The Case for Lifestyle Hotel Residence
An Article Written by Todd Wynne-Parry, Previous Executive Vice President of Global Acquisitions & Development for Two Roads Hospitality
Written Exclusively for BLLA
Note: Since this article was written, Two Roads Hospitality was purchased by Hyatt Hotels Corporation
As the interest in lifestyle hotels continues to grow among travelers and developers, the challenge lies in making such projects feasible. In markets unable to achieve average room rates in excess of $350 per night or with extremely high land or construction costs, a stand-alone, full-service lifestyle hotel will typically struggle to stack up economically. So how are developers feeding the demand for such product? Enter Lifestyle Hotel Residences. By blending a condominium or apartment component with a lifestyle hotel development, the returns on the overall project start to create a compelling economic return.
At Two Roads Hospitality, we have been working with a number of savvy developers around the country to build and operate such developments, but the benefits are not just for the developer. Whether a condo purchaser or an apartment tenant, the residential market has shown a clear desire to live in a building that is both physically and operationally entwined with that of a bona fide lifestyle hotel. The benefits for residents include use of the hotel concierge and other services, as well as access to the best bars and restaurants in their city–literally at their doorstep. This trend has generated record-breaking sales and leasing paces, as well as above market selling prices and rental rates.
In New York City’s Financial District in particular, residential components are profitable and help create a compelling value proposition in a market where real estate is at a premium. Buyers are not only investing in luxury accommodations, but they are also receiving an unrivaled level of service and attention not found in other stand-alone residential buildings throughout Manhattan.
As one of our more recent developments, The Beekman, a Thompson Hotel in downtown Manhattan, provides residents with first-class amenities, including concierge services, housekeeping, a state-of-the-art fitness center, and priority reservations for the hotel’s acclaimed signature restaurants. With food & beverage being a main focus at all Thompson properties, owners at The Beekman Residences also have the unique opportunity to have in-residence dining provided by celebrity chef Tom Colicchio’s Temple Court restaurant, located on the hotel’s ground-floor. Of the 67 total condos available, there are only 11 units remaining. And, another testimony to the strength of this value proposition, The Penthouse of The Beekman Residences recently sold for nearly $12 million, setting a new record for residential sales in the Financial District of Manhattan.
According to an article by Mansion Global, a real estate analyst news site, hotel residences on average provide around a 10% to 20% premium in most markets – ranging from as low as 4% in Bangkok to as high as 40% along Miami’s beachfront. For example, the Four Seasons Hotel & Residences at the Surf Club, just north of Miami Beach, and the Four Seasons Private Residences Fort Lauderdale are commanding a price premium of 30% to 40% for hotel-affiliated residences over other condominium product in the area. In the case of the Montage Residences, you can find double and even triple digit appreciation depending on the destination. This model is attractive to developers because they not only command a price premium for the use of associated hotel amenities, services and branding, but they can also market to a hotel’s proprietary database of customers, helping to expedite sales to customers who already align with their brand.
Some of our recent successes in this growing development trend also include Thompson Seattle and the soon-to-be-constructed The Arts Residences at Thompson San Antonio. These properties exude the timeless yet modern sophistication that urbanites are looking for, while offering an approachable lifestyle experience and a connection to a vibrant community of like-minded locals, travelers, and residents.
On the West Coast, the Thompson Seattle opened in June 2016, with the property’s adjacent, 93-unit Sequel Apartments debuting a month prior in May 2016. By encouraging prospective residents with the benefits of Thompson Seattle’s hotel amenities, Sequel achieved 91% occupancy and had leased 97% of units within the first six months. This exceeded performance for comparable market properties that had long stabilized, which landed at a weighted average of only 93% leased units.
Focused on resident retention, the team at Thompson Seattle works with Sequel on promoting all of the guest and resident services offered, also providing VIP access to the Thompson’s restaurant, Scout, and rooftop bar, The Nest, which was named the “Best Rooftop Bar in Seattle” by The Seattle Times.
Located at the epicenter of San Antonio’s vibrant performing arts district and on the famed River Walk, the Thompson San Antonio and Arts Residences is a $116 million, 20-level, 337,000+-square-foot mixed-use development. Slated for completion in late 2019, the project will include The Arts Residences’ luxury condominiums atop the Thompson hotel. Since the Arts Residences sales gallery opened in May 2017, 40% of its inventory of 66 units has sold, setting a new record for the fastest-selling high-rise luxury condominium project in Texas. The for-sale residences are priced from the high $400s to over $4.5 million for its penthouse accommodations.
“We attribute the speed with which The Arts Residences’ condominium homes are selling to several factors,” explains Roberto Contreras, CEO and president of DC Partners, the developer of Thompson San Antonio. “The location is superb, and being on top of the luxury boutique Thompson San Antonio hotel will give owners access to an astounding array of luxe amenities, including 24-hour concierge, valet and room services; a spa; a pool deck with cabanas and bar; on-site parking; and in-house hotel accommodations for guests. The manageable size of the project is important, as well. With only 162 hotel rooms and 58 condominium homes, we will be able to provide prompt, highly personalized service for every owner.”
We anticipate these types of developments will continue to grow in the U.S. and globally as residential markets continue to tighten, hotel room rates grow at or below inflation, and construction costs remain stable or increase over the medium term. With the trend toward more and more uncontrived, authentic travel experience – which the rise of AirBnB attests to – we see the blend of lifestyle hotel with residential product enjoying a long runway of demand into the future. This is great news for those of us whose uncompromising preference for lifestyle accommodations is no longer restricted to when we travel.