Hotel Sector's Bet on Wellness Faces Profit Challenge
Skift Take
Key Points
- Large wellness facilities in hotels are not leading to increased profitability despite higher absolute revenue.
- Major wellness properties experienced declines in key financial metrics, including a 9% drop in gross operating profit per available room.
- Hotels without wellness features saw a significant gain in gross operating profit, highlighting operational cost challenges for wellness-focused hotels.
Summary
A report by RLA Global finds that large wellness facilities in hotels do not necessarily lead to better profits, despite higher revenue. Major wellness properties, such as those from Hyatt and Hilton, have seen declines in key financial metrics. In contrast, hotels without wellness features have experienced profit gains, pointing to the challenge of managing operational costs in wellness-focused hotels.
A report from consultancy RLA Global found that large wellness facilities did not lead to better returns for hotel companies.
The analysis came as major groups like Hyatt, Accor, and Hilton have been rushing to build elaborate spa complexes and sanctuaries of self-care. It's one of the rare reports to offer a thorough look at hotel wellness, analyzing data from 12,000 hotels tracked by benchmarking company HotStats.
In the first half of 2024, major wellness properties — those sprawling spa complexes with meditation rooms and mineral pools that look great on Instagram — experienced:
- 3% decline in average daily rates.
- 1% decrease in total revenue per occupied room.
- 9% decrease in gross operating profit per available room.
- Major wellness properties managed only 31% leisure profit conversion.
Hotels with no wellness features posted a 28% gain in gross operating profit per available room.
Operating costs are one culprit.
- Major wellness properties are spending more on payroll and departmental expenses than their rivals with smaller wellness offerings. This suggests they need to do more to generate scale efficiencies and maximize the use of their spaces around the clock.
- Major wellness facilities still command higher absolute revenue numbers than those with lesser offerings — in some cases, almost double.
- The challenge lies in converting revenue into profit amid rising operational costs. Aromatherapy specialists and ayurvedic practitioners don't come cheap.
Demand trends are also important.
- Many hotels struggle to fill their spa and wellness centers throughout the day and night, as opposed to just in peak times.
- Efficient operations and targeted wellness offerings may deliver better returns than sprawling facilities that cost more to run.
Accommodations Sector Stock Index Performance Year-to-Date
What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.
The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more hotels and short-term rental financial sector performance.
Photo Credit: A view of an infinity pool looking at the Persian Gulf from the Mandarin Oriental Dubai Hotel in Dubai, UAE. Mandarin Oriental
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