On a day that hot initial public offerings (IPO) are soaring out of sight, Great Wolf Resorts (NASDAQ:WOLF) is putting on a good show. Its stock soared from its $17 IPO price to open at $22.50 a share -- a 32% gain -- although it was trading at $20.55 in late afternoon trading.

Great Wolf Resorts is establishing a new niche, targeting families with children two to 14 years old looking for a drive-to resort featuring an indoor water park and other family-oriented entertainment.

The company operates four northwest-themed Great Wolf Resorts and one nautical-themed Blue Harbor Resort. The resorts are in such famed locations as Wisconsin Dells, Wis., and Sandusky, Ohio -- but new resorts are being built in Williamsburg, Va., the Pocono Mountains in Pennsylvania, and the Canadian side of Niagara Falls.

For the price of a room, a family gets full access to a 34,000-82,000 square-foot indoor waterpark and a "signature (emphasis added) 12-level treehouse water fort." That is one tall John Hancock!

Unlike the hot IPO for the Las Vegas Sands (NYSE:LVS), where IPO shareholders will only own 12% of the company, IPO buyers of Great Wolf will own 49.7%. Those owners, though, are getting a company that had negative net income of $4.9 million for the first nine months of 2004.

Revenue is split 70% for rooms and 30% for food and beverages. The IPO's proceeds will be used to reduce debt and help fund the current expansion. The reduced debt will help results, as will economies of scale as the company grows.

Investors are expecting that families with young children are looking for a two- or three-day resort experience that theme park operators such as Six Flags (NYSE:PKS) and Cedar Fair (NYSE:FUN) cannot offer. And the upside of occupancy rates of 65.1% for the last 12 months (for resorts open for more than a year) is plenty of room to improve operating margins.

This was not a highly anticipated IPO, but it priced at the high end of expectations. The stock has faded as the trading day continued, but it is still up 20% from the IPO price. Investors would be wise to let the IPO froth settle while they wait to see if this company can, in fact, turn a profit.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned but likes to visit Las Vegas.