PortfolioJumeirah Clearwater Bay Resort
Qingshui Wan, Lingshui, Hainan, China
Early in 2013, we interviewed a selection of leading hotel brands on the state of the branded residence sector. 2009 through 2011 were challenging years, characterised by low transaction volumes and downward pressure on prices. However, 2012 has seen a resurgence in particular geographies (notably Asia), and even in North America built inventory began to sell once more. It was a strong year for new destination deals and the operators surveyed indicated a price premium over non-branded, high-end residential, of between 20 to 35 percent, with some prime urban locations significantly outperforming these ratios. One operator surveyed, observed that the branding of real estate by a premier hotel operator typically enhanced sales velocity by 20 to 30 percent, relative to unbranded residential real estate of a similar quantity. Emerging buyer markets included Russians, Brazilians, Arabs and, of course, South East Asians. Typical buyers lie between 40 to 60 years of age.
We asked the operators how the new economic environment would impact their future development plans and they were unanimous in stating that there is now a focus on exceptional sites in prime locations rather than in secondary or tertiary destinations. In some cases, greater scrutiny will be applied to the developer to ensure that they will be a suitable and financially stable partner.
There is greater emphasis, predictably on the more robust economies, notably China and South-East Asia (Indonesia, Philippines and Thailand were the most mentioned) but also Turkey, Morocco and hot spots in the Middle East (UAE and Saudi Arabia). Operator appetite is greater for urban, rather than resort locations, although exceptional resort sites will still be considered.
On average, urban branded residences are achieving annual sales absorption rates of around 50 to 80 units, although there are individual case studies of more robust sales rates in ‘hot’ emerging markets. In high-end resorts, operators historically expected sales to average between 20 and 40 units a year, although there is a strong relationship with price and this range can increase a little for those resorts where apartment products dominate the unit mix. However, these rates of sales velocity have not been achieved over the last four years in the resort market, with a few exceptions, and it remains to be seen what a typical level of sales absorption will constitute in the future.
Discussions generally indicated a rationalisation of unit sizes over the last two years. Pricing pressure makes it more attractive to develop slightly smaller units and maintain the average price per square metre. However, these are luxury products and will always need to be developed to a reasonable size in order to communicate the appropriate marketing message. In a resort context, all operators experienced an increased interest in furniture packages and resort rental pools in recent years, with up to 80 percent take up in longer haul markets.
In summary, ‘operators had a greater sense of optimism and excitement about 2013, with a strong sense that the North America market had bottomed out and emerging markets held strong potential for future growth.’
To obtain a free copy of the report, please fill in your name and email address in the comment section below (your information will not be posted).
Design is a critical aspect of any brand's positioning.
I recently had the honor of presenting some insights on the subject at the Cornell Brand Management Roundtable, hosted by Professor Chekitan Dev, PH.D. and The Center for Hospitality Research.
When it comes to branding hotels and resorts, both art and science are involved. Under the category of art comes stunning photography, which is one way to showcase a property and communicate its "wow" factor.
The science comes from understanding the elements of good design – functionality, quality, and impact.
Where functionality can be assessed (Is the building well designed for its purpose?) and quality can be evaluated (Will the building and materials last?), impact (Does the building lift people's spirits?) is harder to measure ... but that doesn't mean it can't be done.
Using a tool called DQI (Design Quality Indicator) to gauge the impact of 99 design-related variables, Hyatt administered a questionnaire to 2,000 guests and employees at 24 of their hotels. They were able to correlate high DQI scores with strong guest and employee satisfaction as well as with individual properties' RevPAR index.
In a longitudinal study conducted over 20 years, WATG engaged Smith Travel Research to examine the effect of design on a property's top and bottom line by comparing 27 hotels that the firm designed in four separate geographic areas against competitive sets in the same markets managed by the same operators. The WATG hotels outperformed the control group in occupancy, ADR and RevPAR.
These studies, coupled with owner/operator interviews as well as comments from guests and employees, provide quantifiable evidence that good design adds value. And it can do so in three measureable areas:
- Asset value: higher valuation as well as lower operating and maintenance costs;
- Quality of environment: improved productivity and better guest experience; and
- Brand identity: recognition, visibility and media exposure.
A summary of the entire proceedings, called "Fresh Thinking Outside the Box," can be obtained from Cornell for free in exchange for your email address here.
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