Home sweet hotel 

This week’s THREG meeting raised the intriguing issue of whether you would buy an apartment just because it shared a brand with your car or your handbag or your hairdresser. In the UK, the default position is ‘well I would if John Lewis did it’ and that works not only for branded residences, but also funerals, pets and children.

Branded residences are deeply a thing now, as befits our age of branding and everyone wants a bit of it. It does feel to us biased observers that maybe those with some experience in hospitality should get the first crack and we don’t want to live in an actual bag, but the market will speak for itself, and it does. 

Chris Graham, managing director of Graham Associates and author of the segment’s bible on this topic, described it as a “demand-led industry” where buyers had a tremendous appetite. The tremendous appetite extended to all parties, with everyone set to benefit, from owner, to brand to developer.

He told the assembled: “The two main motivating factors are confidence and convenience. The former comes from someone like Four Seasons or Ritz Carlton putting their name above the door, which reassures that the development will be delivered and to a high standard. The latter means you have your own home with a luxury hotel on your doorstep and we have seen the hotels out bling each other in terms of the services offered.”

Elaine Dobson, partner, head of living, Taylor Wessing, agreed, adding: “Our clients look for their own lifestyle choices and the second thing they look for is what return they’re going to get. They want somewhere they can have friends over and then lock and leave and they want to know that they can return and it will be immaculate and they can call on concierge services. The developer wants to know that they will see a return. Both parties want to be sure that whoever is going to turn up to rent it, live in it, buy it, have a certain standard which is why they are paying a substantial increase per square foot. 

“The confidence level is around brand. They want to be sure that they are putting their hands deeper into their pockets because the return is going to be better for them. There are two types; one where the building is branded and one is when it goes into the rental pool. Investors like the rental pool because they don’t have to worry about it being looked after.”

Paul Thomas, VP, UK & Ireland, Nordics, Marriott International, one of the biggest brand stables in the sector, drew attention to the hefty brand premium on offer for developers. In the Manchester project the group is creating with Gary Neville, apartments were selling at 40% to 50% more per square foot than the premium Manchester residential market.

Existing expertise was an attraction for Daniel Johansson, director of development & acquisitions, Cheval Collection, who said: “Our core business is serviced apartments and, after more than 40 years in the business we have extensive experience of long-stay guests, which would be easily transferable to a branded residential product.”

As we are now seeing, it’s not just for those who know about turndown service. Graham added: “We’ve seen more and more evolve in the industry and as non-hospitality brands have jumped on the ‘brandwagon’ they have found they can expand into a whole new segment.

“There are nearly 200 brands in this sector and we are going to see more. The brands are now looking at themselves and wondering how they will differentiate. Where does it stop? We’re starting to see publications, like Condé Nast magazines. We’re going to see more brands, so they will have to be smarter and fleet of foot.

“We’re going to see more standalone, more locations, more lower starred offerings. And why not? Luxury is a relative thing. We are seeing a transition from the super-premium and we will see midscale coming in. We won’t need as much marble and gold taps.”

Residences, as Graham noted, provided operating revenue for the brand, as well as additional inventory, which they will share a management fee with the owner. And, as the sector grows, so are the third-party operators, which means the brand can come in and assist with the design, then step back and earn revenue.

Sounds like a win-win. But Thomas had one note of caution: “Branded residential is great if the brand for that market is correct, but you have to be aware of the demand in that market: a Ritz Carlton is not going to work in Bognor Regis.”

Sector knowledge really is everything. 

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