Branded-Residences-Report-DPS_LR

BRANDED RESIDENCES: AN OVERVIEW

SECOND EDITION

A member of agency group

Foreword Branded Residences: A Brief History

Muriel Muirden The branded residences concept is believed to Hotels portfolio in 1992. Ritz-Carlton followed,
Executive Vice President & have started in the 1920’s at Sherry-Netherland choosing to focus initially on North America.
Managing Director, Strategy at WATG Hotel on New York’s Fifth Avenue, which operated
successfully alongside its own cooperative serviced Around the turn of the millennium, the success of
Arguably around for almost a century, the branded apartments, followed in 1929 by the opening this formula and its marked growth in popularity
residence sector continues to intrigue developers, of The Carlyle Hotel and private residences in among wealthy buyers saw an increasing number
investors and real estate advisors. Madison Avenue. However, the branded residence of market entrants led by Starwood and Fairmont
market, such as we know it today, did not catch and soon followed by other leading hotel operators
Dynamic and still evolving, the sector offers buyers on as an established product within the hotel and such as Kempinski, Aman, St. Regis, Hyatt
some degree of security, an element of prestige resort market until the mid-1980’s when Four Regency, Six Senses, Banyan Tree, W Hotels,
and a hassle-free holiday home. If executed Seasons successfully sold out its Boston hotel Shangri-La, Taj, Viceroy and Mandarin Oriental.
correctly it offers developers attractive price condominiums, soon after which Aman launched
premiums and accelerated sales velocity, whilst Amanpuri in Thailand with 30 branded villas. Today, with over 50 locations between them, Four
the hotel operator gets rewarded for the marketing Seasons and Ritz-Carlton dominate the global
muscle their brand brings to the development. Seeing the potential, Four Seasons seized the branded residences market, although other major
Truly a win-win-win scenario. opportunity and soon established a global presence, operators are catching up, such as Kempinski (with 26
largely due to its purchase of the Asia-based Regent residential schemes globally), St. Regis and W Hotels.
It is therefore small wonder that, as the dust
sheets are being pulled off long dormant resort Tupungato / Shutterstock.com
projects around the world, it is the branded hotel/
residence package that is often the phase one 3
development, reigniting confidence and awareness. The Sherry-Netherland Hotel on New York’s Fifth Avenue

The real growth potential, however, lies in
the urban sector as mixed use developments
and regeneration schemes look to capture the
imagination and attention of űber high-end buyers
in often congested luxury real estate markets.

Chris Graham, a property expert and resort real
estate devotee, has grasped the nettle and collated
and supplemented existing research into the sector
and undertaken interviews with those researching,
developing and selling branded residences. He
presents in this report current thinking and
direction in the sector and observes the rapid
growth in hotel brand participation.

An interesting read and a strong starting point for
future monitoring of the market.

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Hotel Branded Residences: Market Participants are now focusing on offering different options to • The challenging economics of building new
accommodate changing client needs. Hence the luxury hotels without some subsidy from
1   Banyan Tree   Hyatt Place   One & Only Shangri-La   increasing interest in serviced apartments and residential real estate revenues.
Accor Bulgari   Sheraton   branded residences.”
Address   Canyon Ranch   Hyatt Regency   Onyx Six Senses   Demand Side (buyers):
Aloft   Chedi   Starwood Cushman & Wakefield’s Head of Hospitality
Alila Conrad   Independent   Paramount   St. Regis   Richard Candey comments, “It would appear • Assurance of quality in construction, design,
Aman   Dusit Thani   Sukhothai   that hotel guests are becoming more familiar servicing and amenities.
Amari   Edition   Intercontinental   Park Hyatt   Taj   with the concept of branded residences and • “Lock up and leave” capability/option.
Anantara   Fairmont   Thompson   serviced apartments in preference to hotels. The • The ‘brand kudos’ or ‘bragging rights’ associated
Andaz   Four Seasons   JW Marriott   Plaza   Trump   expansion of sector brands is certainly helping with a premium branded address.
Angsana   Gansevoort   Versace   to proliferate the product,” adding that the shift • The potential for investment returns from a
Armani   Golden Tulip   Kempinski   Radisson Blu   Viceroy   in preference among consumers stems from a rental pool (notably in a resort context).
Atlantis   Grand Hyatt   Vida desire for greater independence and flexibility from • An increase in the number of global UHNWIs
Baccarat   Hard Rock   Kimpton   Raffles   W   their accommodation, but with the same levels of who wish to live in, or use, a secure environment,
Baglioni   Hyatt   Waldorf-Astoria   service and convenience. for which branded residences tick many boxes.
Le Meridien   Regent   Westin  

Louvre Renaissance  

Mandarin Oriental  Ritz-Carlton

Millennium Rock Resorts  

Mondrian   Rosewood   A leading expert on branded residences is Muriel Whilst Arlett Hoff accepts that the strong growth
Muirden, VP of Strategy at WATG, who argues that in branded residences has been spurred by its
Montage   SLS   the growth has been driven by a few key factors on attractiveness to both developers and investors,
both sides of the equation (see also p.14): she highlights specific benefits to buyers that she
Movenpick Setai   believes underpin the demand in the market (See
Supply Side (operators): also p. 14):

The hotel branded residences market has The above chart is certainly not a definitive list of • A greater awareness among luxury hotel • Innovation in terms of concept (i.e. a mix of
developed significantly since the 1980’s and all participants, but it is a good illustration of the operators of the power - and value - of their hotel and residential).
remains most prevalent in the North American market. What is interesting is that since this chart brands. • The convenience of onsite services.
market, although emerging markets in the Middle was originally compiled for the first edition of this • Brand owners have the opportunity for brand • Design.
and Far East are gaining ground. At present, the report (late 2015), in less than 2 years the same expansion and strong capital inflows from • Security (i.e. buying into a trusted brand).
European market is relatively small but expanding. data source shows a 27% increase in the number limited exposure/outgoings. • Rental income.
of hotel brand operators in the residential market.
According to Maxmakers, a property development Javier Serrano at STR Global, a leading source Four Seasons Anguilla villa, Caribbean
advisory firm, the number of hotels offering of historical hotel performance, explains that
branded residences increased tenfold during the delay in serviced apartments and residences
the decade to 2012; even today the evidence becoming mainstream is because the operational
suggests that the trend will continue to rise in costs and implications involved were unknown
line with growing consumer demand. Dr. Andrew and these were therefore not widely recognised
Harrington at AHV Associates believes that serviced as a profitable option: “Any property which was
apartments in Europe and mixed-use resorts not purposely built as a hotel or hostel, or was
outside the USA are the most exciting areas for managed by real estate companies, private owners
investment and will become mainstream in the or agencies and hotel branded companies, had
next 5 years. “Branded residences is an especially limited access to this important information.” Arlett
interesting niche in the hospitality business,” Hoff, co-author of HVS Global Hospitality Services’
he adds. “It offers significant attractions for report on branded residences, observes that there
professional investors, including a proven business was a dearth of reliable, consistent and extensive
model that is mainly focused on the top end of the operating data which could be used to benchmark
market which, from an investment perspective, the sector’s performance.
tends to be less volatile.”
Serrano is in no doubt that the growth is driven
Maria Pajares at hospitality PR agency Mason Rose by a drive to satisfy evolving consumer demand:
remarks on the evolution in the industry: “Since “As both leisure and corporate travellers’ length of
we launched over 22 years ago we’ve witnessed stay are now rapidly changing, as accessibility to
sustained patterns of growth in branded residences, a wider range of supply options through diverse
particularly in the luxury hotel sector where more distribution channels - for example via the internet
and more brands are diversifying into residential - has massively increased, and since transportation
developments.” is more accessible and faster, operator brands
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Raffles Residences Makati

Daniel Libeskind’s Zlota 44 in Warsaw, WATG’s Interbrand’s Rebecca Robins (and co-author
St. Regis Hotel & Residences in Singapore, Armani/ of ‘Meta-Luxury: Brands and the Culture of
Casa in Miami by César Pelli and the distinctive Excellence’) hits the nail on the head: “You need
residences by Norman Foster and Frank Gehry at to be able to replicate the same levels of service
Battersea Power Station. excellence in the hotel..... making it a seamless
experience for the brand-loyal consumer. The
Other brand affiliations that add to the offer include sweet spot is where integrity of product meets
Spas (Elemis, Six Senses, Clarins), Celebrity integrity of brand experience.”
Chefs (e.g. Ritz-Carlton’s Abama in Tenerife has
two Michelin-starred restaurants) and Concierge Whilst marketing plays a pivotal role in the effective
services (Quintessentially and Harrods). positioning, presentation and communication of
any real estate project, this applies especially
The list will undoubtedly continue to grow, and to branded residences since the buyers are
we also expect to see eco/green credentials being among the most discerning and their expectations
promoted more prominently. are high. Francesco Cefalu, VP of Development
at Mandarin Oriental, cites the importance
These elements all play an active role in shaping the of professional marketing within three key
design and décor of the residences, in order that differentiators that he believes underpin successful
the completed units accurately reflect their brands branded residences projects:
down to the finest detail and experientially convey
their brand values. To ensure this, the brand owners i) The financial sustainability of the hotel itself.
provide detailed guidelines and design specifications ii) The overall financial solidity of the project,
to the developer that must (normally) be applied enabling it to weather a lower than expected
rigidly - which can on occasion present challenges pre-opening sales absorption rate.
for the architects (see p.10). iii) A clear and realistic understanding of target
markets and a solid marketing strategy.

Jumping on the B®andwagon • Developers: Those with a track-record of St Regis Hotel & Residences Singapore by WATG
distinctive and high profile projects behind them
Not surprisingly, such strong growth in this sector can become ‘the brand’ itself. Examples include
has attracted the attention of fashionable brands Trump and Candy & Candy, and arguably even
in other markets, encouraging them to jump on companies like Emaar, DAMAC and Related. (NB
the bandwagon. this is a good status to achieve, since it can add
a healthy premium to the selling price of their
“We would expect more developer and designer own products that they don’t have to pay out to
brands to emerge in competition to established a third party!)
hotel brands, notably those which are most
experienced in pioneering new locations and • Interior designers: Commissioned to use
applying global standards to local markets,” their design skills to create distinctive bespoke
says Daniel von Barloewen, Head of Residential interiors. A leading company in this sector is
Development Europe at Marriott International Yoo, with a portfolio of over 80 projects
(formerly Head of International Development around the world and a stable of top designers
Consultancy at Savills). These include: which includes Philippe Starck, Jade Jagger and
Kelly Hoppen (Kate Moss was even commissioned
• Fashion and jewellery companies: Luxury Brands as interior designer on a project). Other top
such as Bulgari, Versace, Moschino and Armani interior design stars include Hirsch Bedner, Yabu
have licensed their names (and design Pushelberg, Pierre Yves Rochon and United
expertise) to developers. This segment is Designers, whilst Karma Royal Group works with
expanding into other sectors, e.g. automotive celebrity British designer Nicky Haslam.
(the Porsche Design Tower in Miami, Mercedes-
Benz’ ‘Living @ Fraser’ branded serviced The rising influence of “Starchitects” as a major
apartments in London and Singapore Singapore, USP is also noted. Examples include the Chedi
and the Aston Martin Residences in Miami). Hotel & Residences in Andermatt designed by
Jean-Michel Gathy of Denniston International,
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License Fees Designed for Living

These companies license their brands to developers “Design is a critical part of the creation of a brand. Leontievsky Mys by YOO Inspired by Starck, St. Petersburg
for a royalty fee (typically between 3-5% according The use of well-known architects and interior
to HVS and Savills, although some have been designers for example not only increases the
known to charge more) and there can be additional quality of the final product but also helps potential
costs for related activities such as marketing. “The purchasers identify with the development.”
majority of operators show a general consensus Knight Frank, ‘Branded Developments’
that the license/royalty fee covers the use of the
brand name and approval of marketing material,” Yoo’s founder John Hitchcox spotted a gap in the
comments HVS’ Hoff. “However, certain operators market when he launched into this sector around
consider it their USP to offer additional sales and the turn of the millennium: “Consumers are more
marketing services to third-party developers, which home and design conscious than ever before,” he
may be included in the license/royalty fee but, more observes. “They want to work in creative spaces
likely, will come at an additional cost.” Alexandros and to holiday in beautiful hotels, and they want
Moulas, Associate Director at Savills International that design aesthetic to continue through their
Development Consultancy, adds: “Operators are personal lives into their homes.”
putting forward many permutations; the most
common one I have seen involves an incremental Hitchcox believes that this has led to the huge
fee, but this can end up costing developers a lot more.” increase in branded (or ‘design-led’, as he prefers
to call them) residences in recent years. “This can
Extra services offered may include a dedicated in- really be attributed to the growth of the design
house team to train and assist developers, such as savvy consumer, the ever increasing importance
a marketing and sales support division. However, of brand trust in our society and ultimately,
it is normally the developer’s responsibility to developers recognising the importance of the home
promote and sell the real estate units, covering all as a high involvement purchase.”
of the promotional costs and fees, usually working
with a real estate agent and specialist marketing A designer offers a distinct identity, style and
company. The operator will generally assist in this positioning that resonates (or doesn’t) with
process via their customer network and marketing audiences; these are measured by each individual’s
channels (such as advertising in their house personal understanding, perception and experience
magazines, sections on their website etc).

Private residence at Soneva Fushi, Maldives of that designer or brand. Hitchcox acknowledges this buildings against conventional hotels or indeed
point: “For example, Jade Jagger’s bohemian lifestyle other uses.”
and taste are well recognised and highly coveted. As
such, there is an alignment there with people who Savills’ Alexandros Moulas adds that operators can
buy schemes that Jade has been involved in; they capitalise on their expertise of the luxury market
are buying her design and also a slice of a lifestyle in advising developers on how best to bring the
they aspire to.” product into alignment with their brands.

Robert Green at Sphere Estates agrees; “Respected Whilst it is evident that superior interior design is a
architects and interior designers certainly add major attraction for all parties, it may on occasion
value, enabling purchasers to further identify with deter some wealthy buyers, as Lynn Villadolid of
a development as well as the type of lifestyle it Capital Lifestyle Partners points out: “Some HNWIs
will deliver.” prefer surroundings designed to their own style
and taste, not a ‘cookie-cutter’ template, whether
Regarding the evolving attitudes of developers in the exterior or interior design or the layout of
towards design, Richard Candey at Cushman the rooms, which is exactly the same as in their
& Wakefield observes that they have generally neighbour’s home. These don’t clinch a sale as
become more flexible in terms of their design and easily as being able to offer bespoke interiors to
accommodation layout requirements for branded suit each buyer’s tastes.”
residences and serviced apartments, which he
believes can often result in a better, more efficient “Hospitality design is beyond lifestyle … it’s all
use of an existing building floor plan. “This can give
them a distinct advantage in competing for period about creating memories.”

Kevin Underwood, HKS Architects

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Design Challenges brand even if this is not one of the candidate operators, The Evolution of Luxury: that will most entice buyers and offer ‘more’
as the resulting design will be fit enough to satisfy Tangible vs. Emotional than the competition. Developers, designers and
Luciano Mazza is Director of Hospitality a wide range of other brands. hotel operators must continually raise the bar by
Architecture at HKS Hospitality Group in London. “What passed as a luxury experience even five delivering cutting-edge design and innovation along
With a company’s portfolio that includes Four Our second challenge involves philosophy and with 5* hotel and concierge services. An article in
Seasons, Ritz-Carlton, Shangri-La, Hilton, aesthetics as we consider the all-too-often misused years ago, today feels tired and uninspired. The Mansion Global outlines how the bar gets raised
Hyatt, Conrad, Mandarin Oriental, Ananda and word, “luxury”. What is luxury today, and what will higher and higher as developers compete to ‘out-
Intercontinental, Luciano ranks among the world’s be in the future? Inevitably, someone will ask if we principle of luxury that matters today is emotional gadget’ each other, searching for new and original
most prolific designers of luxury branded resorts. can really define luxury or “box it” into a few words. amenities to offer in their luxury residential units.
Beautiful marble, a striking sofa or a wonderful connection, which starts with human interaction It highlights four distinct trends for marketers to
When it comes to branded residences, today’s bathtub are just intermediate stops on the way focus on:
designers tend to face two primary challenges. to luxury. Exceptional architecture and interiors, and transparency in the process.”
The first is pragmatic: defining the brief and spotless finishes and precise implementation are
vision for the development. However, the process a given, but they are not enough. On top of these Stephanie Pfeffer Anton,
has changed over the years. In the past, it was “must haves”, our designs also need to facilitate the
essential to have an operator signed and involved rise of emotions and memories. (See next section). Luxury Portfolio International
from the kick-off. From a design perspective, this
allowed us to start our creative process with For me, luxury is time, or a blue sky, or fireflies in Interbrand’s Rebecca Robins commented that the • Health & Wellness - Personal training, nutrition,
properly detailed brand standards and input from the garden at night. Sadly, the children of some of definition of luxury has become so diluted that spa, yoga, pilates and meditation (see p.13).
the operator’s representative during meetings. my clients in New Delhi or Shanghai have never seen it is becoming meaningless. Alison Gilmore at • Facilities for teens/older kids.
However, these days clients tend to appoint an a blue sky in their entire life! The moments we get to International Luxury Travel Market agrees: “After • Smart technology - Intelligent security, lighting,
operator at the very last moment - or at least only spend with family, friends or even business partners decades of over-use we should be happy to see the music streaming, auto curtains/blinds, heating.
once the residences’ concept has been established can be a precious luxury. So, when designing term ‘luxury’ being refreshed with new meaning.” • On-site personal and concierge services -
and its design considerably developed. branded residences, our aim is to create conditions Convenience and personalised services. On-site
where people can savour and treasure quality time In the context of hospitality and branded real salons, bakeries, dry cleaners and delicatessens
Branded villa by HKS at the Fairmont, Taghazout, Morocco whilst feeling at one with their surroundings. estate, how do we benchmark luxury? For decades are also becoming increasingly common.
5* was accepted as the pinnacle, yet now we are
I firmly believe a branded residence is still a home. up to 7*. How long perhaps until we reach 10* - However, there is no ‘checklist’ for qualifying a
It must feel appropriate not only to the brand, but and what will it look (or feel) like? property as ‘luxury’; indeed many features associated
to its owner as well. Conversations and in-person with upscale properties - prime location, high-end
meetings with a development’s top purchasers are Luxe Hub Consultancy describes the new hallmarks interiors and FF&E, Kids’ Club, concierge services, a
invaluable for gaining a better read on a specific of luxury as “seamlessness, convenience, speed state-of-the-art spa, pool and fitness centre, are now
market and restoring a designer’s dedication and and quality of personalised service” (NB no standard. It is therefore increasingly the individual/
confidence in delivering exceptional results. mention of any tangible element); indeed the unique elements that differentiate luxury real estate
World Ultra Wealth Report 2017 predicts that from the competition, e.g. a celebrated architect, a
Of course, there’s also the aspect of creating service is likely to become a strong differentiator famous interior designer, a Michelin chef, a brand-
a comfortable degree of exclusivity for the for luxury brands, highlighting a ‘growing operated spa (see p. 7). Additionally, bespoke
community of owners. Recently, I had a discussion requirement for personalisation in the search for facilities like smart home controls, wine cellar and
with a prestigious developer about the sales exclusivity and uniqueness’. It also observes that tasting room, cinema, cigar lounge, entertaining
strategy for some high-end, branded villas we the motivation behind the purchase of a desirable space, chauffeur service and staff accommodation
will be designing. I found it interesting that their luxury asset is just as likely to reflect an increasing (notably in Middle East and Asia) are being included.
aim is not only to sell a villa or a lifestyle, but also focus on a lifestyle experience and personal
an exclusive community that will benefit them enjoyment as a show of wealth. The Bvlgari Residences, Bali
beyond the tangible rewards of their property
Clearly, the intent is to limit the changes required purchase. Potential buyers are not only scrutinised One thing is certain: HNWIs have high expectations
to meet brand guidelines. Delaying the decision for their finances, but also for their family history, and these are rising all the time. They are spending
creates a longer timeframe to evaluate different reputation, etc. For example, celebrities and, in more time researching products and services
operators and can result in developers gaining a particular, footballers, are politely refused. than ever before - and their ability to research,
competitive advantage during final negotiations. question and compare has never been easier (an
At HKS we work with every major international This could be a unique and extreme case, but it article in Harvard Business Review observes: “The
brand, so it’s not uncommon that when we start indicates just how important it is to create the right explosion of digital technologies over the past
to design a hotel or residences, our clients ask us ambience. Bearing this in mind, I see this “Owners’ decade has created empowered consumers so
to follow the standards of one specific high calibre Club” becoming much more significant within expert in their use of tools and information that
10 branded residential developments, an increasingly they can call the shots.”). As such, the quality and
essential and vital part of the luxury offer and not range continually evolves upwards, both to satisfy
merely a nice “complement” to the estate. ever-rising customer expectations and outperform
competitors.

When residential developers plan their projects,
much thought goes into the amenities and features

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YOO Panama, Panama City

There is no doubt that purchasers at the pinnacle ‘added value’ lifestyle benefits associated with are the days that the primary motivation for Escalating Demand for
of the market expect something special in terms of a brand. Indeed Four Seasons states that what buying ‘branded’ was the status symbolism and Wellness
the tangible elements described above. However, appeals most to their (U)HNWI buyers is “…a the assured quality of the furniture, fixtures and
it’s no longer enough to include a wider range of distinguished and personalised service experience equipment. There is a myriad of top hotel brands According to HVS, the global spa movement
features that ‘tick all the boxes’; the level of luxury that a homeowner can’t get anywhere else... which all offering supreme quality FF&E, so the choice is (which includes wellness) is valued at over
hospitality and real estate today is very different ultimately transcends into a lifestyle.” YOO’s John much more about how the brand’s values appeal $3 trillion dollars p.a. No surprise then that
from even just a few years ago and, rather than Hitchcox adds that “emotional attachments lead to the decision-maker’s emotions, intellect and hotel brands are developing ‘wellness retreats’
simply providing more 5* facilities, the focus is to much higher consumer engagement, even after soul,” comments Lynn Villadolid. “The experiences offering diet, nutrition, spiritual counselling and
more about creating a truly personal and emotional returning home.” offered by the brand are now far more important naturopathic health and prevention services
engagement with customers. Whilst buyers’ in consumers’ eyes – the personalised service, the alongside their traditional spa services. The latest
priorities remain consistent in terms of location, Many experts believe it is no longer simply about kids’ programmes, the bespoke events centred white paper “Anatomy of a Trend” by WGSN even
design and access to world-class amenities, many delivering good design and attractive furniture, on their favourite wine or cuisine, the wellness talks about the influx of hotels featuring “rooms
feel that it is now much more about the intangible fixtures and equipment (FF&E) either. “Gone activities - rather than Grohe taps or Gaggenau that have been holistically and technically designed
kitchens.” for optimum well-being and stress relief.”
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A recent article in 4Hotelier (“Crafting the Perfect Some hotels are partnering with leading wellness
Guest Experience”) points out that it’s no longer brands to attract health-conscious clientele, e.g.:
enough merely to provide a guest with a room Mandarin Oriental and The Mayo Clinic launched
to sleep in; “…savvy hoteliers are realising that a series of Healthy Living Programs, AccorHotels
by creating remarkable experiences on property, has formed a partnership with Banyan Tree, Westin
guests are more likely to return and become loyal announced a partnership with cycling company
customers as well as write positive online reviews Peloton and Shangri-La collaborated on a yoga
about your brand.” Mansion Global agrees that video with Lululemon.
“it is the authenticity of experiences for residents
and the meaningfulness of the spaces and living However, several experts feel that this
environments that have now become more ‘commoditisation’ of specialist wellness brands
important than the amenity itself”, whilst ‘Luxury dilutes their value. “Hotel companies have no
Brand Experiences’ (published by Luxury Society) business doing the wellness programs we’re
states that consumers ‘want cool, they want fun doing,” said Six Senses Hotels CEO Neil Jacobs.
and they want experiences.’ These sentiments “Wellness is more than just having a spa… it’s
apply equally to branded residences. about having a truly integrated wellness program
that’s meaningful. To do this well, you’ve got to
According to Horwath HTL’s 2017 BCG report, do the right thing and know that you’ve got the
experiential luxury is growing faster than personal opportunity to change people’s lives.”
luxury goods purchases in all key markets. It
highlights an accelerating shift from “having” to 13
“being”, with consumers seeking emotions and
experiences rather than status. Similarly, a recent
report from Wealth-X looks at the changing face of
luxury and emergence of a new, younger generation
of UHNWIs focused on pursuing rare, tailored
experiences over accumulating replicable ‘things.’

In short, expect less of the tangible and more
of the experiential. However, it is important to
remember that whichever elements a residential
developer chooses to include, first and foremost
these must be tailored to appeal to the profile,
lifestyle and tastes of the target buying audiences.

“Experiential luxury is growing faster than personal
goods luxury, and designer homes are a natural
bridge between these two worlds: is there any
greater experiential product than one you actually
live in?” Mario Ortelli, Sanford C Bernstein

Private residences at Four Seasons Seychelles

Buyer Benefits through recognisable elements such as high
floors and views, quality of location, quality of
“Branded residences are more popular than ever design, the “Starchitect” effect, hotel services Benefits to buyers include: 1. Marc Finney, Head of Hotels and Resorts
and facilities and brand exclusivity. (See ‘Key Consulting at Colliers International, highlights the
among wealthy international buyers as a property Drivers of Premium’ on p.31). • Prime locations need to combine cutting-edge technology with good
• Cutting-edge interior design, design and luxurious spaces. “Buyers are increasingly
investment that offers the best in prestige, WATG’s Muriel Muirden confirms that their technology and architecture 1 mixing work and pleasure. Technology generally
research supports this, also observing that in • Professional management is important, as is genuine luxury - but not just
convenience and innovative design. They come general unit sizes of branded residences are marble and brass rails.” Of course providing these
larger, especially in comparison to European facilities doesn’t come cheap: the furnishing, fixtures,
with a name that buyers trust, first class facilities standards, reflecting the premium (trophy) fittings and fit out of both the units and the common
positioning. parts must be of the highest quality and design.
and, crucially, they can be a good investment.” As a result, the costs associated with a branded
residences development are inevitably higher.
UK property writer Zoe Dare Hall

According to Hotelhomes.com, the benefits to
owners can be summarised as follows:

• Trophy Status: The kudos of owning a home Robert Green at Sphere Estates agrees that • Hassle-free ownership 2. Increasingly with international resort and hotel
in a prominent development like a Ritz-Carlton branded residences are generally larger than
or Four Seasons, with the prestige commonly their non-branded equivalents, with some • Premium/luxury lifestyle groups, owners can exchange usage of their
associated with that brand. Often the most offering what he too describes as ‘trophy-style’ residences with similar standard properties located
desirable properties in their respective areas. properties of 1,000+ sq m. Conversely however,
he sees a growing trend for smaller unit sizes, elsewhere in the group’s network through their
• Superior Services & Amenities: 24/7 access to a especially in urban locations: “Even allowing for
variety of 5* hotel services and facilities. the inbuilt premium, commercial pressure is on • Owner benefits, e.g. residents’ discount loyalty programmes. As Charles Weston-Baker,
the developer to maintain a competitive price/
• Stronger Resale Values: Branded residences are m2 to sell the units quickly, but I also think card, access to the operator’s properties former Director of Residential International at
positioned to outperform the prices of the non- this reflects a decline in demand for excessive, Savills, mentions, “Buying into a brand with many
branded property market. The fact that they oversized homes.”
are limited in supply (and thereby more in other locations 2 locations gives the owner flexibility to ‘swap’ with
exclusive) helps to maintain property values. On the issue of unit sizing, Marriott’s von
Barloewen advises that room sizes and the other equal quality properties, which removes
Four Seasons recognises the ‘trophy’ characteristic mix of room types should be driven by market
amongst its buyers, noting that their brand attracts fundamentals based on empirical research of • Trust and credibility potential boredom factor of always going to the
“… loyalists and trophy collectors who identify with the local residential market, rather than by same place.”
the Four Seasons lifestyle”. the design team or the hotel operator’s room
size standards as, unlike serviced apartments, • Like-minded neighbours 3 3. John Hitchcox’s philosophy came from a belief
Colliers International also regards ‘trophy’ these products are ultimately for longer-term • Stronger resale values that the communal areas in any high-rise should
status as an important consideration, achieved residential use. • Higher rental income with professional also provide a stimulating environment for all who
operator management live there and that buyers in a particular building
• ‘Trophy’ status are likely to have common values, like members of
a club. “I put our success down to our ability to craft
design-led communities that offer a sense of place,
where like-minded people choose to live - a sort
of modern day village.” (See also Luciano Mazza’s
interview on p10).

14 15

Alila villa, Koh Russey, Cambodia global economic downturn. (*Arlett Hoff at HVS momentum: “A trusted brand can set the market
observed that following the onset of the global level for the properties quicker and more firmly
Motivations would associate only with proven developers able economic crisis many planned Caribbean projects than any campaign.” However, he warns that this
to demonstrate an excellent track record. As such, were put on hold, so this was by no means unique must come with an understanding that the focus
Inevitably the motivations for purchasers of they are in effect giving their ‘stamp of approval’ - it was just the highest profile as it involved many should be all about the real estate sales. “Not all
branded residences cover a range of criteria and by lending their name to the development. celebrity buyers). operators get this and try to confuse matters with
will vary from buyer to buyer, but these can be irrelevant operational issues.”
summarised around two principal factors: Ritz-Carlton President Hervé Humler commented Not surprisingly, John Hitchcox firmly believes
that affluent customers choose its branded that confidence extends into design. “Our projects Four Seasons certainly recognises this point
1. Confidence residences because of the assurance that their offer purchasers the confidence that comes with and actively promotes it as a major benefit to
homes will be managed in the same exceptional recognisable design quality. The aesthetic is well developers, being able as a market leader to
For many buyers, the most important factor is way as their hotels, while Four Seasons claims that considered and attention to detail is guaranteed present empirical evidence that their brand actually
the trust associated with buying into a reputable its brand ‘gives added confidence in the delivery of with more consideration given to the design, drives lead generation, creates sales and marketing
brand, since this offers reassurance in the delivery the development, its ongoing property management finishes, furnishings and fixtures, with a better efficiencies and enhances absorption rates by
and quality of the development, as well as its and the sustained value of the real estate.’ understanding of how that impacts how we feel lending credibility, endorsement and identification.
ongoing management and potential resale value. and live in a space. Our brand is synonymous with
Branded residences are considered a relatively This trust also guarantees consistency in terms of this ethos.” So in summary, with branded residences buyers
safe investment since they are a physical asset the quality of the service, facilites and experiences, feel greater confidence about what they can
associated with a respected and desirable brand. whether you are in Beijing, Paris or New York. Buyer confidence is even more important when expect in terms of location, comfort, convenience,
This is especially true when buying abroad, Gary Grant, Managing Director at You, a leading selling in less-established destinations, explains security, peace of mind, design and the level of
particularly in emerging destinations where a UK property marketing agency, comments, Joachim Wrang-Widén, senior VP at Christie’s service they will receive and increasingly, wealthy
branded residence offers greater security to buyers. “The importance of a strong, consistent brand is International Real Estate: “For locations that are buyers are influenced by the emotional benefits
paramount when talking to a sophisticated target not yet well-established, prospective buyers feel associated with kudos. Robert Green sums it up:
Brands also give reassurance in terms of quality, audience. Branding lends credibility, endorsement much more comfortable buying a property that “The concept has evolved from simply providing
design, maintenance and management; they and identification and gives a buyer confidence carries a well-known brand. Without this brand 5* facilities for wealthy, time-poor individuals to
give a level of protection and comfort against in their investment, since it is based upon proven association they will most likely need a good deal a greater focus on architecture, interior design,
risk, since a respected brand’s involvement gives fundamentals, not merely promises.” He adds that if of reassurance.” personalised services and lifestyle experiences.”
confidence to buyers, e.g. that an off-plan property an audience identifies with your brand then they are,
will be completed, fitted and furnished to the high in effect, willingly inviting you to interact with them. Leisure real estate specialist Paul MacSherry From an investor/developer perspective, adding
standards commensurate with that brand. Buyers agrees: “Brands provide buyers with perceived a branded residential component to a project can
can expect that the building will not only be well- Inevitably there have been exceptions, including insulation against risk.” accelerate capital return and improve the overall
managed but also built and fitted to world-class the widely-reported Four Seasons’ Barbados IRR, with revenues from residential sales helping to
standards, on the basis that leading international resort* and the (now resurrected) Tiger Woods Marc Finney, Head of Hotels and Resorts Consulting monetise land and infrastructure costs much faster.
brands - fiercely protective of their reputations - golf course and residences planned for Dubailand, at Colliers International, considers that the cachet
both of which were high profile casualties of the added by an association with a respected brand Steven Pan, Chairman of Regents Hotels Group,
16 also delivers added value in terms of marketing observes; “The development of a luxury hotel is

Amanyara villa

17

a long-term investment; using the Regent brand as understanding of the latter’s brand ethos and 2. Convenience with the rise in home working, some offer business
an anchor, we can deliver exceptional products and core values.” centres and meeting rooms.
provide immediate capital return through residential Wealthy individuals are typically cash rich and time
sales.” On the other side of this equation is Paris-based poor, often with homes in several locations around Christie’s Joachim Wrang-Widén has noticed how
investor CityStar, Commune’s development partner the world. They prefer to be surrounded by personal buyers are focusing increasingly on a wider range
What are a hotel operator’s requirements when in Alila Villas Koh Russey, incorporating Cambodia’s effects in their own homes (or wouldn’t they simply of amenities as well as convenience, adding that
considering whether to include a real estate first luxury branded residences. “Working with Alila stay in a hotel?) and they certainly don’t want “being able to ‘lock-up-and-go’ - or at least have
offering alongside their hotel? “The hotel allows CityStar to ensure that the development to worry about maintenance and security when professional property managers look after the
component has to come before the real estate. meets the highest standards in terms of quality not in residence. Furthermore, when they are in property - is important.”
If there is good tourism potential with a well- and design,” comments President Jean-Louis residence, a 24/7 concierge service allows them to
designed hotel, it will boost the real estate and Charon. “Alila has consistently provided the most enjoy a hotel lifestyle whilst in their own homes. The Address Magazine also highlights this last point:
in turn bring value to the overall development,” thorough and accurate technical support to reach a “Hotel branded residences offer a sense of reliability,
comments Frederic Simon, CEO Asia at Commune common objective. Our partnership with Alila also “Buyers remain driven by both investment and especially when purchasing homes in foreign
Hotels & Resorts, an international management serves as the guarantee that our resort will provide own use and, for the very best projects, usually a countries, since buyers are assured the property
company with a portfolio of brands comprising the highest levels of service to clients.” combination of these,” observes James Price. “At the will be taken care of, whether it is rented out or left
Alila, Thompson, Joie de Vivre and tommie. “It will upper end of the market buyers also demand unique vacant for occasional use”.
not work if the hotel development is dependent James Price, VP Residential (EMEA) at Four qualities of the project itself; this could be through the
on sales of the branded residences to finance the Seasons’ (formerly Head of International architecture creating a statement building.” He adds Joanna Leverett, Head of International Residential
project. The destination, design ethos and quality of Residential Developments at Knight Frank) believes that whether these are resorts or serviced city centre Markets at Cluttons, agrees that buyers increasingly
the development are essential to the partnership.” that the success of branded residential projects residential buildings, ensuring that a project remains prefer this as it offers a hassle-free option, compared
is based upon not simply assuming an appeal rooted in its local culture and design is also important. with the responsibilities - and challenges - of owning
Simon states that, when executed properly, there for buyers that will automatically follow from the and maintaining a standalone overseas home, whilst
are many benefits to a hotel operator, not least link with the hotel brand. “The residences need Most offer owners a comprehensive range of Four Seasons promotes “worry-free living in well-
the additional stock that offers an alternative to to be very carefully planned in tandem with the integrated hotel-style services, which usually include appointed residences” to its potential homeowners.
standard hotel accommodation. “The residential development of the hotel; this relates to all aspects 24-hour concierge and security, CCTV, secure
component offers us a diversified portfolio of including design and space planning, back of house underground parking, porters, communications and “Our branded residences give buyers the
multi-bedroom accommodation that is favoured infrastructure, services and residences designed entertainment systems, cleaning, laundry and even opportunity to experience the best aspects of their
especially by high-end travellers who desire the around local residential market requirements and shopping services. favorite brands while simultaneously enjoying the
luxury of private space. These clientele become buyers/homeowners rather than for hotel guests, peace of mind that comes with a project developed
good brand ambassadors and repeat customers.” amenity mix etc. Essentially a mixed-use project With the high demand for wellbeing, access to an by Related Group. We look forward to announcing
requires a holistic approach and perspective on-site gym and/or health centre is now standard, future branded collaborations and once again
Simon believes that the developer needs to throughout.” (See also Marriott on p.23). with a spa and associated treatments, swimming pool, raising the bar for luxury living.”
incorporate the operator’s core brand values in sauna and steam rooms.
the design and development from the very start “Residents demonstrate a commitment to our Jon Paul Pérez, Vice President, Related Group
of the project. “As in any long term partnership, destinations and to our brand. They are the Other premium facilities regularly include a golf (Brand partnerships with Armani, Auberge Resorts,
success is built on mutual respect between ultimate brand ambassadors.” simulator, screening room, even wine storage and,
the developer and the hotel operator and an sbe, St. Regis, SLS LUX and Hyde).
Kristie Goshow, Viceroy

WWSSininggaappoorerebbyyWWAATTGG

Managed Rental driver for the majority of purchasers in virtually all Brand or Bland? • Following its merger with Starwood, Marriott
cases, especially in second home markets. Depending International has 30 brands covering separate
Owners can normally benefit from the option of on the type of property, this will either include both “It isn’t enough for brands to trade on what the market segments, including eight in the luxury
renting out their properties through the hotel or a strong net yield as well as capital growth potential, label used to stand for. They need to demonstrate tier which are categorised into two main types
operator’s managed rental pool, although which can or at least enough net yield to cover the annual their value in an ever-increasingly competitive of luxury ‘personas’: “Classic Luxury” and
often (but not always) restrict personal usage to ownership costs of the property.” Target returns marketplace. The challenge for today’s luxury “Distinctive Luxury.” Interviewed in Elite
defined periods amounting to a few weeks each year. typically range from 3-5% net yield (6-9% gross). brands is a considerable one. Not only do they Traveler, Marriott’s Global Chief Brand Officer
However, given the cosmopolitan nature of owners have to contend with being challenged by the Tina Edmundson explains: “Classic brands
and the fact that they may have several homes “Most buyers, including HNWIs/UHNWIs, want their customer they thought they knew, they are also represent time-honoured hospitality for the
around the world, this is not seen as a hindrance. purchases to be a good investment, to provide having to deal with new audiences and their modern traveller, while Distinctive brands
Furthermore, the income generated (which is shared rental income, generate capital growth and be a accompanying behaviours.” provide memorable experiences with a unique
with the operator) can cover the running costs of the property they can use at various times during the ‘10 Top Luxury Brand Experiences’, Luxury Society perspective.” Since the merger she has worked
property, often even generating a welcome surplus. year,” says Marriott’s Daniel von Barloewen. He on setting the hotel brands apart by “highlighting
recommends that a wise developer should give as A brand says a lot about the person buying it, as nuanced differences”; for example, “Ritz-Carlton
“There is a growing realisation that owning property much consideration to achievable net rental yields - it offers a distinct identity, positioning and lifestyle truly facilitates the destination in extraordinary
abroad can be a hassle, so having it ‘brand managed’ in particular for 1 and 2-bedroom units - as they do that becomes associated with that individual. As ways, while the St. Regis is the destination, and
solves a lot of these issues,” observes Colliers’ to their achievable sales price/sq m target. “It may such, a specific brand either resonates with a should be the best of that location.”
Marc Finney. “There is also the expectation that the therefore prove to be the case that for many resort particular audience or it doesn’t. Developers must
income from renting will cover most, if not all of locations, when analysed on a Cashflow Present therefore ensure that their chosen brand partner • Hilton has 14 brands, each designed to occupy
the annual maintenance costs.” “Even HNWI’s are Value basis, that an upper-upscale hotel with reflects the demographic profile and lifestyle a specific, non-competing space in the portfolio.
attracted by rental pools as a means of covering branded residences linked to its managed rental aspirations of their intended buyers. At the top end, Waldorf-Astoria is the flagship
running costs whilst getting, in effect, ‘free’ stays,” programme will ultimately produce a better financial brand with hotels that offer ‘the highest
adds Robert Green. “Increasingly buyers want viability than a luxury hotel with fully stand-alone An obvious starting point is that the brand must standards of facilities and service’ and deliver
some level of rental return, especially in resort branded residences.” also complement the location, as Frederic Simon ‘unforgettable experiences at iconic destinations
locations where they tend to visit their homes at Commune Hotels & Resorts emphasises: “Most around the world.’ Conrad, which was the luxury
less frequently.” WATG’s research supports this, The attractiveness of the rental yields - importantly, it is the destination and locality that flagship brand until 2006, offers ‘access to a
finding that although it varies by destination, the particularly when guaranteed - has also been dictates the project.” world of infinite connections, intuitive services,
percentage of resort branded residences entered proven to have a direct impact on the annual and inspired experiences along our guests’
into a rental pool has risen to between 70-80%. sales absorption rate of the residential units (e.g. On this point, Daniel von Barloewen observes, journeys.’
Marriott’s Luxury Collection at Pine Cliffs Algarve “As markets mature over time, any brand will
Research by the International Development offered 5% for 5 years, which resulted in achieving have to become synonymous with the quality of a • With 23 brands, AccorHotels is now one of the
Consultancy at Savills found that found that over rapid annual sales of the residences). particular location as a destination or address. With largest hospitality groups in the world. Following
60% of its global second home buyers place a real estate, value cannot be sustainably conferred its acquisition of FRHI which added Fairmont,
heavy weighting on the investment angle of their It is worth emphasising that generally only properties by a hotel or designer name alone; in the long Raffles and Swissôtel to its portfolio, as well
property purchases, with only 34% buying purely furnished by the operators are permitted to participate term, the location itself will ultimately be the most as its strategic partnership and equity stake in
for private use. “Naturally these statistics vary from in the rental pool, in order to ensure that there is important factor.” Banyan Tree, Accor has become a major player
location to location,” comments Alexandros Moulas, consistency in terms of FF&E and interior design (i.e. in the luxury sector. Chris Cahill, Accor’s CEO
“but the investment angle will still be a fundamental that complements the brand style) and that high Extensive research confirms that the lifestyle Luxury Brands, prioritises the autonomy and
quality standards are maintained. experience is an increasingly important factor in distinctiveness of each brand. “We are careful to
brand differentiation. Four Seasons’ James Price avoid brand bleed, where the qualities of one
Rental Pool Structures furnished residential units. Part of these will be sold explains that at each development “…it is a very brand start to merge with another”, he comments.
to private investors with a mandatory rental pool specialised experience which is set up, one that To achieve this, Cahill maintains distinct brand
The majority of branded residences ownership requirement. The other part will form a guaranteed sets Four Seasons apart from other branded teams and encourages his directors to develop
frameworks and rental pool structures fall into number of units for the operator’s management, residences in the market.” their own programs. Each brand is given enough
one of the below categories: regardless of the rental pool. Sold branded space to maintain its own personality and
residences will be managed by the operator as Jeff Tisdall at Accor concurs, adding: “As important unique appeal.
Ownership Framework 1 serviced apartments, to the extent and as long as as the bricks and mortar, it’s our suite of hotel and
The development consists of a hotel component these are kept in the rental pool, all in a ‘serviced residential services that really differentiate our “80% of CEOs believe their brand differs from the
and a branded component of fully furnished apartments’ structure. offerings.” competition, but only 20% of customers agree
residential units for sale, with a ‘mandatory’ with that.”
rental pool. The residences are managed by the Ownership Framework 3 But how easy is it for customers to differentiate between
operator as serviced apartments in a ‘hotel + Residences are branded and sold to owners but the plethora of luxury hotel brands in the market Ricco de Blank, CEO of SHKP Hotels
serviced apartments’ structure. with no mandatory rental pool, programme or today? Let’s look at a snapshot of three leading (owns two Ritz-Carltons, a St. Regis and a W Hotel)
agreement. This is the structure mostly in place in players:
Ownership Framework 2 established cities. Reading through the positioning statements of
T2h0e development consists of branded, fully some hotel brands the lines of differentiation
Source: Savills
21

become pretty blurred, even to seasoned With this rapid proliferation of brands, Schmidt Spotlight on Marriott component is sustainable and successful. We also
practitioners; indeed in some cases it can be adds that “there will quickly come a point when International have a dedicated residential team that understands
difficult to determine how in reality they differ from the promise, look, feel and experience they offer the markets and demands of the customers in
one another, as the 2017 Skift report (Building becomes (and is found to be) as generic and bland Following its merger with Starwood, Marriott those markets.
Brand Love and Loyalty in Luxury Hospitality) as the regulation Sheratons, Hiltons and Hyatts International became the largest branded
observes: “There is diminishing competitive they were designed to supersede. From that point, residential operator in the world, representing Are the branded residences considered
advantage for hospitality brands to trumpet the only way is down.” 56% of high-end branded residences globally. secondary to the hotel?
themselves as ‘experiences’ when so many brands Marriott’s portfolio includes almost 90 residential
in almost every market segment are saying the Above all, it is the buyer who needs to understand projects, with another 55 in the pipeline. Branded residences are an equally important and
same thing.” the differences and specific attributes that apply Dana Jacobsohn, Vice President of Mixed Use valuable component in mixed-use developments.
to each brand if they are to fully appreciate the Development, explains how the company helps The basic upfront considerations to be vetted are
On this point Piers Schmidt, founder of Luxury added-value benefits that each brand promises, developers to select the right brand and the key the financial feasibility of each of the components.
Branding consultancy, analysed 81 new hotel that will enhance his or her lifestyle experience. factors that influence this. The most successful mixed-use projects are ones
brands in the burgeoning so-called ‘lifestyle’ where each component can sustain itself
category and found a series of interesting It is therefore a key role for professional marketers The Residences at The Miami Beach Edition independently and then combined they all
correlations. “If we look at the taglines employed to ensure that the offer communicated is distinctive complement each another and create a successful
by these lifestyle brands, the lack of differentiation and differentiated – otherwise it risks being simply mixed-use project. On the residential side, we
becomes apparent,” he comments. “A significant another “me too” product. And just because a need to be mindful of the potential residential
proportion of their slogans employ similar sound brand is well established in one region does not mean pricing and pace of sales compared to the cost to
bites; for example, four of these each claim they that it will enjoy the same success in other regions. development.
are “designed for the modern traveller”, “hotels
designed for the modern traveller’, “created for a “Your brand is what people say about you when Do the brand license fees vary from brand to
new generation of travellers” and “unique hotels for you’re not in the room.” brand?
unique travelers”. This is buzzword bingo at its best!” Jeff Bezos, Amazon
Branded license fees are often subject to some
The Ritz-Carlton ReWsidSenincgeas,pKoerey bByiscWayAnTeG negotiation depending on the nature of the project
itself and the intended brand.

Is Marriott receptive to operating standalone
branded residences, i.e. not located directly
adjacent to one of its hotels?

With such an impressive array of brands to Not unexpectedly many hotel operators shy away
choose from, how do you and the Owner/ from standalone residences, so Marriott is a bit
Developer decide on the most appropriate unusual as we currently operate 9 standalone
brand? residences – all Ritz-Carlton – with a further 5
(Ritz-Carlton and St Regis) in the pipeline. These
Typically, when an Owner/Developer approaches us are entirely self-sufficient and all are managed
they have an idea which Marriott brand they want by Marriott International, each with a dedicated
for both the hotel and the residences. However, the concierge and an array of services that you would
initial brand requested is not always the brand that expect at a luxury residential project. Typically
will ultimately be selected. We work closely with these need to be quite large complexes with a
the Owner/Developer through a comprehensive minimum of 100 residences (and typically at least
due diligence process to examine a range of key 200 residences), in order to spread the costs of
factors to ensure that the project is feasible and providing these professional, bespoke services
that we arrive at the optimum brand fit. affordably among its residents.

22 What are these key factors? “Branded Residences is a high priority for Marriott,
the leader in the hospitality industry by number
We evaluate a range of criteria including a review of properties and brands. With 13 luxury and upper
of the regional and local economy, tourism, upscale brands in our portfolio available for branded
corporate demand generators, buyer profile, residences, we are uniquely able to deliver the
existing supply, future pipeline and pricing / pace optimum brand for each development that best suits
of residential sales. One of the crucial elements the site and the residential buyer profile to maximise
that underpins our decision is the site itself. We the success and profitability of a project.”
have very skilled teams in house at Marriott that
complete a full feasibility analysis and site analysis Tim Grisius, Global Real Estate Officer,
for the hotel and the residential, to ensure each Marriott Internation2a3l

Aligning a Residential Choosing the right brand partner is critical to a ensure that their chosen partner brand reflects among consumer segments applies equally to brands
Project with the development’s success. The branded residential
Right Brand element is such a fundamentally important part to the the demographic profile and aspirations of their associated with real estate developments.
financial viability of the project, it is essential to give
“When a developer is choosing which hotel operator this equal consideration when choosing the optimum intended purchaser audiences, resonating and
would be the best fit, whilst he can expect some hotel/operator brand partner for the development.
guidance from the major operators, there is no aligning with their lifestyle aspirations. In other Both Marriott’s von Barloewen and Savills’ Dominic
substitute for good old fashioned research. Take time The brand chosen for the residential element
to understand the philosophy and positioning of each must also be one that is recognised and respected words, the buying audiences’ perceptions of the Grace point out that a development may find
of your shortlisted brands to ensure that their values among the target buyer markets and will be able
and strengths align with yours. This way, everybody to command both the expected price premiums operator brand is a key influencing factor, since itself hostage to fortune if, for example, the brand
is on the same page from the get-go.“ and strong absorption rates. Buyers of branded
residences generally identify with a certain lifestyle individual brands inevitably appeal to different experiences a PR disaster, since this is likely to
Ben Martin, AECOM Economics and taste that are closely associated with that
particular brand. Developers must therefore demographic audiences. For example: impact the desirability of the residences. A topical

• W Residences promote their brand as “vibrant, and highly relevant example of a brand’s ‘value’ in
inspiring, iconic, innovative and influential”, the court of public opinion is Trump:

citing its “passion for fashion, music and design”. In the months preceding the US election, a study

• Compare this to Mandarin Oriental’s more commissioned by Yahoo! Finance found that

‘genteel’ brand offer, where “each hotel has the price premium attached to Trump branded

its own individual charm with oriental touches residences had fallen, while New York Times

that reflect Mandarin Oriental’s heritage”. For reported that hundreds of Trump tenants in NYC

their residences they promote “the comforts signed a petition to “Dump the Trump Name” from

of a private home combined with the unsurpassed their buildings. After Donald Trump was elected

Brand Misalignment Therefore, as early as was practicable, we stopped amenities and legendary service of Mandarin President, enthusiasm for the brand faded as he
using the brand in our sales materials and
Case Study 1: Sun Gardens Dubrovnik, Croatia. instead started to market an independent resort Oriental”. moved to enact controversial policies, notably
Julian Houchin, iO Resort Management. destination, re-branding as The Residences at Sun
Gardens. As a result, despite this being a highly • Yoo, as an interior design-led brand, promotes a travel ban on several predominantly Muslim
When we launched our residential sales seasonal resort destination we have now sold
programme at Sun Gardens, we had inherited out Phase 1 to over 15 different nationalities and their residences through the style and nations. A press article ‘Muslim Business World to
a leading European hospitality brand that was created a rental management platform generating
already under contract to the resort so naturally 7%+ gross yields for owners. reputation of their impressive stable of Trump: ‘You’re Fired’ reported the ensuing negative
we wanted to feature this well-known brand as a
major added-value benefit for buyers. We believed Case Study 2: Golf Resort, Portugal designers, each bringing a unique identity to sentiments towards Trump developments in Turkey,
that it resonated well in our target markets, Chris Graham, Graham Associates.
notably Russian speaking, and would provide individual projects. Azerbaijan and UAE and the Trump name and image
confidence for prospects buying into a mixed- I first experienced the impact of a ‘branding mis-
use resort in an emerging market. What we very match’ several years ago when my team was It can be argued that those properties with a were removed from the marketing for a $6 billion
quickly discovered was quite the contrary: invited to investigate a repositioning strategy for a highly ‘distinctive’ or niche brand attached will golf complex in Dubai. Similarly, Indian developer
residential golf resort north of Lisbon, where sales never appeal to certain audience segments. As Lodha suspended sales at Trump Tower in Mumbai.
1. The brand operator did not understand the had slumped. There was a good Westin hotel and
concept of resort based real estate and spa at the hub of the resort but, at that time in such, associating with a particular brand may Whilst established brands may be strong enough to
consequently did not want their brand associated Europe, Westin was a relatively unrecognised hotel
with real estate sales. They couldn’t understand brand; indeed our customer research confirmed present a risk by reducing the size of the market weather a storm (that very often passes), negative
that we were selling whole ownership, in effect emphatically that many potential buyers were
freehold, which - importantly for a buyer - can not familiar with Westin - and in fact many had it by alienating some potential buying audiences to a PR can quickly damage the status and reputation
be part-funded with a mortgage. They assumed confused with Best Western!
we were selling timeshare and that it would greater degree than non-branded residences. of your development and therefore hit sales and
tarnish their brand! “There’s no doubt that having a 5* hotel in the
2. It became clear that this hotel brand was of resort appealed to buyers at the time, but Chris values so effective PR management is essential.
limited importance to our potential buyers; their Graham’s research was a real eye-opener as it
decisions were much more about the destination, was completely at odds with the development It boils down to personal choice; consumers today are And the worse the scandal, the harder the impact;
on-site management and the resort offering. team’s previous beliefs about customer awareness
3. We realised that the brand would in time impede of the Westin brand and the value it would add,” more empowered than ever before and are spoiled remember, people are only human!
our ability to achieve higher projected price points comments Paul MacSherry, the resort’s UK Sales
over the course of the residential sales programme. Director at the time. “It transpired that, rather than for choice in terms of brands. A study by Shullman
Furthermore, following the slump in the oil price the hotel brand itself, it was simply the fact that
the market fundamentals shifted away from our there was a 5* hotel on site that offered a degree Research Centre highlighted the broad disparities in The right hotel brand will deliver a valuable
prime Russian speaking target markets, and the of comfort for many of our buyers. However, this
brand did not resonate as much in other markets. lack of brand appreciation certainly did not support brand perception among affluent older and younger short-cut for developers, particularly for off-plan
the level of sales that had been expected.”
24 generations in the USA. For example, Lexus and BMW developments, but it must be able to retain its

ranked in the Top 5 brands among both Millennials and promise in real estate. It can also greatly help

Gen Xers, yet neither of these made it into the 50+ create the context for buyers - it’s just got to be

Boomers’ Top 10. Not unexpectedly such inconsistency the right brand for them.” Paul MacSherry

Source HotelHomes.com/Savills Not unexpectedly over half are in North America,
where the branded residences concept originated.
It is interesting that the developed European
markets account for only around 10% (although
we expect this to grow). If we separate the Middle
East from Africa the figure in the latter would be
quite low, just as it would be if we remove the
Caribbean from Latin America. However, with the
rapid increase in HNWIs and the many benefits
that branded residences provide, it can only be
a matter of time before we see more of these
appearing across these vast emerging continents2.5

Urban vs. Resort Brand Affiliated vs. Independent

Source HotelHomes.com/Savills Branded
Independent

Branded residences are found in both urban and and resort), the organisation actively embraces Source: C9 Hotelworks

resort locations. In urban locations, these tend opportunities to operate residences alongside hotel

to be apartments and penthouses located in the rooms. “There is a distinct synergy that unfolds observes Robert Green. However, in emerging world. The concept began in Thailand in 1988 with
locations it could become a double-edged sword: the Amanpuri Phuket, where private residences were
upper floors of a (hotel) complex, whereas in resort when we have traditional hotel rooms alongside “Some investors will view market-entry in the early launched alongside the hotel. The Four Seasons
locations residences usually comprise apartments, residences,” observes Viceroy’s Kristie Goshow. stages as advantageous to benefit from value- Chiang Mai (launched in 1995) introduced Thailand’s
“The resulting experience in each product, whether increase as the market develops,” says Joachim first branded residences to be associated with an
penthouses, townhouses and villas, all in close Wrang-Widén at Christie’s. “However the risk is then international hotel chain. According to research
room or residence, is better, more intuitive, more trying to sell a comparatively older asset in a market by C9 Hotelworks, the hotel branded residences
proximity to the operator hotel. that has subsequently developed and where newer - market in Southeast Asia has now topped US$16
sensational, had the counterpart never been there.” possibly better - products are, relatively speaking, at billion and is still growing. (NB Thailand leads the
a similar price level.” way with branded residences accounting for around
“Our research found that operator appetite is one-third of its total projects).
increasingly greater for urban rather than resort In line with the explosive demand in emerging
locations,” reports WATG’s Muriel Muirden. This is markets for luxury branded items, the concept As reported in the 2015 edition of this report, in
largely thought to be a reaction to basic demand of branded residences is an effective way to sell line with the wider market C9 Hotelworks’ research
patterns of the recent past, she explains. “Primary/ top-end real estate in these expanding markets found that combined hotel and residential projects
secondary residences in core urban locations have and Savills anticipates that branded residences will were shifting from resort to urban locations.
shown increased attention from HNWIs of late, due to continue to have significant and growing importance However, the company’s latest research finds
their perceived ‘safe haven’ investment credentials. for newly wealthy buyers and in emerging economies. that today’s investment buyers are back heavily
The operators are doing deals where the development “They also have a significant and ongoing place in in resort destinations (although MD Bill Barnett
is taking place. Going forward, as resort demand resorts,” adds Marriott’s Daniel von Barloewen. reports that this is driven by domestic demand),
- and therefore development - returns, branded with many attracted by high guaranteed yields
residences will also be expected to feature.” South East Asia (that may prove to be unsustainable).
Today the Far East branded residences resort
Source HotelHomes.com/Savills market is arguably the most developed in the C9’s earlier research also highlighted a ‘refocus’ by

The majority of branded residences today are The Ritz-Carlton Residences,Baltimore
located in major cities; according to data from
Savills, 65% of branded residences around the Source HotelHomes.com/Savills
world are located in urban locations and 35% are in
beach/resort locations. Many experts believe that “Prime urban branded developments have greater
this urban-dominant trend will continue; as Robert appeal because they are perceived as less risky,”
Green points out; “Ritz-Carlton’s branded urban
products are expected to represent two thirds of 27
its inventory in the future.” However Four Seasons,
which has an increasing proportion of its pipeline
with a residential component, sees equal demand
and growth in both urban and resort settings.

With almost 40% of the Viceroy Hotel portfolio
involving mixed-use developments (both urban
26

One Hyde Park by Candy & Candy

A Brand Premium for a Premium Brand

global hotel chains, which recognised ‘an essential this a major consideration for the future. However, What is clear is that, whether in an urban or resort than comparable luxury homes further up the
need to partner with property developers in creating Four Seasons is introducing standalone residential location, branded properties sell at a considerable coast, most of which were in better locations.
hotel residence offerings in order to spur pipeline projects, typically located in vibrant urban markets premium over comparable non-branded residential
growth’. This has certainly proven to be correct: with strong demand characteristics. “We are real estate products. In 2012 Knight Frank research found that luxury
currently across Southeast Asia, there is an estimated exploring standalone branded residential projects branded residences around the world commanded an
94 mainstream hotel residence projects with more in major urban centers where we already have an “In an urban location these properties are often average uplift of over 30% compared with non-branded
than 21,000 units on line, with 78 properties expected existing hotel,” comments James Price, citing Four apartments on the top two or three floors of the hotel, schemes. Most experts still agree with this benchmark
to complete between 2018 and 2020, representing an Seasons’ first standalone development at Twenty whilst in a resort context these units are, in most cases, figure, as the following soundbites confirm:
83% increase over current inventory. Grosvenor Square in London. “These are designed detached villas,” explains Muirden. “In both instances
to offer a differentiated homeownership experience they are sold at a premium to other comparable • “Branded residences tick all these boxes. Add the
Urban Location with a full range of amenities and services within the residential real estate products on the market.” fact that (they) yield a premium estimated to
Location continues to be a prime factor. Savills context of an efficient building operation.” (See also range between 20% and 40% over similar
research has shown that the success of branded Marriott on p.23) In addition to the numerous benefits associated with unbranded residential developments and, in
residential development, in particular in established branded residences discussed above, a strong brand: exceptional cases, as much as 50% to 100% more,
first-world cities such as London and New York, is Although the sector focus is currently shifting it becomes clear why this is one of the fastest
down to a combination of factors, of which location is towards prime urban locations, we cannot ignore • Enhances sales velocity by as much as 30%. growing asset classes.” The Address Magazine
the primary one. “The potential in prime city urban the number of thriving ultra-luxury branded resort • Maintains resale values.
locations is significant, although the more established real estate in far-flung locations like the Maldives, • Delivers higher rental returns as a result of • “Operators have indicated that typically a price
the residential market is in a particular location, the Caribbean or Seychelles. The question therefore fewer voids in rental periods. premium can be expected over identical non-
greater the importance of selecting the best sub-location is, why do HNWIs choose to invest in a far-away branded products of between 20-35%.” Muriel
within that area,” comments Alexandros Moulas. home at a high brand premium, probably visited As such, the significant price premium can easily Muirden, WATG
only a couple of times per year and often requiring be justified to both developer and purchaser,
WATG’s research also found that operators are upfront cash payments, combined with the risk of with neither requiring too much convincing of the • “Anything between 20-30% normally, but
unanimous that there is now a focus on exceptional drastic changes in weather and unstable politics? benefits - and this in turn has led to the popularity occasionally they can completely re-set the
sites in prime locations, rather than in secondary of this formula. “The growth in branded residences benchmark for a location.” Marc Finney, Colliers
or tertiary destinations. “North America remains “Well, simply because they can,” says Lynn has been spurred by its attractiveness to both
the stalwart of the branded residence sector, with Villadolid. “There are now 2,000 billionaires in developers and investors,” comments HVS’ Arlett • “The level of the premium varies from market to
the big players heavily embedded and seeking new the world, growing at 13% per annum, according Hoff. “Compared with unbranded residential market. It also depends on what the brand is
opportunities,” observes Muriel Muirden. “The land to Forbes. Such immense wealth has rendered properties it is proven that developers of branded and how importantly it is valued. A good example
use came to prominence just in time to ride the their spending virtually untouchable by changes residences can demand premiums in cities around is Burj Khalifa in Dubai, where an Armani
coat tails of the Asian development boom, where in share prices, interest rates or currencies. Let’s the world by simply having a brand affiliation.” residence trades with a premium of up to 30%
brand power resonates strongly.” Muirden points face it, if money was no object such that we would compared to a similar sized apartment in the
out that, as a positive development climate returns worry about spending US$5-20M on a faraway James Price is in no doubt that leading brands today tower that does not carry the Armani brand.”
to Western Europe, branded residences in both an holiday home, who wouldn’t want to spend time in can add value and assist greatly in the marketability Joachim Wrang-Widén, Christies’ International
urban and resort context are expected to finally the familiar comfort of their own homes enjoying of new projects. “However,” he adds, “they must
start gaining traction, having been unrepresented temperate weather, snorkeling with turtles and offer tangible benefits for the residents.” • “A globally recognized 5* brand such as Four
for so long. She also predicts continuing growth in dolphins, feeling sublime white sand under our Seasons, Ritz-Carlton or Aman have proven
Asia, highlighting the region as a testing ground for feet, sipping Nespresso served by a discreet butler Leverett adds that these developments also tend to consistently in all economic circumstances,
pioneering iterations of the concept with regards while hearing the lapping of the waves and being see a similar premium for rentals and on resale, so both regionally and internationally, that there is
to scale, business models and levels of servicing/ tanned under a magnificent sun? I know I would.” buyers can feel confident that their purchase of a a 25-50% premium over prevailing market
supporting amenities. branded residence will hold its value. “Absolutely,” values.” Robin Paterson, Sotheby’s International
Colliers International’s Marc Finney takes a rather echoes Joachim Wrang-Widén. “Branded residences
HVS reports that operators generally do not less romantic view: “People drop their guard also achieve higher liquidity on the resale market a • “Hotel residences affiliated with international
operate standalone residential products (i.e. not when they are on holiday and can make irrational few years down the line.” brands have demonstrated pronounced premiums
immediately adjacent to one of its hotels), nor is decisions.” in selling prices by 25%-35%.” C9 Hotelworks
Muriel Muirden argues that a unique combination
28 of a world-class hotel brand with a top global Never short of surprises, the real estate market
destination can, in special cases, add even higher continually raises the bar to new levels and
premiums, citing the example of the (now there are some extreme cases that demonstrate
dormant) Four Seasons at Clearwater Bay on the substantial premium that the ‘right’ mix of
Barbados’ much sought-after Platinum Coast, branding, design, facilities and location can deliver:
where off-plan prices were considerably higher

29

• Palazzo Versace and D1 in Dubai are neighbouring “I think it has simply been a question of both Since there is a strong correlation between repeat have found the extent of the premium relates to
developments on Dubai Creek, yet apartments opportunity and brand positioning,” comments visitors to a destination and their propensity to several factors combined, including the hotel brand,
at Palazzo Versace (branded) achieved an uplift Charles Weston-Baker. “New development deals in purchase a property there, it follows that attracting design, location, range of services and exclusivity of
of over 100% against comparable D1 (unbranded) major cities like London and New York are in great more wealthy visitors should in turn lead to more the experience for residents. Of course, some of this
apartments next door. demand and therefore require a very full price for foreigners buying property. People rarely purchase comes at extra cost to the developer.”
the opportunity; as such, supported by strong end- a property without having a good understanding of
• The branded residences at The Ritz-Carlton user demand, branding has not been necessary.” the local market; they therefore need to be aware – In determining the premium level, Colliers
Dorado Beach in Puerto Rico sold at up to 250% He observes that where branded residences have and convinced - of the benefits, attractions, security assesses the combination of several influencing
above the average psf price of non-branded occurred in London, the brand is usually brought (financial and personal) and lifestyle, especially factors to calculate the price premium on a
units in the same development. in to “add value” by giving a distinctive design when compared against other destinations on their branded residential development, such as
style (e.g. Bulgari), to provide comfort to attract shortlists. It is the responsibility of the marketing (inter alia):
So will the premium on branded residences a specific international HNWI target audience, or team to communicate this effectively. (See also p.21).
continue to thrive? Most experts believe it will - simply due to convenient proximity for servicing • Brand positioning – The more prestigious an
not least, as Lynn Villadolid points out, because the residences (e.g. One Hyde Park/Mandarin Key Drivers of Premium operator brand, the higher the premium.
financial resale values have traditionally been Oriental). • Range of hotel services and facilities offered.
at least up to 1.5x higher than the non-branded When compared against similar prime residential • Rental pool with a proven operator, to appeal to
alternative over a medium term (c.5 years) or However, due to the changing economic landscape developments, Colliers International found that the investor market.
longer holding period. To illustrate this, Wrang-Widén (e.g. higher stamp duty/taxes, Brexit) resulting in premium is highly correlated with brand positioning • Exclusivity, service and benefits to residents –
reports that The Armani Penthouses in Dubai were lower demand, London is seeing an increase in the and experiences and has created the segmented creating an ‘experience’ premium.
selling at more than 50% higher than when they number of luxury branded developments at the top pyramid shown below. • Location and neighbourhood.
were launched five years previously. of the market, along with the associated higher • Quality of design and the “Starchitect” effect.
price premiums. Dominic Grace, Head of London “The price premium for branded residences can be • High floors and views – units on higher floors
However, Villadolid warns that the premium Residential Developments at Savills, comments on significant,” observes Marc Finney, Head of Hotels achieve a premium over similar residences on
between branded and non-branded homes is this trend: “Notwithstanding the tougher market & Resorts Consulting at Colliers International. “We lower floors.
narrowing. “The supply of non-branded alternatives conditions, there is undoubtedly a broadening
with top quality FF&E and bespoke services on trend of cross-branding emerging here, that
offer, and the advent of mediums like Airbnb originated in the USA as a proven way of adding
(or such equivalent for UHNWs) have started to value and differentiating a residential development.
erode this premium and will continue to do so.” This is tied in with a more international buying
Alexandros Moulas at Savills agrees, pointing audience, which values a premium brand association
out that if a brand commands a premium at the in a way that many domestic buyers do not.” He
point of initial sale, there is a risk of depreciation adds that another key factor is the rise in demand
unless it is well maintained over time. “There is for personalised services; “Wealthy buyers want
certainly potential for short-lived brand reputation. the 6* services they know they can get from an
Once a scheme, block, or property type becomes established hospitality brand and are prepared to
a bit tired or unfashionable, the inevitable price pay a premium to get these.”
depreciation can become exacerbated as demand
diminishes and the market shrinks. ‘Trendy’ However, the premium for these benefits must still
facilities become outdated and undervalued if they be justified to buyers warns Charlie Walsh, Sales
do not adapt with changing occupier needs and the Director at Lodha: “In mature markets like London,
nature of the underlying property asset.” domestic buyers still want to understand the true
added-value they will receive for paying the price
Urban Premiums premium.”

The lower price premiums that are generally The Influence of Brands on Destinations
being achieved in some major cities is most likely
due to a combination of already very high prices Premium brands can have a positive impact on a
for super-premium real estate and strong buyer destination. This is particularly true in emerging
demand, leaving little room - or requirement - for locations as, when a leading luxury brand chooses
a 3rd party brand along with the significant price to ‘plant its flag’ in a particular region, this can
premium that needs to be added. For example, significantly elevate the perception of that location
Knight Frank’s report on branded developments in the marketplace. This in turn creates a robust
found that the average uplift in London was just platform on which to build a luxury tourism offering
over 11% and 12.4% in New York. and attract other brands as well as wealthier visitors.

30 © Colliers International 2017
31

Addressing the Legal Aspects standards. The operator produces an annual
budget and the developer is then required to levy
Graeme Dickson is a Partner in the Hotels, Resorts the branded residence owners (normally based
& Tourism Group at Baker & McKenzie. on unit size). If the common areas of the branded
residences are not maintained by the developer
How does the branding work for the to the required standards, e.g. due to insufficient
residences? funding, this usually gives the operator the right to
terminate the association. (See also p.35)

Usually the operator grants the developer a licence Does the operator provide the residence Structure of a typical Branded Residences project
to sell the residence incorporating reference to the owner with any IP rights attached to the
brand. Additionally, the operator grants a licence brand?
to the developer to refer to the brand for a defined
term (usually the same as the hotel management Usually not, because is it is a precondition that the
agreement). developer guarantees that the branded residence
owner will not contravene the terms of the licence.
What fees are charged by the operator with Of course the developer is often reluctant to
respect to the branded residences? provide such a guarantee, especially as it would
likely continue to operate after all residences
The operator charges a percentage of the sale price have been sold and the developer has effectively
of each residence (NB there is no “standard” fee moved on. Conversely, the operator will provide
as this can vary from operator to operator). The the developer (and in turn the branded residence
licence usually contains provisions to the effect that: owners) with the right to refer to the building in a
way which identifies the branding without the grant
• The operator is entitled to terminate the licence of any intellectual property rights - for example,
if the developer does not sell a specified number when an owner wishes to sell his or her residence,
of residences within a specified time period; a right to refer to it as being located within the
• Residences must be sold for their market value; [relevant brand] building or complex.
• The operator has stringent rights to vet
information provided to prospective purchasers What if an owner wishes to offer their
and may anonymously attend sales presentations branded residence as part of the hotel’s
to ensure that there are no misrepresentations inventory in the rental programme?
being made about the brand;
• The developer may seek to negotiate a The residence owner is usually required to
concession to the effect that a certain number acquire the standard furniture pack and make
of the residences be held back by the developer the residence available to the hotel for a specified
or sold for less than the market price. period. The hotel usually frowns on residences
being offered independently for short term rental
What is the relationship between the hotel as effectively this is in competition.
management agreement and the branding
agreement? Do issues arise if the branded residences
share facilities with the hotel?
If the hotel management agreement terminates for
any reason then usually this automatically This can be contentious as the standard
terminates the branded residences licences. requirements of the hotel may be greater and
Conversely however, if the branded residence hence more expensive than for residential
licence terminates then this does not automatically accommodation (e.g. concierge services).
see a termination of the hotel management
agreement. What hotel services are usually made
available to the residence owners and
How does the operator ensure that the occupants?
residences are maintained to its brand’s
standards? Residence owners and their guests are usually
treated the same as hotel guests, although in some
Usually the operator contracts with the developer instances they may receive benefits not available
to maintain the common areas of the branded to hotel guests, such as discounts.
residence component, consistent with their brand
32 33

Governance: Providing a selling of homes in a condominium or the plots in a • Many jurisdictions do not have a legal structure • All too frequently developers commence
Legal Framework residential subdivision. or regulatory framework that can accommodate planning and construction without addressing
issues that are common in mixed-use projects. fundamental questions relating to sharing
It is important to consider the legal documentation Why is a Home Owners’ Association • Many foreign developers have little idea how facilities and costs, nor consider what happens if
and the overall transparency of dealings. In necessary? to legally structure a mixed-use project and there is a disagreement in the future.
circumstances where a branded residential their legal counsel may be inexperienced.
development is being created, proper governance When developing the branded residential • Developers frequently leave legal issues to the Final words of wisdom?
for the Residential Owners is a pre-requisite component of a mixed-use development, it is end, assuming that this work can be completed
to ensure a well-managed, maintained and vitally important to focus on how the residences quickly (when in fact it cannot!). Depending upon the jurisdiction, governance
harmonious project. In this section, former lawyer, will operate in practice. The building’s operational • Developers often fail to consider that they may can be a legal minefield. To eliminate the risk
hospitality and real estate industry veteran Paul management will most likely be the subject of want to sell the hotel in the future. of potential problems downstream, there is no
Dean provides some valuable insights. a Property Management Agreement with the • Risk of termination of the management contract substitute for seeking early expert advice when
appointed Hotel Operator but there is still a while allowing the branded residences to retain planning mixed-use projects, especially those that
requirement to establish a set of rules to: use of the brand (e.g. China). incorporate branded residences.

What do we mean by “Governance”? • Provide a framework for the Property Owners, Accommodating Conflicting the owners should seek assurances that there
particularly regarding their specific rights and Interests will be a continuing brand presence capable of
In the context of branded residential projects, obligations as they relate to the common maintaining a premium position in the market
governance typically determines control and property elements within the development. There is plenty of sound advice as to the need for place, and that associated future costs will not be
responsibility – i.e. how stakeholders can have • Define how those common property elements a significant upfront investment in establishing an disproportionately high.
their say; who makes, monitors and implements will be maintained over time. effective legal structure to govern the relationship
decisions, and accountability. It should cover the • Specify how the maintenance costs are to be between the developer, operator and branded When a hotel is including private residences in
establishment of policies and the monitoring of met by the Property Owners in a fair and residence owners; however, in preparing the its room inventory, owners should expect the
their implementation. To facilitate this process equitable way. structure it is worth keeping in mind the tensions developer to have negotiated provisions in the
efficiently, the creation of a representative entity that can exist between the interests of the hotel management agreement (and other relevant
is a necessary first step - usually in the form of a The authority of the HOA may be determined by developer, the operator and owners as the project documentation) in terms of re-equipping and
Home Owners’ Association (HOA). the local real estate laws and by the project’s matures. Felicity Jones, Head of Hotels and Leisure refurbishment, which give the residence owners
“governing documents”. These documents usually at Watson Farley & Williams LLP, addresses a sufficient rights to ensure their homes are being
Is Governance standard across all markets? include the Covenants, Conditions & Restrictions couple of key issues relating to the interests of the appropriately and collectively protected.
[C.C.&R.’s], the corporate documents (Articles and residence owners, the hotel owner and the brand
Some jurisdictions legislate that Property Owners Bylaws) as referenced in the C.C.&R.s, and any HOA operator that the developer will need to balance. Loss of the Brand
must become part of the HOA; however, Government governing body-enacted rules and regulations as
oversight of HOA’s varies from one jurisdiction to authorised (expressly or implicitly) by the C.C.&R’s. Implementation of Brand Standards In some jurisdictions it has proved easier for the
another, especially in Asia, and often this can be interested parties to terminate a brand than in
minimal. More significant challenges may therefore HOA membership is usually a mandatory condition The operator’s priority is to ensure that its others. Whilst it may be the actions of the hotel
have to be addressed in jurisdictions where of purchase for a residential buyer; all members brand standards are maintained throughout the owner that lead to the loss of the brand (i.e.
condominium law is either not yet established or must pay assessments to it and abide by its development during the term of the operating due to a failure to perform its obligations), more
is in its early stages of development, especially governing documents. When an owner sells the agreement and that, over time, those standards frequently it is down to the residence owners; in
regarding Branded Villas or Apartments in resort encumbered property (and any improvements stay up-to-date in the market place. A developer some jurisdictions they cannot be forced to join (or
destinations where larger mixed-use development thereon), the seller ceases to be a member of the keen to sign up with a brand to market the remain in) the Home Owners Association, which
sites are available. HOA and the new owner automatically becomes a residences should consider the costs of the brand can lead to problems such as unpaid management
member and assumes all obligations. maintenance charges that will fall to the hotel and and maintenance fees. This is a more challenging
In these situations, the governing documents individual residence owners (and the extent to situation to resolve. As such, the developer
“run with the land” – which means that the An HOA may grant the developer privileged voting which these are fair and equitably apportioned). must balance the approach of the operator with
documents “touch and concern” the land and rights in the HOA, while still allowing the developer the interests of an owner and take steps to limit
there is no mutual agreement between the seller to exit financial and legal responsibility of the If the developer maintains an interest in the the exposure to residents that may result from
and subsequent buyers regarding their terms. organisation (normally by transferring ownership development there is (usually) a stronger incentive the behaviour of one or more ‘rogue owners’.
In essence, these are “adhesion contracts” – a of the HOA to the homeowners after selling a to ensure that costs for common spaces / facilities Similarly, the rights of the operator to continue to
condition of ownership and a prospective buyer has predetermined number of residences or plots). are contained, brand standards maintained and operate should be addressed - provided of course
to take it or leave it. regulations properly implemented. However, that it provides the agreed services and charges for
since it is more likely that the developer will them in a fair and equitable manner. Failure to do
Many HOA’s are incorporated and are subject to What things should a developer or operator want to exit the project in due course, given the so can result in the loss of the brand and potential
specific laws within the applicable jurisdiction think about? potential premium paid for the branded residences claims from owners and/or the operator - in which
that govern HOA’s and non-profit corporations. In case it is all parties who will suffer.
the USA for example, typically the HOA will be a When undertaking a branded residential project
corporation formed by the real estate developer overseas (especially in emerging markets) 35
for the purposes of marketing, managing and consideration must be given to specific issues and
challenges, for example:
34

Residence at Banyan Tree Laguna, Phuket

Spotlight on AccorHotels

AccorHotels’ 2016 acquisition of Fairmont, Raffles important as the bricks and mortar, it’s our
and Swissôtel, as well as its strategic partnership suite of hotel and residential services that really
and equity stake in Banyan Tree, has significantly differentiate our offerings.”
enhanced the company’s residential portfolio to
provide a comprehensive suite of branded residence Accor sees constant innovation as a key to its
solutions spanning midscale, luxury and ultra-luxe success in this sector. “Purchasers of branded
segments. It has also created a dominant new residences are typically participating at the very
player in the market. In this interview, Jeff Tisdall, highest end of their respective residential markets,”
VP Residential Development, summarises Accor’s comments Tisdall. “Consistently we see that they
approach to branded residences. seek out leading edge design and first-of-a-kind
features and benefits”.

With a strong track record of pioneering the To find out what their target customers (i.e. from Collaboration is another key element that Accor thereby delivering optimal returns. “We assess very
development of branded residences in new source markets) really want, the approach is emphasises; the company feels it is critical to carefully whether it’s an upper-upscale brand like
markets, Accor has demonstrated that its model research led. “We listen to the market. Today we leverage the insights of all project stakeholders Pullman, or a proven luxury brand like Sofitel or
can be replicated across diverse geographies and are managing relationships with more than - the marketing agency/consultancy, designers, Fairmont that is best positioned to unlock value.
segments. From lifestyle brands like So Sofitel 3000 residence owners worldwide, and their sales teams and, most obviously, development In some markets we are finding the right fit is a
Residences to the elegance of a Raffles Residence, feedback has helped us immensely. In addition partners. “Key elements of our residential offering midscale brand like Novotel”. Furthermore, Accor
and an operating portfolio and development pipeline to expert interviews and feasibility studies, we are designed to appeal broadly to HNW and UHNW places a lot of emphasis on alignment and vision.
which extends to markets as varied as Los Angeles, also encourage focus groups as a means of buyers, across varying markets and geographies - a “At the end of the day it’s a partnership - we need
Vancouver, Istanbul, Sofia, Bulgaria, Abu Dhabi, identifying and prioritising buyer requirements good example being our Global Residential Owners to understand what makes a branded residential
Marrakech, Kuala Lumpur and Chengdu, China, it’s for each project. This enables us to get close to Benefits Program which ensures our Residence development successful from the perspective of
a concept that has proven highly adaptive. our customer and develop facilities and service owners are extremely well taken care of whenever our partner, and ensure we align ourselves with
offerings that anticipate consumer needs in a very and wherever they travel with us,” comments those objectives. We have also been very fortunate
Accor’s experience in branded residences dates fast a moving market segment.” Tisdall, “but our product design process is open and to work with residential development partners who
back to the late 90s with the launch of a ground collaborative and that helps us ensure we adapt understand the importance of branding and work
breaking project in Acapulco, Mexico under the So Sofitel Residence, Kuala Lumpur properly to local contexts.” closely with us to protect and enhance the brand
Fairmont Heritage Place (FHP) private residence throughout the development and marketing process”.
club brand; today there are 10 FHP projects Tisdall notes that Accor’s developments’ partners
operating worldwide. Whole ownership Branded are often key to this process. “Our typical partner While most of Accor’s residential developments
Residences and luxe Serviced Residences (operated is a leading developer in the markets in which are co-located with one of its hotels, the group
on an extended-stay basis) were subsequently they operate - often having developed several will selectively pursue standalone opportunities.
introduced under most of the company’s midscale successful residential projects before introducing As Tisdall notes, “we think standalone branded
through ultra-luxe brands. Today the company’s a branded residence. At Accor, our role is to residences can be a very successful model, when
portfolio of Residences has grown to more than integrate our services, brands and insights - with the the right conditions are in place”. He adds that the
20 properties worldwide, with another 40+ in unique qualities our partners bring to the table - to viability of standalone branded residences needs to
the development pipeline. Generally the for-sale create truly innovative and compelling residential be examined carefully - and that a key is to find a
Branded Residences are presented as lifestyle/ environments.” He adds that this sort of partnering is way of recreating the economy of scale that would
owner usage focused offerings, with rental essential when entering new or emerging markets. otherwise be provided by integrating hotel and
programs common in resort destinations. residential operations. With an eye on the future
With a wide array of mixed-use solutions to offer, it he notes, “With the right partner and strategy, a
The company’s typical branded residences model is crucial for Accor to help its developers select the standalone development in London, Paris or Hong
assumes a mixed-use development in which the brand that is best suited to market characteristics, Kong would be very interesting”.
residences are co-located with a hotel asset. It
stresses the importance of effective development 37
planning, to ensure hotel services and facilities are
appropriately leveraged to maximize the residential
experience, while design safeguards privacy and
exclusivity. As Jeff Tisdall explains: “The co-location
model serves a number of objectives - notably
enhancing the economics of hotel ownership, but
also by creating a value proposition for Residential
purchasers that is extremely compelling. As
36

Fairmont Heritage Place Mayakoba

Conclusions There are numerous elements to consider when
planning, designing and building a branded mixed-
“Overall we believe there is strong potential for There is little doubt that the concept of branded • High premiums being squeezed in developed use development. However, one thing is certain:
the right brands to perform well and to continue residences has become a mainstream, expanding markets with more competition. the days of “build it and they will come” are long
to command significant residential price and evolving part of the real estate industry. • More standalone branded residences, mostly in gone. Today’s affluent buyers are spoiled for
premiums, although in our opinion there is a We are seeing unprecedented levels of branded an urban environment. choice and bombarded with opportunities to invest
risk of this window of opportunity lasting only residences across Far Eastern markets and the in luxury homes across the globe.
a couple of decades. Notwithstanding this, the evidence is that the formula is expanding rapidly Finally, a brief word on the importance of positioning
potential returns and improved rate of sales for in other emerging markets (as well as more and differentiation: branded residences that present It is the role of professional marketers to
developers and increased non-hotel room revenue established ones). a clearly defined offer and attractive lifestyle, which advise on how best to package and promote a
can be high and therefore eminently worthwhile, resonate with buying audiences, will succeed to a residential development effectively, in order to
particularly in high quality resort locations and From the findings of this report, in the future we much greater degree than those that do not stand target and attract discerning international buyer
emerging markets.” might expect to see: out for anything distinctive. audiences. Having worked on many projects
around the world, I am continually reminded of
Daniel von Barloewen, Marriott International • Continuing expansion in the sector in terms of In conclusion, as with any sector, a successful real the importance of standing out from the herd -
the number and range of market participants. estate development must be driven by satisfying and for the right reasons. As the evidence in this
“As a real estate investor, it is critically important • A shift in the balance from resort residences (even exceeding) customers’ ever-evolving report (which has been compiled from extensive
to deliver an uncompromising product in terms of towards branded urban mixed-use developments. requirements and desires. Increasingly, these published research, articles and industry sources)
location, architecture, interior design, art, amenity • Less focus on ‘tangible’ elements, more on have been shifting with growing impetus towards reveals, when residences are well presented and
and service. Partnering with an existing brand with emotional. the convenience, security and confidence that are appropriately branded it can provide elevated
a strong reputation and experience in delivering • Wellbeing and positive ‘healing’ environments associated with branded residences - and, from the levels of distinctiveness and desirability that deliver
the highest levels of service has been shown to will become standard. evidence presented in this report, this trend looks confidence and boost sales momentum.
achieve significant premium pricing in the market, • Broader quality of branded units for sale (i.e. set to continue.
making it a very compelling economic option.” lower star rated hotel operators). If you would like to discuss any aspects of a project
• The emergence of residential lifestyle brands for (whether planned, in development or operational)
Paul Vollman, Managing Partner, specific demographic segments (e.g. retirement). please feel free to contact me - and if I can’t
Yorktown Partners LLP • The emergence of exciting new destinations help with the answers you seek, I probably know
across the globe offering branded residences, someone who can!
38 including South America and Africa.
• More branded residences in Europe. I hope you enjoy reading this report. My thanks to
all those who have contributed their time, insights
and experiences.

Chris Graham

39

About the Author

With a career spanning over 30 years in sales
and marketing, Chris Graham first gained his
real estate experience as Group Marketing
Director at leading estate agency Hamptons
International. In 2008 he founded Graham
Associates, a London based branding, marketing
and lead generation consultancy, to specialise
in international real estate developments and
residential resorts.

In 2009 Graham Associates joined You Group,
a central London agency with 38 full-time staff,
with annual billings exceeding £40 million and an
impressive client portfolio including many of the
UK’s top real estate brands.

Chris and his team work closely with leading real
estate and resort clients around the world,
for whom they develop bespoke marketing
strategies, sales collateral and lead generation
campaigns. Many of the projects undertaken
in the past two decades have involved a branded
residences component, highlighting first-hand
the benefits and growth potential of this exciting
sector of the market.

Chris and the property team have won several
industry awards including Best Development
Marketing (x7), Best Property Website and Best
Estate Agency Marketing (International Property
Awards); Best Marketing Campaign and Best
Integrated Campaign (International Building
Press Awards); Best Marketing (National
Housing Awards) and the OPP Gold Award for
Marketing Excellence.

A member of agency group “Experiential luxury is growing faster
than personal goods luxury, and designer
homes are a natural bridge between
these two worlds: is there any greater
experiential product than one you
actually live in?”

77 St Martins Lane
London WC2N 4AA

Tel: 020 7420 3550
Email: [email protected]

www.gagms.com

F4ro0nt cover image: Residence at Banyan Tree Laguna, Phuket ©CHRIS GRAHAM, NOVEMBER 2017