Right-sizing your resort: is bigger better?

Backed by robust economic growth, solid corporate profits and few new additions to supply, the resort sector has been a star performer since the last recession. With potential resort sites remaining scarce, many developers seek to acquire existing resorts with redevelopment potential or resorts with excess land for expansion. However, what is the right size? Is bigger better? Is biggest best?

At JLL, we analyzed a select set of upper-upscale and above resorts located in the United States based on size: 400 to 699 rooms (standard); 700 to 949 rooms (large scale); and more than 950 rooms (big box), as well as several performance metrics.


From 2010 to 2018, big box exhibited a materially higher average occupancy of 73 percent, compared to large scale’s 69 percent and standard’s 61 percent occupancy levels, respectively. Based on these figures, biggest is better when it comes to occupancy performance.

This is because large resorts can afford to feature expansive amenities that appeal to guests from both transient and group segments, including multiple food-and-beverage concepts, recreational offerings such as golf, pools, water rides and spas. Additionally, big boxes feature extensive meeting and exhibit spaces, enabling them to induce and accommodate large convention groups.

Average Daily Rate

While each category experienced healthy annual growth rates from 2010-2018, average daily rate’s (ADR) compound annual growth rate tells us biggest may not be best.

Standard achieved the highest ADR CAGR (3.8 percent), followed closely by large scale at 3.7 percent, then big box at 2.5 percent. However, large scale achieved the highest ADR levels. Since 2009, large scale’s annual ADRs always have been higher than that of standard resorts (10 percent to 14 percent more).

Bigger does seem to hold an advantage. Since large scale tends to feature extensive amenities, high-end properties also are able to capture higher-rated groups, such as incentive groups, without having their overall rates being diluted by lower-rated demand.

Revenue Per Available Room

Since 2009, large scale’s annual revenue per available room (RevPAR) have been consistently 22 percent to 30 percent more than that of standard’s and achieve an average RevPAR premium of 26 percent.

Although largest in average size and with the lowest ADR among the three categories, big box achieved superior RevPAR compared to standard: in 2018 its RevPAR premium over standard was 11 percent.

From a RevPAR perspective, it would appear, once again, biggest is not the best, but bigger is advantageous.


Big box demonstrated superior profit margin at a gross operating profit to total revenue ratio of 39 percent and earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 29.9 percent. Large scale follows closely with GOP and EBITDA margins of 37.2 percent and 26.5 percent, respectively.

Standard trailed, largely due to less profitable F&B revenue compositions and the lack of economies of scale that enabled a less-efficient operation than at larger properties.

Top Takeaways

There is never a one-size-fits-all solution when it comes to hotel development.

Although large scale demonstrated the highest RevPAR, big box delivered higher profit margins. Therefore, it does seem bigger is better—with a caveat—only in the market that supports it.

Locational attributes, destination appeal, feeder markets, infrastructure readiness, accessibility, seasonality patterns, labor pool, community support, development program, amenities, positioning, branding, barriers to entry and capital liquidity all are key factors that influence the potential success of a development. It's imperative all factors are researched carefully, considered and supported by data-backed analysis to ensure a successful development.

Charlotte Kang is EVP/head of feasibility, portfolio and valuation for JLL Hotels & Hospitality.