The wellness sector has seen phenomenal growth rates, especially since the pandemic. Hotels have been quick to tap into the potential of wellness services and have enhanced these offerings, such as offering diversified wellness services in existing hotels and launching wellness retreats. A recent study found that wellness hotels around the world recorded impressive growth in 2023, although performance remained uneven across wellness categories and hotel asset classes.
According to RLA Global’s latest Wellness Real Estate Report, published in partnership with HotStats, hotels offering wellness services saw a steady increase in TRevPAR in 2023, with minor wellness hotels (those generating less than $1 million in 10% of total revenue from wellness and leisure) seeing an average increase in TRevPAR of 26% compared to 2022.
RLA Global said smaller wellness hotels have demonstrated greater flexibility in optimizing operational costs, contributing to profits, but their performance points to a fragmented hotel wellness market that investors should pay attention to.
According to the study, luxury hotels with major wellness services recorded three times the TRevPAR of top luxury hotels, but lagged behind top luxury hotels in year-over-year TRevPAR growth and experienced a 4% decline in ADR.Top luxury hotels performed best in terms of ADR and TRevPAR growth in the major wellness services, minor wellness services, and no wellness services categories.
“The emphasis of luxury is on protecting the experience first and foremost, which sometimes means sacrificing other things that might be more beneficial. It gets in the way of offering guests a very high-end, very exclusive, very personalized experience,” said Jeremy McCarthy, group director of spa and wellness at Mandarin Oriental.
Regionally, all markets saw significant year-over-year improvement in TRevPAR, with the Americas growing by +13% and Asia Pacific growing by +48%. GOPPAR similarly continued its positive trajectory, with all markets posting steady growth. GOPPAR doubled in Asia Pacific and increased by 25% in Africa.
In 2023, average F&B revenue per room increased slightly across all three categories, driven mainly by restaurant spending, but large and small wellness hotels saw a decline in beverage sales and room service revenue, down 13% and 12%, respectively.
In addition to hotels, wellness services are also becoming an integral part of the value proposition of branded residence projects globally, according to the study. A study of branded residence developments in Dubai found that completed and pipeline projects have 10 key wellness facilities – indoor swimming pools, vitality pools, relaxation lounges, hair and nail salons, yoga studios, spas, saunas, spa treatment rooms, gyms and outdoor pools.
According to a recent study by the Global Wellness Institute (GWI), the wellness real estate sector is one of the most lucrative real estate categories, with the global market size expected to reach $438.2 billion by 2023.
From 2019 to 2020, wellness real estate was one of the few wellness sectors to post impressive performance (growth of 21.6%), despite the contraction in overall construction output and global GDP (-0.8% and -2.6%, respectively). From 2019 to 2023, the wellness real estate sector maintained a high average annual growth rate of 18.1%, compared to the overall construction industry average annual growth rate of 5.1%.
According to GWI’s research, the wellness real estate market is mainly concentrated in North America, Asia Pacific, and Europe, with these three regions collectively accounting for 99% of the global market. North America will be the largest regional market by 2023, accounting for 44% of the global share.
Despite significant demand for wellness facilities, global construction growth is slowing, falling from 16.7% growth in 2020-21 to just 1.9% in 2022-23. GWI attributes this to slowing global economic growth, a severe real estate crisis in China, and negative construction market growth in many regions, including Asia Pacific (-1.3%), Middle East & North Africa (-2.2%) and Sub-Saharan Africa (-7.6%).
