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Methodology for Feasibility Studies for Waterparks and Hotels

Methodology for Feasibility Studies for Waterparks and Hotels. Presented by: David J. Sangree, MAI, CPA, ISHC. Feasibility Study Components. A feasibility study analyzes: Supply and demand Demographics Usage/occupancy Revenues Expenses Net income

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Methodology for Feasibility Studies for Waterparks and Hotels

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  1. Methodology for Feasibility Studies for Waterparks and Hotels Presented by: David J. Sangree, MAI, CPA, ISHC

  2. Feasibility Study Components • A feasibility study analyzes: • Supply and demand • Demographics • Usage/occupancy • Revenues • Expenses • Net income • to determine the value of the proposed project compared to its projected development costs. Presentation by David J. Sangree, MAI, CPA, ISHC

  3. Purpose of Feasibility Study • Purpose • Necessity • Scope of assignment • Who is the client: developer, lender, government, etc. • Determine financial feasibility • Analyze plans and designs and make recommendations Presentation by David J. Sangree, MAI, CPA, ISHC

  4. Waterpark Definitions • An outdoor waterpark is a facility offering three or more waterslides and other aquatic facilities. • An indoor waterpark resort is a lodging establishment containing an indoor aquatic facility with a minimum of 10,000 square feet of indoor waterpark space and inclusive of amenities such as slides, tubes, and a variety of indoor water play features. Presentation by David J. Sangree, MAI, CPA, ISHC

  5. Waterpark Definitions • A standalone indoor waterpark is an aquatic center without an attached hotel, having a minimum of 10,000 square feet, inclusive of amenities such as slides, tubes, and a variety of indoor water play features. • A resort hotel with outdoor waterpark is a hotel with three or more water play features, such as slides, lazy rivers, or wave pools that require lifeguards. Presentation by David J. Sangree, MAI, CPA, ISHC

  6. Major Components of a Feasibility Study • Area, Demographic, and Neighborhood Analysis • Site Review • Proposed Development Recommendations and Costs • Market Analysis • Proposed Development Usage and Pricing Analysis • Financial Analysis • Feasibility Analysis • Comparison of Value Created to Projected Costs Presentation by David J. Sangree, MAI, CPA, ISHC

  7. Area Review • Area, Demographic, and Neighborhood Analysis • Population Trends • Number of families with children within driving distance • Household Growth • Household Economics • Area Economics • Area Transportation  Presentation by David J. Sangree, MAI, CPA, ISHC

  8. Site Review • Site Review • Drive-time Demographics: • Indoor waterpark resort: 180 miles • Outdoor waterpark: 60 miles • Site visibility and access • Amenities/nearby tourist attractions • Governmental Impacts Presentation by David J. Sangree, MAI, CPA, ISHC

  9. Demographics Comparison Presentation by David J. Sangree, MAI, CPA, ISHC

  10. Demographics Comparison Presentation by David J. Sangree, MAI, CPA, ISHC

  11. Drive Time Analysis Presentation by David J. Sangree, MAI, CPA, ISHC

  12. Facility Recommendations • Proposed Development Recommendations and Costs • Physical plant information • Facility size • Branding • Hotel affiliation • Amenities • Theme • Development costs Presentation by David J. Sangree, MAI, CPA, ISHC

  13. Market Analysis • Market Analysis – Hotel Market • Hotel competitors • Existing indoor waterpark resorts • Demographic analysis • Recent hotel openings • Potential hotel openings • Market segmentation and market penetration • Projections Presentation by David J. Sangree, MAI, CPA, ISHC

  14. Hotel Statistics Presentation by David J. Sangree, MAI, CPA, ISHC

  15. 2016 Hotel Statistics Presentation by David J. Sangree, MAI, CPA, ISHC

  16. Hotel Statistics Presentation by David J. Sangree, MAI, CPA, ISHC

  17. Market Analysis • Market Analysis – Waterpark Resort Market • Existing and potential competitors • Attendance • Demographics • Amenities of competitors • Waterpark pricing Presentation by David J. Sangree, MAI, CPA, ISHC

  18. Waterpark Statistics Presentation by David J. Sangree, MAI, CPA, ISHC

  19. Waterpark Statistics Presentation by David J. Sangree, MAI, CPA, ISHC

  20. Waterpark Statistics • The Midwest boasts the largest number of indoor waterparks. • The South has the largest number of outdoor waterparks with the Midwest close behind. It offers few indoor waterparks indicating potential opportunity. • The Northeast has the fewest number of outdoor waterparks and the fewest combined indoor waterparks (resorts and stand-alone), indicating potential opportunity. • The majority of outdoor waterparks are municipal due to the Midwest having so many municipal outdoor waterparks Presentation by David J. Sangree, MAI, CPA, ISHC

  21. Indoor Waterpark Openings Presentation by David J. Sangree, MAI, CPA, ISHC

  22. Outdoor Waterpark Openings Presentation by David J. Sangree, MAI, CPA, ISHC

  23. Usage and Pricing – Indoor Waterpark Resorts • Proposed Development Usage and Pricing Analysis – Indoor Waterpark Resorts: • Occupancy and ADR • Demand Interviews • Hotel and Waterpark Demand • Day Passes • Projections • Pricing Presentation by David J. Sangree, MAI, CPA, ISHC

  24. Usage and Pricing-Outdoor Waterparks • Proposed Development Usage and Pricing Analysis – Outdoor Waterparks: • Usage • Facilities • Population • Projections • Pricing • Climate Presentation by David J. Sangree, MAI, CPA, ISHC

  25. Financial Analysis • Financial Analysis • Estimate the potential gross revenues for the subject property. • Analyze and project departmental, undistributed, and fixed expenses. • Project the resultant net operating income over an appropriate holding period. Presentation by David J. Sangree, MAI, CPA, ISHC

  26. Discounted Cash Flow • 7. Feasibility Analysis • Economic value is calculated through a discounted cash flow analysis. Presentation by David J. Sangree, MAI, CPA, ISHC

  27. Discounted Cash Flow • Sum of cash flows plus the reversionary sale price equals market value Presentation by David J. Sangree, MAI, CPA, ISHC

  28. Valuation to Costs • Comparison of Value Created to Projected Costs • Is the development justified? • How does valuation through a discounted cash flow analysis compare with proposed development budget including entrepreneurial profit? • Need to request municipal incentives? Presentation by David J. Sangree, MAI, CPA, ISHC

  29. Waterpark Resort Challenges • Smaller properties generally struggle: three smaller indoor waterpark resorts in Ohio struggle due to competition from 890-room Kalahari Resort with 173,000 square foot indoor waterpark in Sandusky, Ohio – (one achieves occupancy levels in the 20% to 30% range) • Coco Key Waterpark Resort in Waterbury, Connecticut closed in 2016 due to poor performance and was torn down. • Weather affects outdoor waterpark performance. • Too much competition can affect performance. Presentation by David J. Sangree, MAI, CPA, ISHC

  30. Conclusion • National hotel industry achieved highest occupancy and ADR levels in 2016 and projections are for another record year in 2017 • Hurricane and other unusual weather patterns have impacted hotel occupancy and waterpark attendance in Texas, Florida, and other locations in 2017 • Growth by the Great Wolf Lodge chain is positive for the industry as they develop new properties in Georgia, Illinois and Minnesota over the next 12 months • Kalahari Resorts is expanding their properties in Wisconsin and Pennsylvania and developing a new property in Texas • Continued growth and interest in the waterpark segment with increased numbers of news stories Presentation by David J. Sangree, MAI, CPA, ISHC

  31. Conclusion • Both private developers and municipalities continue to introduce new indoor and outdoor waterparks across the U.S. and Canada • The development of an outdoor waterpark is less expensive than an indoor waterpark and can add seasonal recreation to a property. • Waterpark designers continue to develop exciting new rides and attractions • Volcano Bay in Orlando is the most expensive outdoor waterpark in the United States to be built • Need to balance revenues versus costs Presentation by David J. Sangree, MAI, CPA, ISHC

  32. Kalahari Indoor Waterpark Resort - PA Presentation by David J. Sangree, MAI, CPA, ISHC

  33. Typhoon Texas Outdoor Waterpark Presentation by David J. Sangree, MAI, CPA, ISHC

  34. Questions David J. Sangree, MAI, CPA, ISHC President Hotel & Leisure Advisors, LLC 14805 Detroit Avenue, Suite 420 Cleveland, OH 44107 Phone: 216-810-5800 dsangree@hladvisors.com www.hladvisors.com Presentation by David J. Sangree, MAI, CPA, ISHC

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