The impact of wellness on real estate performance

Young group of sportspeople taking a yoga class outdoors
Young group of sportspeople taking a yoga class outdoors. (GlobalStock/Getty Images)

The concept of wellness was already a growing trend in the hospitality industry even before the Covid-19 pandemic struck but with health and fitness now at the forefront of many peoples’ minds its influence is only going to grow as travel demand returns.

The Wellness Real Estate Report, a new study by RLA Global, looks beyond the buzzword by analysing the financial impact on real estate performance. The authors used data from P&L benchmarking company HotStats to evaluate the performance of 3,200 hotels of all classes worldwide to help judge the wellness contribution.

“The objective of this report is to support industry stakeholders in evaluating the tangible impacts of wellbeing and wellness on the performance of real estate and identifying key factors they should consider when planning these activities withing real estate projects,” said RLA Global group CEO Roger Allen in a forward to the report.

“The Covid-19 pandemic had a twofold impact on resorts, hotels and other real estate assets with a wellbeing and wellness proposition. It cut revenue and profit in 2020 due to lockdowns and restricted airlift, but at the same time it created a stronger customer focus on health, both mental and physical, translating into an increased demand for wellbeing and wellness offerings.”

The report draws a couple of interesting headline conclusions. The first being that hotels with major wellness offerings generated close to 75% more in total revenue per available room (TRevPAR) compared with hotels with minor wellness offering. This was driven by a 65% higher average daily rate (ADR).  The only difficulty here in drawing a firm conclusion is that most major wellness properties are at the luxury end of the market.

The second headline is interesting in that it points almost in the other direction. Running a major wellness offering doesn’t always lead to a better bottom-line performance because minor wellness properties outperformed them with a 3.6% higher gross operating profit and a 5.7% better total operating profit conversion.