Did you know that Australia’s hotel occupancy rates dropped by as much as 90 per cent since the outbreak?
According to STR, hotel occupancy rates until September 2020 are only below 20 per cent in Sydney, Melbourne, Adelaide, and Darwin. In Sydney, hotel bookings have dwindled by 64 per cent compared to the same time last year. STR foresaw that pre-COVID hotel demand would not return until 2023.
Even Airbnb, the original disruptor, was not immune to Covid-19. As the federal government closed international borders, visitor arrival declined by 99.7 per cent from 1.67 million in April last year to 21,170 in April this year.
So, what about hotels? How will they innovate and why could this be a commercial threat to property developers?
Hotels are already pivoting their attention to the residential estate which has grown through the years called Branded Residences.
Branded Residences Defined
Branded Residences were identified by Colliers International as “prime residential products leveraging off the quality of the hotel brand to create an aspirational product, reflecting luxury and prestige.” Concierge, health and wellness centre, and housekeeping are the top amenities that branded residences benefit from.
Head of Savills World Research Paul Tostevin stated that there are three types of branded residences:
- Co-Located – Branded residences located next to a hotel
- Condo hotel – Branded residences located inside the hotel
- Standalone – Branded residences without the full-service hotel aspect
In Sydney, the embodiment of a branded residence is the Crown Residences One Barangaroo. Designed to receive pleasure from the astonishing views of Sydney Harbour, it features a limited collection of 82 residences with amenities and services including a concierge, valet, dining, and health and wellness centre.
A growing real estate sector
In the 2019 Global Research Paper of Savills entitled “The rise and rise of branded residences”, a significant increase of 198% in the number of branded schemes were revealed in the last decade. Hoteliers dominate the sector with hotel-branded residences accounting for 85% of completed projects and 96% of pipeline projects.
Given that luxury hotel brands are the kings of this sector, Savills see “Upper Upscale Brands” to grow in the next few years. Additionally, a mixture of diversified brands with luxury car brands like Porsche and Aston Martin and fashion powerhouses like Armani and Versace showing keen interest will be seen in the future.
At present, there are around 80 brands in the sector and a further 30 more will join in the coming years. Indeed, it just keeps getting bigger and bigger.
Should residential property developers be worried?
Well, every smart property developer should be. In fact, this shift has already started to accelerate and these are the commercial reasons that make them formidable.
1. They Have Established Global Brand Presence
Who has not heard of Four Seasons and Ritz Carlton?
Branded Residences are legacy luxury hotel brands. They are part of almost everyone’s general knowledge with their years of operations dating back to as far as the 1960s.
With this supreme popularity, how do you compete with decades of brand awareness, trust and marketing finesse when they have access to a global database of paying guests?
You also need to understand that the key edge of branded residences is prestige. Owning a branded residence is owning an address like no other and for the top 1%, this is a priority.
Let that sink in.
Related post: How To Create The Perfect Campaign
2. They Are Remarkably Skilled and Experienced
With decades of operational experience, imagine the quantity and quality of the intellectual property, customer insights, skills, and experience acquired over the years to outperform you in all areas, be it functionality, design, and customer service.
Did you know that a branded residence averages a premium of 35%?
And yet buyers don’t mind paying for this premium. Take a look at the Four Seasons Residences at The Surf Club in Miami. A 2019 Forbes article revealed that it was already 90 per cent sold with home prices ranging from $3.450 million for a two-bedroom to $29,950,000 for a 4-bedroom Penthouse. Indeed, their skills were already wrought by time.
3. They Have an Ultra-Large Customer Base
Legacy luxury hotels hold vast quantities of data and the history of past customers. This has been the result of their continuous quest for strengthening their numbers by augmenting their data-driven thinking to generate sales. They know who their best clients are, where they live, their food preferences, how often they travel and who resided in the presidential suite in the past 12 months.
As a trusted and respected brand, their initial launch campaign alone can sell out a building.
4. They Understand Wellness
As we have previously covered, wellness is the future of real estate so homes with a wellness component will become the new luxury for the elite, and where hotel brands excel.
Spas, pools, saunas, and gyms are hotels’ typical amenities that count as their strong points. In fact, property developers have always used hotel metaphors to describe their amenities because people know the hotel standard.
Three viable tips to help you overcome this disruption.
So, what are our recommendations to the current clients we consult with?
- Protect your database. Your Intellectual Property and customer base is priceless and mass communication starts with a healthy email list.
- Provide raving customer service and build a community. Did you know that a 5% increase in customer retention improves profitability by 75%? It only goes to show that keeping an eye on every enquiry, regardless of the customer service it requires, is a key to maintaining your identity and community.
- Understand and incorporate wellness into your business model. In 2017, Wellness Lifestyle Real Estate was already valued at $134 Billion and with the pandemic, more people will demand a healthier-built living environment.