AUGUST 20, 2024
the BUSINESS OF WELLNESS
As I started writing this article, I realized how much has changed in the market since COVID-19. While I don’t want to continually reference the disturbing years we all experienced, it is inevitable that the pandemic brought seismic changes in consumer habits. It is not a coincidence we see one wellness club or hotel popping up after another.
Evaluating Trends in Luxury WellnessThese market changes are particularly evident in North America and Western Europe, where wellness-focused real estate has demonstrated significant adaptability and recovery. RevPAR has reached levels ranging from 94% to 121% of 2019 levels across regions, according to JLL. As consumers prioritize well-being and personalized services, these types of properties see sustained demand despite inflation and other stressors.
In North America, major cities like Mexico City and Miami have witnessed a surge of wellness travelers, albeit occupancy rates are still slightly below pre-pandemic levels in CDMX, for example. Similarly, in Europe, destinations recognized for their natural beauty and serenity, such as Austria, Switzerland and Spain, are leading the way. These countries are home to legacy wellness retreats like SHA Wellness by AB Living Group and Lanserhof, attracting affluent clientele with significant purchasing power, seeking both physical and mental rejuvenation.
Photo Credit: Sha Wellness
That being said, evaluating the current dynamics in wellness hospitality is nuanced. One of the most significant shifts has been in purchasing behavior. While today’s luxury traveler is more health-conscious and demands state-of-the-art spas and treatments, this also poses a risk to hotel and PMC owners. How much should you invest in spaces that require significant CapEx based on a trend that might not drive the consumer to the property long-term? Trends in wellness can be fickle, and what is popular today may not be in demand tomorrow. It is essential for developers to stay adaptable and balance consumer demand with the ability to pivot strategies as needed.
Technological integration is another critical trend. We are shifting away from natural therapies or ingredients towards clinical and robust, science-backed modalities. Such offerings and AI applications enhance the guest experience and provide valuable data that can be used to refine hotel or private members' services.
RISKS TO CONSIDER IN DEVELOPMENT
When evaluating the feasibility of developing a wellness-focused hotel or a private members club, several factors come to mind. Location remains paramount. Properties situated in prime geographies that offer the beauty of natural landscapes are particularly sought after. The ability to merge a secluded environment with accessibility to major urban centers can significantly enhance a property’s attractiveness. If you can leave work on a Friday afternoon, drive 30 minutes from the city center, and have a weekend of luxury, tranquil detox, how much of a premium would you pay for that?
Unique offerings and points of view are other crucial factors. Hotels and clubs that provide high-quality, unique wellness experiences are more likely to attract discerning clientele, which in turn helps with guest loyalty. As the wellness market evolves, this should go beyond the usual yoga, breathwork, and cold plunges.
One reason why SHA Wellness has been a consistent beacon for wellness tourism is that they offer specialized and highly curated programming that hardly has any competition on an international level. This includes biological profile performance tests, oxytests, and neurocognitive assessments. A strong concept that doesn’t just mirror the competition helps with building brand equity and sets the foundation for multi-location rollouts.
Private members clubs have been around for centuries and are a well-defined concept, especially in cities like London and New York. White’s, the first private members club in London, was created 300 years ago as a place for gentlemen to gather and discuss business. While members clubs have evolved since, most of them still revolve around a specific interest or member type, think Royal Automobile Club or Soho House.
As the popularity of such properties grows, one of the primary concerns is the risk that the market could become oversaturated, leading to increased competition and oversupply. Developers must assess the landscape to ensure there is sufficient demand to support their business case. Economic downturns represent another significant risk. Luxury hospitality is not a necessity; it is elective spending.
Mental health facilities that resemble luxury hotels are also gaining popularity. These facilities offer a more aesthetically pleasing environment for treatments, providing a space that aligns with the consumer lifestyle and values. The trend towards more holistic services is expected to continue, with a growing emphasis on experiences that connect the mind and body.
Many argue that this moment in PMCs and wellness hotels feels like the internet boom. Everyone is racing for a piece of the pie, and such soaring growth is not going to last forever.
But for now, the jury is still out.
