LOS ANGELES — As change is the only constant, so too must the hotel industry change to adapt to new environments and guest demands.
During a general session on development disruptors at the Americas Lodging Investment Summit, hotel executives spoke about how their companies are meeting the needs of guests and getting deals done despite challenging development conditions.
Changing Guest Behavior
Guests’ food preferences have changed over time, said Monica Xuereb, chief commercial officer at Loews Hotels & Co. Most want to eat delicious, nutritious food, so Loews has adapted to focus on sourcing food sustainably. The company has partnered with companies, local farms and food-and-beverage artisans to bring these products in-house for guests, she said.
The goal is to offer food that is both good for guests and the environment, she said.
“I think what makes us different is that we are able to bring this approach to all our outlets, not just one restaurant or in one venue,” Xuereb said. “This kind of sustainability sourcing, biodynamic approach is really in every [food and beverage] outlet in the hotel, whether that’s banquets, your grab-and-go, your coffee shop.
“Because we're an owner operator, we can say that it's really a standard across all of our hotels, and I think our guests really appreciate that,” she said.
Remote work has completely influenced how guests want to stay in hotels, said Dana Jacobsohn, chief development officer of North America luxury brands and global mixed-use at Marriott International. People who work remotely are traveling more, expanding the bleisure demand segment. That’s resulting in longer-term stays.
Jacobsohn said her niece recently graduated from college and works for MasterCard, where she’s allowed to work remotely for one month out of the year. It’s not a vacation, but they can work anywhere in the world, she said.
Business traveler road warriors such as Jacobsohn's niece, traveling nurses or construction workers are all looking for affordable places they can stay for long periods of time, which is why Marriott launched its midscale extended-stay brand, StudioRes, last year, she said.
“What we’ve seen is this desire for customers to stay for a very long time,” Jacobsohn said. “It’s global.”
Luxury hotel guests are untethered more than most guests, said Robin Kennedy, executive vice president and chief development officer at Montage International Hotel Group. They are able to go anywhere anytime, and that changes the patterns of how they see stays and how they’re experiencing their stays. They’re looking for more space in their rooms, and average daily rates across room types are popping in different locations.
“They’re willing to pay for it,” she said.
These guests are always on, so they’re looking for moments when they can turn off and disconnect, Kennedy said. In turn, wellness is a big part of what they’re focusing on at resorts. It’s spa stays as well as recreational experiences and being out in the environment to find moments early in the morning or breaks during work.
“If you're programming your hotel and thinking about how you're providing these experiences, that guest will continue to come back,” she said.
Getting Deals Done
Arlington, Texas, is a unique destination with incredible demand generators, including the AT&T Stadium and Global Life Park, Xuereb said. The market brings in about 115 to 125 high-profile events annually, such as the Beyoncé and Taylor Swift concerts last year.
The market has had less-than-desirable hotel supply, she said. In 2017, Loews had the opportunity to sign up for a 300-room Live! By Loews hotel, which later opened in 2019. With the event-generated demand in the market, the hotel was able to charge $800 rates in a market that was typically less than $200. The hotel also captured great group demand in the market that otherwise wouldn’t have considered Arlington before.
“The city had some really grand aspirations of becoming one of the North Texas premier meetings and events destinations, but they didn't have enough hotel rooms,” she said.
Because of the potential in the market, Loews pursued another hotel deal in Arlington, Xuereb said. The company began working on setting up construction for an 888-room Loews hotel that would include a new convention center through a public-private partnership with the city.
“Here we are, working with the city on the partnership documents. The ink is fairly dry, and COVID hits,” she said.
Loews viewed the pandemic as a cyclical event that wasn’t going to cause a major decline, she said. The project moved forward during the pandemic so that it would be ready to take off once conditions improved. Its parent company, Loews Corp., approved seeking a $300 million loan for the hotel after putting in $250 million of its own equity.
While the lending environment was difficult during the pandemic, lenders knew that Loews invests capital into its own projects and operates as a long-term partner, she said. In the end, the company was able to secure two of the biggest hotel construction loans given during the pandemic: $300 million for the Arlington project and another $621 million for three other hotels. The new Loews Arlington Hotel is expected to open soon, and it already has more than 260,000 room nights on the books.
“I think the biggest benefit of taking a risk during the pandemic is that we managed to secure great financing and really secure pricing on construction that really saved us millions of dollars because of the massive inflation costs that followed,” Xuereb said.
HEI Hotels & Resorts was involved in two development projects that opened at roughly the same time a few months ago, said Rachel Moniz, chief operating officer at HEI Hotels. The first was an independent luxury hotel, the 200-room Crescent Hotel. The second was the 110-room Hyatt Place Albany.
For the Crescent hotel project, it was HEI Hotels’ first time managing a hotel in Fort Worth, she said. It was familiar with Dallas, but the team learned more about the market primarily from the developer. The hotel is part of a $275 million mixed-use development that includes office space, apartments, a wellness club and special event space.
The developer took the approach of embracing the community by bringing in local artists to do their work in the hotel and sourcing food from local farms, which along with the different elements of the mixed-use development helped drive community support for the project, Moniz said.
“All of those touchpoints are really, really important, and this became a real community project,” she said. “The hotel opened with enormous success and fanfare.”
The Hyatt in Albany was under development when the pandemic began, so everything stopped, Moniz said. After a brief break with the developer, HEI Hotels returned with a banking relationship with a Green Bank since the hotel changed to become all-electric. That opened up capital funding as well as state and local grants. The hotel also dropped in size by about 20 keys to make the deal pencil.
“It was really interesting to see how these things can happen even during times where it'd be tough to build a new hotel,” she said.
Any luxury hotel that has been developed over the past few years is part of a mixed-use project, Jacobsohn said. At Marriott, most of its luxury hotels that are in mixed-use projects have branded residential as a component. The St. Regis in Chicago has 396 residences under the St. Regis brand alongside 196 hotel rooms.
The property is located in the area known as Lakeshore East and sits on a former golf course, she said. Along with the residences, the property has food-and-beverage offerings.
“That 196-room hotel created the halo effect to help finance many other portions of the mixed-use component,” she said.