia, has partnered with Clinique La Prairie, a wellness brand, to create a luxury Clinique La Prairie Health Resort offering 13 villas and 52 rooms and suites.
- “It’s my personal belief that there could be at least some benefit either from an organic perspective or a price perspective for branded residences that include a wellness feature,” Miller said. “Part of the wellness storyline is labor-intensive and sometimes lower-margin facilities, such as gyms and spas. These facilities could have increased usage by people in the residences and, in theory, help the wellness facilities not be as reliant on fluctuating transitory hotel demand. That could help the hotel manage the labor, utilities, and other costs.”
- Locals might also find offers like that appealing, Miller said. “In certain markets, like maybe Miami, a branded offering might provide a high-net-worth consumer with a higher degree of confidence that they’re going to get a better quality treatment than at a local independent establishment in the same neighborhood.”
- One example I found that might fit the pattern is Aman’s sister brand, Janu, which is set to open its first hotel, Janu Tokyo, by year-end with 122 guest rooms. Its 4,000-square-meter wellness facility, Janu Wellness Centre, will be one of the largest in the Japanese capital. The integrated real-estate project will include Aman Residences in a separate building, with 91 homes and a residents-only 1,400-square-meter Aman Spa.
The themes are emerging, but it’s still early days.
- “There are several what I consider secular tailwinds in consumer spend on wellness,” Miller said. “It’s been spurred on even more post-pandemic.”
- There’s been significant growth in the number of spas at a two-decade pace of about 7 percent a year, according to the International Spa Association (ISPA).
- “There were approximately 4,100 spas in the U.S. in 1999 compared to over 21,000 in 2021,” Miller said, noting the sector, according to the International Spa Association, only saw roughly 1,000 permanent closures in the pandemic.
- Revenues grew from $4.2 billion in 1999 to $19 billion in 2019, ISPA estimated.
- There’s been a “rising consumer focus on health and well-being, especially since 2020,” and “younger consumers spending more on experiences, partly due to focus on physical and especially mental health.”
Hotels have to tread carefully in wellness because execution matters.
- In Miller’s experience, he has seen hotel spa margins below 10 percent and above 30 percent.
- “Even luxury hotel operators can struggle to provide a sophisticated and compelling spa operation,” Miller said, noting that poor execution can, in some cases, damage the reputation of the parent hotel brand.
- Appealing to the local community and not just guests can be critical.
- Miller noted that CBRE’s Trends In the Hotel Spa Industry 2019 Edition noted that at 159 U.S. hotel spas they studied, about half were guests and the rest locals. At urban hotel spas, in particular, the percentage of locals rose to 61 percent.
- What counts as good execution? Miller said: “Good experiences start from the booking process and promotional material to the reception, continuing through the check-in process and the questions prior to the start of a wellness service, monitoring the customer when appropriate during the service for discomfort or worse, through the period when a customer may take advantage of the post-treatment areas, and within the retail area before departing.
- Examples of good execution that come to my mind include the luxury wellness hotel Lily of the Valley, Pillar (focused on movement, nutrition, and recovery), and Yeotown (spa resorts with a holistic view). At the Andronis Concept Wellness Resort in Santorini, Greece, the therapies are based on a full wellness proﬁle of guests following a non-invasive bio-energy approach that includes analyzing a hair sample.
- Miller said hotels could find some good examples at sea. Last year he toured the cruise ship Norwegian Prima whose Mandara Spa — run by third-party OneSpaWorld — and found that it was “frankly an impressive example of the build-out, design, and amenities.”
For additional insight, I spoke with Matt Schuyler, chief brand officer at Hilton.
- As noted above, Hilton has installed Peloton Bikes in gyms across its U.S. hotels.
- “It’s no longer sufficient just to have a set of weights and a treadmill and a stationary bike in a fitness center in a traditional focused service or suite product,” Schuyler said. “Connected fitness is now standard. That’s why we did a strategic mash-up with Peloton. You can use our TV sets in guest rooms to connect to your Peloton app and do a workout within your room, too.”
- The company has been fine-tuning its food and beverage offerings across its brands, in response to customer feedback. It’s been trying to offer healthier options in ways that can scale well operationally.
- “We see wellness as evolving into well-being — about a broader concern for mind, body, and spirit,” Schuyler said.
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