AEC firms, developers, and investors worldwide are bullish on hotels. Our hospitality Giants share what’s new in this fast-morphing sector.
‘Open throttle.’ That’s how real estate giant Jones Lang
LaSalle characterizes the global market for hotel deals in 2014.
Transaction volume in the sector is predicted to reach
nearly $50 billion this year—about 10% higher than last year, which was more
than 30% higher than the year before. Travel research consulting firm STR says
nearly 3,000 construction projects were active at the beginning of 2014 in the
U.S. alone, up 16% compared with 2013. The previous year saw a 48% increase.
Funding for hotel investments is easier to secure than it
has been since the 2008 crash. Half of lenders recently surveyed by STR,
RobertDouglas, and Hotel News Now expect their overall hospitality volume to at
least match 2013’s strong showing, and 35% say they will increase hotel lending
significantly or moderately. “It feels good out there in the market,” says
Robert Stiles, Principal and Managing Director at RobertDouglas.
Many major cities worldwide have seen strong economic
recovery that justifies lodging investments, and growth is moving into
secondary markets, especially in the Americas and Europe, according to JLL’s
“Hotel Investment Outlook: Global 2014." However, conference and group
business hasn’t reached pre-recession levels, and worries about the fairly soft
world economy are making many players risk-averse. Cautious clients are asking
their AEC partners for a high level of responsiveness.
“Costs continue to drive the market,” says Don Harrier, AIA,
Principal and Senior VP, HKS Hill Glazier Studio. “How quickly and efficiently a hotel can open
is what makes that project attractive to an equity partner. The luxury market
generally remains slow, while small, efficient, yet chic hotels in select
markets, as well as large convention hotels in urban areas, are what’s hot.
REITs are looking for acquisitions in key gateway cities. The movement is
centered around existing assets—renovation and repositioning work—and less
ground-up.”
1. Demand for
sustainable, healthy, locally authentic properties, with an eye toward
attracting Millennials.
2. Adaptive reuse
of interesting non-hotel buildings that provide a strong sense of place and,
often, tax advantages.
3. Renovation of
existing hotel properties to meet pent-up demand and rising consumer
expectations.
4. Renewed
popularity of large projects mixing hospitality, residential, workplace,
entertainment, sports, and other functions.
5. Rise of the
value-oriented “select-service” category, bridging the gap between luxury and
economy.
In many cases, projects are being shaped not only by
economic trends but also by owners’ need to attract Millennials, whose tastes
tend to differ from those of their Boomer parents. Greenness, wellness, and
distinctiveness are important themes, according to firms active in the
hospitality sector.
“There has been a definite demographic shift toward strong
sustainable practices, enthusiasm for an increased amount of shared community space,
and an eclectic design product approach,” says Manuel Cadrecha, AIA, LEED AP,
Principal and Corporate+Commercial+Civic Global Market Leader for Perkins+Will.
Here’s what readers are telling BD+C about major trends in
hotel design and construction.
1. Millennials’
checklist: green, healthy, local
As discussed in BD+C’s Greenbuild issue, owners of hotels
are increasingly concerned about expanding sustainability efforts beyond O+M
procedures such as laundry. Energy- and water-conserving facilities not only
save money but also dovetail with owners’ desire to market comfort, wellness,
and environmental responsibility.
“Clients are expecting top-of-the-line room control systems
to be installed for a better guest experience,” says Paul Finamore, Senior VP
and Director of Operations in the New York City office of Lend Lease. “Features
typically include heating, ventilation, and air conditioning control, in-room
lighting, and occupancy sensors designed to set back thermostats when the room
is unoccupied, reducing energy consumption.”
The MGM Grand Hotel in Las Vegas has taken the concept to
extremes with its Stay Well rooms, created in collaboration with the Cleveland
Clinic and New York design firm Delos LLC. Features include dawn-simulating
alarm clocks, HEPA-filtered air purifiers, light machines that complement
clients’ circadian rhythms, vitamin C-enriched shower water, and aromatherapy
diffusers. The MGM Grand started with 42 Stay Well rooms in 2012 but has since
expanded to more than 170.
John Gerondelis, AIA, LEED AP BD+C, a Principal at
Smallwood, Reynolds, Stewart, Stewart & Associates, says the “green” push
and the “healthy and authentic” drumbeat are complementary. He calls this
convergence “ecological aesthetics”: the mandate to create properties that
reflect their locations, instead of cookie-cutter designs. The holistic
approach goes deeper than systems engineering and interior design, according to
Gerondelis.
“The focus for a while has been on improving materials and
machines, such as high-performance glazing and more efficient mechanical
systems,” he says. But now, clients believe “the development should also look
green, or at least more contextual—more like the place in which it’s located.”
Some major chains are responding with “lifestyle hotels”:
boutique-ish brands that benefit from parent companies’ economies of scale and
infrastructure. Brands that are actively building include Element and Aloft
(Starwood); Edition (Marriott); Andaz (Hyatt); and Hotel Indigo
(InterContinental Hotels Group). Rooms are well-detailed but tend to be fairly
small, to nudge customers into the properties’ restaurants and bars.
Whatever the solution, owners are demanding that properties
be more carefully tailored to their settings, says Shawn Basler, a Principal
who leads Perkins Eastman’s hospitality practice. “The beachfront resort must
interpret its context with a modern hand that recognizes increasingly
sophisticated expectations. The reimagined boutique hotel must project a unique
design vision.”
2. For a
one-of-a-kind vibe, repurpose history
Adaptive reuse of existing facilities—from factories to
office buildings—is one strategy for affirming the local context. Kimpton
Hotels has built a business from this model, but other hoteliers are jumping on
board, according to Janet Smith Haltom, AIA, Principal at Hnedak Bobo Group.
“Many of the projects we’re involved with are not
necessarily conversions of historic properties into grand, five-star landmark
hotels, but rather a complete transformation of historic structures into
mixed-use, residential, and hospitality projects that take full advantage of
their location in the urban core,” she says. “With historic tax credits
available, and most cities offering additional incentives for redevelopment, it
represents smart investment.”
Haltom says the typical program includes restoration of
lobbies and other public spaces, with preservation of decorative features when
possible, plus spacious guestrooms and upgraded MEP and HVAC systems. Tweaks of
historic color palettes may be necessary to meet modern tastes, she advises.
Building Teams can benefit from liaisons with state historic preservation
offices, local city governments, and even the National Park Service, helping to
ensure compliance with federal rehab standards and full benefits from historic
preservation tax credits.
Structures dating from the late 1800s and the first few
decades of the 20th century are favored, particularly when they offer high
floor-to-floor heights and adaptability to natural ventilation. However,
Modernist structures are also being reborn.
For instance, Joie de Vivre just opened The Epiphany Hotel
in Palo Alto, Calif., near Stanford University, repurposing an eight-story
senior living center built in the 1970s. Steinberg Architects, McCartan
Interior Design, and think tank IDEO collaborated on the boutique project with
Commune Hotels & Resorts, Joie de Vivre’s parent company. “This is intended
to be a playful, authentic property full of imagination and aligned with the
local lifestyle,” says Commune’s CEO Niki Leondakis. The “California cool”
aesthetic in this once-pedestrian building includes tech-heavy guest rooms,
work “lounges,” fancy linens and amenities, and Fred water, a Sausalito product
supplied in refillable flask-shaped bottles.
3. Renovate, or risk
irrelevance
The need to stay competitive is also driving hotel-to-hotel
renovations, including same-brand upgrades as well as transformations to
entirely different brand flags. Last year was a record-breaker for hotel
renovations in the U.S., with one out of five existing properties getting an
upgrade, according to the Preston Robert Tisch Center for Hospitality, Tourism
and Sports Management at New York University. (A more typical annual average is
15%.)
“The major brands are
actively changing their standards based on what guests want today and in the
future,” says Patricia Miller, VP and Managing Principal, LEO A DALY. “Room
layouts, guest bathrooms, and design styles are being developed in response to
each brand’s target customer base and changes in technology.”
Jacqueline McGee, Principal and leader of hospitality and
high-end residential design for CBT Architects, agrees. “Because the hotel
renovation cycle was disrupted by the 2008 market crash, many are now catching
up. So there is a crush of renovations happening right now. Many properties are
competing for resources from firms that downsized after the crash, including
contractors and suppliers.”
Loews Hotels & Resorts is a prominent example of big
bucks being spent on renovation. An upgrade initiative will eventually impact
15 of its 19 properties, including a $70 million makeover of the flagship Loews
Regency in New York City. Accor, whose Pullman brand is an important lifestyle
label in Europe and Asia, is also busily renovating, including five sites in
Paris alone. Accor is upgrading within other brands—notably, an $85 million
revamp of the Novotel Times Square. Originally targeted toward budget-conscious
European tourists, the Novotel has been redesigned by Stonehill & Taylor as
an edgy, youth-minded property reflective of the New York buzz.
Also on the repositioning bandwagon is Caesars
Entertainment, which has spent $185 million converting the traditional Bill’s
Gamblin’ Hall & Saloon, on the Las Vegas strip, into the Cromwell Hotel.
The property received a new façade, 188 renovated hotel rooms, redecorated
public spaces, a remodeled casino, new retail outlets, a restaurant helmed by
celebrity chef Giada de Laurentiis, and a “day/night club,” incorporating a
pool and spa with a bar and live music venue. These changes are the price of
staying competitve, says Frank Dumont, VP and Director of Design for LEO A
DALY, which designed the project.
“Our clients are all looking for new types of venues to
entice visitors from competing facilities,” says Dumont. “They’re trying to
take advantage of the views for a more resort-like experience. Additions of
day/night clubs are also a large growth area. People spend large sums at these
clubs, and it’s an attraction for locals and tourists alike.”
4. Hotels meet
housing in mixed-use plans
Before the economic crash, large mixed-use projects that
included hotels were a popular development model. This scenario is regaining
momentum in thriving urban cores, integrating hospitality with retail and
entertainment venues, rental and sale housing, and offices. “Residential
components that are for sale, in the appropriate market, can help finance the
overall development, providing lower up-front financial risk,” says SRSSA’s
Gerondelis. “Sometimes residences are branded with the hotels.”
High-density, small-footprint projects are favored in the
Middle East and Asia, such as the upcoming 67-story Kempinski Hotel and
Residences in Jeddah, Saudi Arabia. The Perkins+Will project will include a
luxury hotel, serviced apartments, and condominiums, all positioned to provide
spectacular views of the Red Sea.
Where there’s room, multi-building low-rise schemes are more
common. For instance, developer The Athens Group is guiding a $100 million
expansion of the Inn at Palmetto Bluff, part of the existing 20,000-acre
Palmetto Bluff residential development created by Crescent Communities in
Bluffton, S.C. The project includes 150 hotel rooms, a spa and fitness center,
meeting facilities, and restaurants. Buildings are modestly sized with
traditional Low Country architecture, complementing 50 existing guest cottages.
Montage Hotels & Resorts will also be offering branded residences as part
of the initiative. The Building Team includes design firms HKS Hill Glazier
Studio, Hart Howerton, and Wilson Associates.
 |
|
Hotel rooms in the U.S. as of January 2014, including
existing supply and properties in construction, plus a percentage change
comparison with January 2013. “In construction” data includes projects where
building has commenced; “active pipeline” data includes projects in the
construction, final planning, and planning stages but not projects in the
pre-planning stage. The “unaffiliated” category represents properties that are
not part of a chain, with a high number of rooms in the pipeline for these
independents.
|
Some transit-oriented versions of mixed-use include hotels
plus condos without a retail/entertainment component; a different take consists
of hotels and conference facilities linked to major sports venues. “The hotel
and meeting space keeps the real estate generating income for the 250 days of
the year when the sports venue is not being used,” says Gerondelis.
Rob Blalock, Division Manager for contractor Brasfield &
Gorrie (and a member of BD+C’s “40 Under 40” Class of 2013), concludes: “We’re
seeing a trend in hotel projects connected to larger developments, as these
seem to make more sense from a financing standpoint. Hotels are coming back,
but they need to be part of a larger story to get off the ground, whether
that’s a convention center, a theme park, or some other attraction.”
5. Select-service bridges the value gap
Grand isn’t the only viable game, however. Select-service
hotels—traditionally defined as properties without restaurants or banquet
facilities—are also hot. In fact, this sector currently represents the leading
format among new-construction projects for U.S. chains. Representative brands
include Courtyard by Marriott, Hyatt Place, and Hilton Garden Inn.
Today’s version of select-service straddles a full-scale
convention hotel and a bare-bones property. Sites may include fitness rooms,
business centers, guest laundry machines, mini convenience stores, indoor or
outdoor pools, small meeting rooms, and modest restaurants. Whatever the mix,
the building type exudes an image of value.
Business and leisure travelers appreciate the thrifty
pricing, according to Charles Pinkham, VP, Development, with real estate
investment firm Portman Holdings. “Select-service appeals because it offers
travelers everything they need and nothing they don’t need,” he says. “Large
ballrooms, large restaurant menus, spa services, and other options that come
with a full-service hotel are eliminated, allowing the traveler to pay a good
price for a nice room.”
Many of today’s lenders see select-service as a particularly
low-risk proposition. “These properties are the easiest to finance,” says LEO A
DALY’s Miller.
Portman Holdings is currently focusing on premium urban
locations in Tier 2 cities. “We feel there’s a decent pipeline for these
projects there,” says Pinkham.
Whatever the scope, uniformity no longer sells. Economies of
scale are always appealing, and no one wants to reinvent the wheel. But,
increasingly, the traveling public will pay for experiences that are more
special than another night in a generic property. Individualized designs
represent greater potential revenue for Building Teams than merely replicating
prototypes. Nimble firms will have an advantage in a scenario where each
project is viewed as a one-off.
“Owners are asking us to customize design to create an
identity unique to a specific property,” says Miller. “Designers have to speed
up the schedule to meet the need. We need to be careful to schedule enough
design time to properly coordinate and address potential issues early.”
Building Teams that know how to squeeze a buck will also be
prized, says Brasfield & Gorrie’s Blalock. “Increased activity has spurred
price increases by suppliers and subcontractors who are anxious to boost
performance after several years of lean margins. Rising costs are passed along
to projects, posing a challenge to tight budgets. Developers are racing to beat
competition to the market while trying to leverage buying power.”
Source: BDCNetwork.com
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