Current hospitality industry trends include real estate groups bypassing established, branded hotel companies and instead starting their own brands.
Current hospitality industry trends include real estate development and investment groups completely bypassing established, branded hotel companies and launching their own branded hotels. With a decidedly small scope, brands like AJ Capital Partners, Quadrum Global and others are showing that this is more trend than fad — which could mean an appealing alternative for developers looking to take baby steps.
The private equity firm Starwood Capital Group, which primarily focuses on global real estate, recently invested $196 million into rebranding its portfolio of U.K. hotels, creating what it refers to as a new “urban lifestyle” hotel group called the Principal Hotel Company. Starwood Capital describes Principal as a “collection of city-center hotels based in landmark buildings in exceptional locations” across the U.K. and emphasizes the buildings’ distinctive heritages and the relationship between the properties and their surroundings.
“Our people and our buildings have great stories to tell, and these stories differentiate you from the competition, giving your guests and your staff something to cheer about,” said Barry Sternlicht, chairman and CEO of Starwood Capital Group. “The story of each hotel, its amazing history and architecture is the opposite of the mass-produced chain hotel, and provides us with a canvas on which to curate a unique sense of place.”
Hotels With Unique Styles
The company’s first three hotels include The Principal Manchester, three adjoining buildings dating to 1895 that recently underwent a $30.7 million renovation; The Principal York, formerly the Royal York Hotel, which dates to 1878; and The Principal Edinburgh, five Georgian townhouses built in 1775 which, jointly, have operated as a hotel since 1881. Three more U.K. hotels will join the brand within the next two years.
And this is not Starwood Capital Group’s first foray into hotel branding. Last year, the company successfully launched its luxury 1 Hotels, which stands out by being a socially conscious brand that aims to both minimize its footprint and change industry standards by leveraging local resources, conserving non-renewable resources, mitigating paper consumption and reducing landfill waste.
Similarly, the real estate investment company AJ Capital Partners launched its Graduate Hotels brand two years ago. Graduate Hotels are located in U.S. university towns and focus on the college towns’ history and culture.
The hotel and restaurant management, development and consulting firm Palisades Hospitality Group launched its own Mosaic Hotel Group this year. The company’s expansion into luxury hotels in destination markets includes hotels in Sonoma County, Palm Springs and Napa Valley as well as in Valle de Bravo, Mexico. And the international developer and investment firm Quadrum Global recently opened two New York City hotels, Arlo Hudson Square and Arlo NoMad, under its new Arlo Hotels brand.
Hotel brands used to promote their product consistency, but many of today’s customers are younger, better educated and better traveled than in the past and they don’t want a generic travel experience. According to American Express, millennials, usually defined as people born between 1980 and 2000 and the largest demographic since the Baby Boomers, plan to travel more than Boomers in the next five years (52.8 percent of millennials vs. 32.1 percent of Boomers) and they spend more when they travel, too. Millennials prefer unique experiences over “cookie-cutter hotels,” which is where small hotel brands have the advantage.
American Express found that 89 percent of millennials also place a high value on personalized service when they travel. Enhanced in-room technology is the trend they rank as most appealing — such as Marriott’s in-room virtual reality (VR) travel service, which lets guests order a VR kit to their room with which they can experience other destinations.
It all adds up to changing traveler preferences and charting how to meet these expectations. The profile of today’s travelers has changed. Hospitality industry trends such as development and real estate groups launching and managing their own brands are a reaction to this, and allow companies more control over their properties and their investment. Oleg Pavlov, Quadrum Global founder and CEO, sums up the trend as a win for everyone: “Given where the hotel investment market is today, we believe that self-managing our newest crop of hotel projects puts us in a better position to create value for investors and customers over the entire lifecycle of these projects.”