Want to generate millions in revenue long before your hotel even opens its doors? Add branded residences! That has been - and still continues to be - the thinking of many developers. However, that viewpoint is now evolving and many are now doing away completely with the hotel component. According to data presented by Global Branded Residences, standalone developments currently account for around one-third of the global branded residences market and 40 per cent of the development pipeline.
Standalone expansion
Jeff Tisdall, senior vice president of mixed-use development at Accor, says the figures broadly reflect what the company has experienced within its own pipeline.
“Those numbers are broadly speaking consistent with what we see in the market and what we see within our own business. It's a trend that we've observed for several years, one that excites us and one that we see as a real opportunity for several of our brands.”
But although developers are asking the question: “if branded residences are the star attraction, do we need the hotel at all?”, industry experts do not see standalone residences replacing traditional hotel-linked schemes. Instead, they say the model is expanding the market by unlocking projects that previously would never have happened.
Urban development sites don’t often offer enough space for both a luxury hotel and a substantial residential component, notes Chris Graham, founder of Graham Associates, adding “if you’re in the middle of a city, you can often find existing office buildings and apartment blocks to convert.”
The model also allows hospitality companies to expand into markets and neighbourhoods where a hotel alone may not make commercial sense.
“It allows the brands to extend into areas where they normally might not. They can have a brand extension without the necessity to have a hotel on that particular site,” Graham adds.
Tisdall agrees. “We see tremendous opportunity across the US,” he says, pointing to Florida, Texas and Denver, while also highlighting Southeast Asia, Spain and Portugal as markets where standalone developments are broadening the company's reach.
“Standalone is enabling new markets, but it's also enabling new locations within existing markets,” he adds.
Outside of traditional central districts, Tisdall says Accor is seeing branded residences spread into affluent residential neighbourhoods that may not support a hotel but possess the characteristics wealthy buyers value most including strong schools and lifestyle infrastructure.
Furthermore, the standalone model allows developers to introduce branded residences without the operational complexity of building and running a hotel.
“The hotel brings in a whole new raft of challenges and costs. Some developers don't want hotels. They're just doing real estate,” Graham notes.
Rethinking the model
An important point though, Tisdall argues, is that the term “standalone” is evolving past just removing the hotel but rather co-locating the residential component with another product. He stresses that the absence of the hotel doesn’t mean the residential product just stands by itself.
He explains: “In the absence of a hotel, what becomes really important is understanding how to recreate that hospitality engine that brings brands like Fairmont, Raffles or SLS to life in a branded living context.”
For Accor, that means exploring what else could sit alongside the residences. Depending on the project, that may mean co-locating residences with private clubs, destination restaurants wellness concepts or other lifestyle offerings.
But removing the hotel creates an obvious challenge around delivering a great hospitality experience when the very engine that traditionally powers it has disappeared.
For Graham, the answer starts with accepting that standalone residences require a different balance between amenities, services and affordability.
“The more services you provide, the more expensive it's going to be,” he says.
Instead of attempting to recreate every hotel facility, he believes operators should focus on essential services while offering additional experiences on demand.
“There are core services such as concierge and valet parking. But the offer can be extended through a broad range of à la carte services. If someone wants a dog walker, their car cleaned or something else entirely, those become optional extras rather than costs that everybody has to pay for.
That closely mirrors Accor's own thinking where within the residences themselves, amenities are being designed around concierge-arranged, on-demand services rather than permanently staffed facilities. For example, private dining may be designed around a commercial-grade kitchen that residents reserve when entertaining guests. Concierge teams can then arrange chefs, catering staff or sommeliers as required.
“The trick shot,” Tisdall says, “is to elevate the experience in a manner that's commensurate with the brand but without a corresponding increase to overheads.”
Looking to the future
A big question though is whether the residential aspect with cannibalise hotel investment. But don’t panic! Tisdall says that’s unlikely.
“We’re seeing a lot of the standalone growth come from pure-play residential developers. There isn't a zero-sum game. Luxury hotels and resorts will continue to grow, and more often than not you'll continue to see branded living components alongside them. The standalone side, though, will continue to accelerate.”
Despite the rapid growth, neither Graham nor Tisdall believes maturity has been reached.
Graham expects standalone residences eventually to account for more than half of all branded residential development as the model expands beyond luxury into upper-upscale and upscale segments.
”There is absolutely no reason why you cannot have a branded standalone four-star product. People still want convenience, services and lifestyle. They just don't necessarily need as much marble and gold taps.”
Tisdall is equally convinced that there’s still a lot of runway. Beyond new hospitality brands, he expects partnerships with fashion, automotive and design companies, alongside new combinations of branded residences with private clubs, marinas, golf courses and destination food-and-beverage concepts.
“We're really just scratching the surface,” he says.
But as standalone residences proliferate, they both stress focus needs to extend well beyond launch day, with Graham stating long-term stewardship is what ultimately separates hospitality brands from many new entrants, of which there are many as traditional hotel operators continue to compete with fashion houses, automotive brands etc.
“You're not talking about selling a two-week vacation. You're talking about a 10- to 20-year investment.”
Tisdall shares the concern, adding that success should not be measured by initial sales performance alone. “Homeowner satisfaction five, 10 or 20 years down the road is very important. The operating phase is crucial,” he says, as he stressing the importance of finding smarter ways to deliver value when the hotel – and corresponding amenities - are no longer part of the equation.