To boost business at lagging hotels throughout the country, a Milwaukee development firm and a Denver hotel operator have developed  a simple formula- add water and stir. Wave Development and Denver-based Sage Hospitality are to buy hotels and then add indoor water parks, making them more attractive to families seeking weekend getaways and vacations.

Wave and Sage have opened 3 water parks at hotels in northern Illinois and Ohio since December, with 3 more openings planned for later this year. The two companies could eventually own up to 20 hotels with water parks, with each development costing around $55 million, said Brad Robinette, Sage's senior vice president for growth.

The companies are buying hotels that mainly cater to business travelers, who typically need rooms from Monday through Thursday nights. By adding the water parks, Wave and Sage are drawing more leisure travelers, which boosts the weekend business at the hotels, Robinette said. "It's a perfect match of putting business in your hotel at the slowest times."

Wave Development first took that approach when it added a water park to the former Country Inn Hotel in Waukesha, now known as Country Springs. The water park at Country Springs, which opened in March 2005, led to higher room rates, and it has boosted the hotel's occupancy, said Ed Carow, a Wave Development principal. "It's been a tremendous asset. Revenues have been dramatically increased."

Local ties

Carow and his Wave co-owners, fellow developer Mark Flaherty and Chuck Heath, who owns Madison-based Horizon Construction, reckoned they could take the Country Springs model and apply it to other hotels that do well with business travelers, but suffer from a sparse weekend trade. Wave hooked up with Sage, which runs around 50 hotels, through Hexagon Investments, a private equity firm with offices in both Milwaukee and Denver

Hexagon's president is Scott Reiman, a Denver-area resident and son of Roy Reiman, the founder of Greendale-based magazine publisher Reiman Publications. Roy Reiman and other members of his family are investors in Hexagon.

Hexagon is an investor in Sage's only Wisconsin hotel, the Residence Inn by Marriott-Downtown Milwaukee, and in a Pittsburgh hotel that Sage operates. Hexagon also is an investor in Wave's Country Springs project.

The partnership, which includes investment capital from Hexagon, Sage and Wave, have so far bought 8 hotels. Since December, it has opened water parks at 3 locations: Cherry Valley Lodge, in Newark, Ohio, near Columbus; Sheraton Chicago Northwest, in Arlington Heights, Ill., and Best Western Clock Tower Resort, in Rockford, Ill.

Three more water parks are to open in 2007, in Danvers, Mass., near Boston; Omaha and Cincinnati. The other 2 will open in 2008, in Mount Laurel, N.J., near Philadelphia, and Kansas City. Sage and Wave are looking for other hotels to buy, Robinette and Carow said.

Looking for value

The targeted hotels must come with enough land to add a water park, Carow said. Sage and Wave also want hotels with lagging occupancy numbers that would benefit from a major investment, Robinette said. That helps lower the hotel's sale price. "We're looking for value buys," Robinette said.

Along with the new water parks, which typically cost around $22 million to $25 million, the hotels are receiving room upgrades and other improvements, ranging from $4 million to $14 million. The other component is the acquisition costs, which vary widely.

The water parks carry the name of CoCo Key Water Resort and range from around 40,000 square feet to 80,000 square feet. Each water park includes slides, pools, a floating movie theater and other features. They also have a Key West theme, with cabanas and palm trees among the dcor.

Business vs. pleasure

With the water parks  livening up the hotels, Sage and Wave are looking to ensure that business travelers - their core customers - aren't put off by the sight of waterpark visitors strolling dripping through the corridors and the water parks are being built in areas of the hotels that are away from the conference rooms and other features used mainly by business travelers.  Furthermore, guests using the water parks and business travelers are being placed in rooms that are in separate portions of the hotels.