Indoor Waterpark Resort Feasibility - Site Selection
Hotel & Leisure Advisors was engaged by a client to prepare a market feasibility and financial analysis study for an indoor waterpark resort. Part of our analysis included the review of several potential sites to determine which site had the best potential for development of an indoor waterpark resort. We evaluated each site and documented the advantages and disadvantages of each.
Site 1 was near a major intersection with good visibility from the highway and easy access. It had the additional advantage of being surrounded by retail shops and was within a partially built, master planned community that had plans for an amusement park. Site 1 had only one real disadvantage, which was the fact that the plans for the amusement park were still in the development stages and had not started.
Site 2 was likewise at a major intersection with good visibility and easy access. This site had the additional advantage of being large enough to accommodate a wide range of facilities with room for expansion. A major medical center was under construction close to the site. One major disadvantage was there were no attractions, such as restaurants or other retail shops built around it. But the site was large enough that future development could accommodate these added amenities.
Site 3 had good visibility from a local state route but was located one mile from the exit. The site benefitted from the nearby existing attractions, including hotels, retail, and a museum. However, it was in a flood plain, had no visibility from the major nearby interstate, and due to its smaller size would not be able to accommodate larger facilities and other developments.
Taking into consideration the attributes of each site and the clients proposed development plans, we ranked the sites using a scoring methodology based on several key factors including: visibility from the interstate and access, access from the interstate, proximity to tourist attractions, proximity to planned development, lack of physical constraints of the site, and site size. Analysis of these factors enabled us to offer the client a clearer picture of which site was better positioned for the development of the indoor waterpark resort.
Outdoor Waterpark Feasibility - Two Scenario Analysis
Owners of existing hotels will often consider upgrades and additions to their properties. We recently completed a study that assisted our client in determining the feasibility of adding an outdoor waterpark to a resort hotel. As part of our analysis, we presented the client with two scenarios to allow them to evaluate the pros and cons of adding the waterpark versus not improving the property. Scenario One represented the subject resort hotel assuming the addition of an outdoor waterpark and enhancements to the family activities such as the addition of miniature golf, expansion of the arcade and children’s activity center, and the addition of a zipline complex. Scenario Two represented the subject hotel assuming no major changes were made.
We evaluated and made financial projections for Scenario One and took into consideration many factors relevant to waterpark development and operation. We examined the current hotel financial performance, the location of the hotel, area demand generators that might have interest in a proposed waterpark, potential day pass demand for the waterpark and family activities, and competitive hotels and waterparks. We projected average daily rate, occupancy, revenues, expenses, and net operating income at the hotel with the addition of the waterpark.
We also prepared financial projections for Scenario Two, which assumed the property remained the same without the addition of the waterpark and family activities. We compared the financial projections for the expanded hotel in Scenario One with the projections for the Scenario Two. We calculated the difference in net income for 10 years between the two scenarios. We applied a discounted cash flow analysis to the difference to calculate the value created from the addition of the waterpark and family activities. We compared the value created to the construction costs for the expansion to determine whether the addition of the waterpark and family activities was feasible.
Our analysis provided a detailed financial analysis to determine whether the projected development budget for the outdoor waterpark and improvements to the family activities at the existing resort hotel was less than or greater than the value created from the expansion. This determined whether the project is feasible. By adding the outdoor waterpark, H&LA projected the subject to achieve a higher occupancy rate and a higher ADR than if the resort remained unchanged. This analysis allowed our client to see both scenarios and make a better informed decision about the proposed expansion and the future of the property.