Growing Importance of Wellness in the Hospitality Real Estate Sector

Latest Trends in Wellness Real Estate Sector

Only a few years ago, the wellness real estate sector was only an emerging industry that was not well understood by stakeholders – from consumers to developers and investors. Based on the latest market reports of GWI (Global Wellness Institute) and Facts and Factors, the global wellness real estate market size was increasing rapidly from USD148 billion in 2017 up to USD279 billion in 2021 and is estimated to grow to over USD 860 billion by 2028, suggesting a compound annual growth rate (CAGR) of approximately 20.7% over between 2022 and 2028.

The COVID-19 pandemic has created a major shift in the construction and real estate industry toward wellness. The rapid rise of the wellness real estate sector has been a bright spot in the wellness economy during the pandemic, with the sector’s growth significantly outpacing predictions as well as general economic growth trends. Prior to the pandemic, between 2017 and 2019 the wellness real estate sector grew by 23% annually, as compared to 5.4% annual growth for the overall construction sector. Moreover, the wellness real estate sector growth outpaced the overall construction growth in every region during the pandemic. The wellness real estate market is heavily concentrated in North America, Asia-Pacific, and Europe. Although North America has been dominating the wellness real estate market, followed by Asia-Pacific, the growth of this sector was also unbroken in Europe over the past 5-6 years amounting to approximately USD 60 billion (indicating 22% of the global market) in 2021, including in CEE region.

The power of wellness real estate can be attributed to healthy lifestyles, and fostering communities that share similar values, and personal goals. Although wellness real estate represents a small portion of the real estate industry, the benefits it brings are expected to generate a rising interest from stakeholders globally.

Latest Trends in the Wellness Tourism Sector

According to Research and Markets (R&M), the global wellness tourism market reached a value of USD 822 billion in 2021. Looking forward, R&M expects the market to reach a value of USD 1,250 billion by 2027, exhibiting a CAGR of 7.23% during 2021-2027. Based on McKinsey and Company, wellness tourism accounts for approximately 17% of global tourism and is growing faster than any other sector within the industry. Hotels and resorts are definitely one of the fastest-growing segments of wellness tourism and the wellness real estate sector, which is truly justified as lodging is a critical component of any country’s or region’s tourism growth.

Impacts of Wellness on the Hospitality Real Estate Sector

Based on HotStats’s P&L benchmarking data for 2019-2012 from a pool of 3,200 properties of major, minor, and no wellness hotels, the major wellness hotels/resorts were able to drive a better recovery performance compared to the minor and no wellness properties. Hotels with major wellness have not only outperformed during the recovery but also proved to be more defensive during the downturn, being a rare combination. In 2021, the top performers of both minor and major wellness properties outpaced their 2019 ADR performance.

The data confirms that the leisure department played a significant role in generating revenue at major wellness properties in 2020 and 2021. This definitely proves the positive impact of the wellness and leisure department on the overall performance of the property and also the added value of wellness offerings when it comes to the need to diversify and grow. With their extensive leisure services and recreational experiences, major wellness properties have more resources to drive recovery and offset the loss of revenue in other departments within the property. In addition, major wellness properties are typically upscale to luxury properties catering to high-spending guests whose budget is less impacted by the general economic climate.

Top industry trend influencing wellness in real estate: Branded Residences

RLA Global’s Wellness Real Estate Report indicates that the branded residence projects are attracting renewed customer interest as a result of growing global wealth and the post-Covid demand for real estate in less crowded, non-urban environments. The current provision of wellness amenities across the branded residential schemes is robust and growing. From the standard offering of a fitness center and a pool to more extensive wellness provisions such as spas, steam rooms, and treatment rooms, branded residential schemes have been recognizing the increasing demand for wellness.

For most operators and buyers, wellness amenities will be key going forward. Indeed, most wellness amenities can be found in over 50% of the branded residential developments studied during a relevant global market assessment. And for brands looking to bring new properties to market, they need to consider not only what the current needs are for residents but also what residents will be looking for in terms of amenity offerings when the project opens.

For more industry insights, meet with and learn directly from major players in the hospitality real estate sector at HOTCO (International Hotel Investment Conference) in Vienna between 27 and 28 March 2023.

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