News for the Hospitality Executive
Are Design Hotels More Attractive Real Estate
Investments than Traditional Hotels?
by Lukas Hochedlinger - July 29, 2010
Previous research for the UK and US markets suggested that design hotels perform better than traditional, “non-design” hotels. This is also one of the key findings of a recent survey conducted throughout Europe. Does this imply that design hotels are consequently more attractive real estate investments from an investor’s perspective? The answer is yes if one strictly follows certain guidelines.
The design hotel market is already booming, and the number of new design hotels and design brands are expected to grow continuously across Europe over the next years. The fact that essentially all large hotel chains including Starwood, InterContinental, Hyatt, Rezidor, etc. started creating their own design/lifestyle brands supports this notion and reflects the operators’ and investors’ increased interest in this hotel segment.
There is no agreement about the definition of a design hotel and the current market size in Europe. And what are the differences between so-called design(er) hotels, boutique hotels and lifestyle hotels? In this survey, Hochedlinger investigated the different terms used for unique, individual and design focused hotels with a personalized service. One conclusion of this survey is that the above three terms are often used interchangeably and that all three hotel terms share more or less the same attributes with regard to size, design, location and management. However, most surveyed hotels in Europe consider themselves “design hotels”.
Since the development of the first design hotels in London in the early 1980s, the European market has grown to more than 300 design hotels across the continent. By far the largest number of design hotels can be found in the UK, followed by Italy, Germany, Spain and Austria. CEE countries contribute less than 5% of the total design hotel supply in Europe and are considered the least developed region in Europe.
Based on this study, almost three quarters of the European design hotel supply are individually operated properties. Compared to the US, where lifestyle developments in resorts are popular, the trend in Europe has been the development of boutique hotels in urban areas with 70% of all identified design hotels being located in cities.
Return vs. risk
Existing research on the performance of design hotels was limited to the US and the UK markets so far. These surveys confirmed the ability of design hotels to outperform non-design hotels with regard to occupancy and rate. In order to fill this data gap, Hochedlinger investigated the relative performance of all European design hotels and provided the following new benchmark figures:
Recommendations for investors
With changing demographics and values, the design/lifestyle/boutique
segment in Europe is expected to further grow over the next few years.
As a consequence, new hotels in this niche will be increasingly forced
to differentiate themselves from their “peers”.
About the Author:
Lukas Hochedlinger, MA, MSc performed the survey as part of a master thesis at the Danube University in Austria/Europe. He has extensive experience in the field of hotel advisory and valuations, particularly in Central and Eastern Europe. Starting September 2010, he will represent Europe’s leading hotel transaction advisory company Christie+Co in Vienna with a focus on the Austrian and Central and Eastern European markets. He can be reached at firstname.lastname@example.org for any further questions or a free copy of the full report.
|Also See:||Lifestyle Hotels: Gotta Have Soul / Daniel Edward Craig / July 2009|