MADRID — The lifestyle segment is no longer a niche sector flying under the radar in the hospitality industry.
Lifestyle hotels are moving the needle with guests, spurring global brand companies to develop or acquire lifestyle brands and attracting investors who see money to be made.
A panel of hotel executives at the Atlantic Ocean Hotel Investors’ Summit discussed how the lifestyle hotel segment is evolving to fuel investment, profitability, brand scale and revenue both from guests and non-guests.
At the brand company level, growing lifestyle hotel brands in house or adding an up-and-coming concept via acquisition are major pieces of long-term growth strategy.
Over the last several years, Hyatt Hotels Corp. has looked to deals and joint ventures to increase its footprint in the lifestyle space. In 2018, Hyatt acquired Two Roads Hospitality and its five lifestyle brands. In 2021, Hyatt purchased Apple Leisure Group and its all-inclusive resort brands. In 2023, Hyatt acquired the brand and management platform of New York-based Dream Hotel Group and its three lifestyle brands. And in 2024, Hyatt acquired Standard International and its four brands along with a separate deal for German lifestyle brand Me and All.
With all of that recent acquisitions activity, Hyatt will soon create its own lifestyle division, according to Felicity Black-Roberts, senior vice president of development, Europe, Middle East and Africa. She said Hyatt is betting big on lifestyle and creating brands that owners want to be part of and that can being better returns.
Black-Roberts said not every lifestyle brand at Hyatt is designed to grow in scale as quickly as others.
“As we create a new division, the focus on new locations becomes a group decision. We will spend more time, energy and follow-through on how to program a hotel, create it and that it stays relevant over time. We understand that the risk-reward profile [of a lifestyle hotel] is not right for all investors,” she said.
French hotel company Accor has similarly acquired lifestyle brands over the years but allowed them to continue to operate with their original visions. Marine Duchesne, vice president of development of Europe for Accor's lifestyle division Ennismore, said it's crucial for Ennismore to be a standalone division in terms of its brands’ creativity, which continue to be led by their original founders.
“That the people are still there since the brands were created is important. Designers. Marketers. I have been there for seven years, but we still need to adapt to every single market to generate the extra revenue we need,” she said.
Keith Evans, founder and CEO of Lifestyle Hospitality Capital Group, said his firm acquired a majority stake Ireland’s Dean Hotel Group in 2023 and expanded the initial eight-hotel portfolio to 11 hotels with more growth in the works.
As a segment, lifestyle hotels bring “better returns on complex deals,” Evans said, and the other panelists agreed.
Evans said lifestyle is a fundamental part of his investment strategy so as hotels can be “where the consumer is, differentiated products and [that have] many more levers to drive profitability.”
With the rise of corporate mergers and acquisitions and repositioning within the lifestyle hotel space over the last few years, the executives and boards of directors who negotiated those deals expect the returns on investment will start flowing soon, Evans said.
“Then [hoteliers] have to chase that. Over the next 18 months, there will be increased competition, but that is good for investors. Terms will improve, and like most things in life, that will find a balance,” he said.
The first part of his strategy is real-estate driven, but there will be “a lot of work on the brand architecture so that by the end of the year we can work on third-party management and on an asset-light strategy,” Evans said.
"We will continue to put money behind it,” he added.
Whether lifestyle hotels are independent, affiliated with small brands or part of a large brand network, they must have a differentiated niche that caters to a sizable consumer base.
“We move away from standardized products,” Evans said. “We take every effort to design every square meter to create value and to attract non-hotel guest for" food and beverage.
Other important considerations are on securing superior returns on the real estate and to create products that are scalable.
Benoit Amado, vice president of operations for the Europe and U.S. at Gaw Capital Group, said lifestyle hotels that generate 50% of revenue in nonrooms revenue is a “heavy” responsibility and a hotel's food-and-beverage offerings must always stay relevant.
“It is not easy. You also need a buzz that remains around a property. For rooms, that flows well; in [food and beverage], you have to fill all the spaces, and are you running it yourself, or are you outsourcing? It is not easy to have a lifestyle product that outperforms the market,” he said.
Squeezing a hotel’s every space and scaling brands are two fundamental steps to better profitability, panelists said. But implementing the same approaches, experiences and brand standards to everyone is not a route toward gaining recognition, buzz and revenue.
Evans said his company is investing in public areas throughout its hotel portfolio.
“We’re expanding across Europe and U.S. Forty-five percent of revenue comes from [food and beverage]. On average, each hotel has four outlets, with 75% to 80% of [diners being] non-hotel guests, ... that density drives rooms profitability,” he said. “We can also integrate co-working, members’ clubs. We want the local community to be there; as we’ve seen that translates into higher profitability.”
Securing the necessary return on incremental areas in public spaces often requires expensive fit-out in some areas of the hotels, Evans said.
“It is not everyone’s cup of tea. It is outside the comfort zone of some investors,” he added.
Gaw's Amado said the lifestyle hotel segment can be viewed as generational, demographics and, increasingly, multigenerational.
“It is constantly changing, and you now have to offer something more than just for the nomads and hipsters,” he said.
Hotel food and beverage can be accretive and drive room rate, panelists said.
“A key characteristic [for food and beverage] is that there is a labor market that works well. London, Dublin, Spain, Portugal all work; others do not, and some U.S. markets are challenging,” Evans said.
The lifestyle hotel space is becoming more and more competitive as it gains popularity, Black-Roberts said.
“I see a lot of request-for-proposal processes, and they are hugely competitive. It is more and more difficult to win the deal, and some of the deal terms now are very difficult to get the right risk-reward ratio,” she said.
Investors and hotel brands need awareness of that risk for every request for proposal falling on their desks.
“It is not good for the ops teams to see that [the hotel] is to be paying out against the guarantee in the first years of the ramp up. … Attrition rates on these RFPs are getting higher,” she said.