In 2021, residential real estate developers find new success with hotels

The adage ‘location, location, location’ still holds true, but some traditionally residential real estate developers are taking it to the next level as pandemic market trends make new hotel opportunities available. Condos, villas, homes and commercial real estate fluctuate with supply and demand. The pandemic makes hotel investment particularly attractive to some developers.

Many see a hotel as a way to complement and enhance the residential commercial components of neighborhood projects. Others, often in tropical vacation destinations, may find that demand far exceeds the supply of vacation real estate, even before Covid-19. Either way, hotels present a whole new world of challenges that real estate companies may not be familiar with, such as average daily rate, occupancy levels, revenue per available room, and staff issues.

The decision to enter a new investment sector is not taken lightly. While most real estate companies looking for a hotel go for a third party to operate it, the inherent risk remains. Hotels operate businesses that rely on real estate investment. They require the know-how of an industry veteran to operate them.

According to Alvaro Acebal, director of operations for Beach Enclave in the Turks and Caicos Islands, it’s common to see hotel companies getting into real estate. He cites hotel brands such as Ritz-Carlton, St. Regis, and W Hotels that operate residential components in or next to certain hotels. However, Acebal notes that it’s rare to see the reverse with real estate companies taking their first steps in building a hotel.

An April Wall Street Journal report pointed to a rebound for hotel investors after a 2020 hit due to the pandemic. In some cases, real estate companies are drawn to the opportunity to buy struggling hotels (mainly due to the Covid-19 pandemic) and convert them into affordable housing, according to a recent CNBC report.

While many real estate investment projects began even before the coronavirus entered our daily lexicon, the fortunes of the industry are not entirely gloomy. Growth may be market specific, with some officials in cities like New York even looking to scale back on new hotel projects, according to the New York Times, while other destinations appear to be expanding.

Acebal points out that in many markets, real estate companies turning to hospitality can make a lot of sense. This type of leap of faith can lead to success for more than just a hotel or a real estate company. It can inject energy and demand into areas that once thrived through long-term vacation stays or permanent home ownership. With hotels as an anchor, communities can grow and prosper. Here are some of the new hotels that are the result of residential real estate investors trying it out.

Kimpton Cottonwood Hotel, Omaha, Nebraska

The Blackstone district

When Matt Dwyer, Director of GreenSlate Development, started investing in the Blackstone District a few years ago, the mood around the city was rather upbeat. The once somewhat neglected area sits on the edge of the city center, and the coordinated effort to connect the city center to the many medical centers on the other side made sense.

Today, the Blackstone district is full of chic boutiques, yoga studios, cafes, restaurants, breweries and residential buildings. In the center of the neighborhood stood the old Blackstone Hotel, now an office building. It made sense for Dwyer and his colleagues, who had previously only invested in residential real estate, to buy it and convert it into a flagship hotel, now known as the Kimpton Cottonwood Hotel, which is part of InterContinental Hotels Group (IHG).

Over a century old, local residents have fond memories of attending important receptions and events at the hotel. It was in his rooftop Schimmel Ballroom, now popular for wedding events and featuring an outdoor patio and chef’s herb garden, that Richard Nixon announced his run for president.

Restored to its old glamor, but with plenty of modern decor touches (including Kimpton’s favorites like morning coffee, evening wine receptions, and in-room yoga mats), The Cottonwood is packed with activities. Even its Committee Chophouse restaurant and Cottonwood Room bar draw locals to browse historical photos of the neighborhood and the hotel’s past.

“We decided to make an ad hoc pivot in hospitality because the building and its history offered a unique opportunity to restore an iconic hotel to the city where we were all born and the neighborhood we all worked so hard to create “says Dwyer.

The Club at Beach Enclave Long Bay, Turks and Caicos

Providenciales

Beach Enclave’s chic, multi-bedroom oceanfront villas are located in three different areas of Providenciales, the main island of the Turks and Caicos Islands. Nearly 70% of its visitors arrive on the island by private plane to go on vacation (or even an extended stay to work remotely). Since the villas, most of which have five bedrooms, have to be bought as a batch (rather than rented one by one), this is the kind of place where families or groups of friends travel together to escape the hustle and bustle. large hotels.

Each villa has a swimming pool surrounded by sun loungers, an outdoor patio with dining area and grill, spacious living areas and a fully equipped kitchen with the services of a butler. A chef can also prepare meals on request and breakfast is free for all guests.

The collection of residences is so popular that regular customers started asking for more facilities to be able to stay on the property, which led to the idea of ​​building a hotel.

While Beach Enclave guests have access to tennis and basketball courts, 24-hour fitness centers, and in-room spa services, many wanted more, including the ability to socialize outside the villa.

Traditionally, the Turks and Caicos Islands market has relied more on real estate and condominium-style hotels rather than typical resorts. That is changing, however, with the opening of new hotels like The Ritz-Carlton, Turks and Caicos this summer and a new hotel project, The Club at Beach Enclave Long Bay, with 24 rooms and eight residences comprising four rooms with the largest waterfront on the islands coming next year.

The latter will be the first hotel project of Vasco Borges, CEO and founder of Beach Enclave. When Borges left his career in finance to pursue the private villa investment model, he tapped into a new interest in hospitality after seeing the growing demand from existing clientele interested in taking their family on vacation with them.

Demand for residences was instantly popular and sold out within months, and a hotel seemed like a natural extension. According to Borges, both models provide a great experience, and his company is in talks with developers elsewhere in the Caribbean to bring this model to other beachfront locations, especially those with convenient access to “major markets.” North America ”.

The Ray Hotel, Delray Beach, Florida

Delray Beach

When Craig Menin, CEO of Menin, a real estate company with residential and commercial properties, opened Delray Beach Market (Florida’s largest food court) this year, his plan was simple. He wanted to invest in the continued development of the Delray Beach community and participate in its move upmarket while filling a void where concepts (such as the food hall) did not exist.

“As a person living in Delray Beach and traveling a lot, I saw that there was a hole in the market,” Menin explains.

The Ray Hotel will be part of that plan when it opens in September as a member of Curio Collection by Hilton. Menen wants to keep Delray Beach “less dense” and “small scale”. By going beyond residential and commercial projects and into the hotel sector, the company can shape the aesthetics and overall direction of the neighborhood design. Since Menen’s vast experience lies in real estate development rather than hotel operations, she will rely on Hilton to manage the hotel and Clique Hospitality to oversee its restaurants.

“We want to retain the history, beauty and charm of Delray Beach, but we also want to provide opportunities to enhance our urban beach town,” adds Menin.

This is what a flagship hotel project can do for many communities, and nowadays many new real estate companies in the hotel industry are taking the reins to make it happen.


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