BERLIN — Branded residences continue to be a bigger piece of the pie for hotel companies, both as part of larger hotel projects and as stand-alone developments, experts said.
During the 2024 International Hospitality Investment Forum, Marriott International's Chief Development Officer for North America Luxury Brands and Global Mixed-Use Dana Jacobsohn said buyers for residential units in branded residences are willing to pay a bit extra for the credibility and love of a brand.
"In addition to credibility, for us at Marriott, 90% of our residential owners are Bonvoy [loyalty program] members," she said during a session on branded residences. "So these are people who love our brands. They love traveling in our hotels globally, and they want to live in our hotels day in and day out."
From a developer perspective, part of the appeal is how selling residences can help fill a part of a hotel development's capital stack.
Nicholas Mellis, vice president of acquisitions for Highgate Hotels, said another financial benefit, particularly in resort destinations, is the premium you can achieve when residential units are put into the rental pool for "upper-midscale, upper-upscale type products."
"There's an opportunity to really push on the margin in resorts destinations," he said, adding owners of luxury units will be less profit-driven.
Guido Fredrich, chief development officer for Corinthia Hotels, said it's important not to think of branded-residence buyers as different than hotel guests, especially since many buyers are seeking a branded residence for the hotel's amenities.
"They're buying the experience in a way not dissimilar to what we're seeing in the hotel business, as well," he said. "It's in tune with the general shift towards experiential buying behavior that was probably there before COVID [and] was accelerated by COVID, and it's just gotten stronger and stronger. People are prepared to spend more on experiences and memories."
There's been significant demographic shifts for buyers of hotel branded residences, opening up the possibility of younger buyers, Jacobsohn said. And as the pool of potential residents grows, she said that opens more opportunities for residences tied to more hotel brands.
"Projects are shifting," she said. Marriott has "a stand-alone Ritz-Carlton residential project that we thought was going to be empty nesters [buying]. ... But then we found out families were moving in."
Alda Filipe, real estate director for Kronos Homes, said it's vitally important to get the right resident into the right property, though, because as the number of options in the space grows, so does the variety of experiences.
"When I'm selling an Edition, it's very different when I'm selling a W," she said. "You can't really complain when you buy into a W that there's a bit of noise."
Filipe said it's crucial for brands to be clear about the experience they're selling to guests to avoid any sort of frustration or dissatisfaction.
Another area brands, owners and residences need to align is the expectations for the units, as brands are invested in making sure they stay up to certain quality standards, Fredrich said.
"And that should be in everyone's interest because otherwise we're hurting the very core of the proposition," he said.
On the residential side, brand standards are still important but are also guidelines so that properties better fit in their markets, Jacobsohn said.
"If you're in New York City or Singapore, the sizes of your units are different than your units in the Algarve," she said.
Mellis said owners looking to use their units for rental income need to be mindful about aligning on things such as furniture, fixtures and equipment.
"I think if that alignment is presented in the right way, that should be easy for them to understand," he said.
But if branded-residence owners are not interested in falling in line with the brands expectations, they might be looking at buying the wrong type of unit, Filipe said.
"Sometimes you just have to say to the client, 'Look, it's the model, and if you don't want it to go to that level, just buy non-branded,'" she said.