North American Hotel Investment Conference

The 2014 North America Hotel Investment Conference (NATHIC), held November 19 through 21 in Chicago, brought together a strong showing of hotel owners, investors, brokers, consultants, franchisors, brand representatives, and students from Michigan State University, New York University, and DePaul University. Top U.S. hospitality executives served on panel discussions that addressed an array of topics related to hotel ownership, development, and management, as well as the recent proliferation of new hotel brands and the catalyzing impact of Millennials or “Generation C” on the industry. A sense of optimism echoed throughout the conference, supported by reports of continued hotel performance improvements in markets nationwide. Read on for some of highlights from NATHIC 2014.


New Brands
Established brands are plentiful in the current pipeline of new hotel supply, while new brands and brand concepts continue to emerge and gain traction. Many industry insiders—including keynote speaker Jack DeBoer, who originally conceived the Residence Inn, Summerfield Suites, Candlewood Suites, and Value Place lines of hotels and, most recently, the WaterWalk Apartments—believe that the limited availability of established brands brings about the creation of new ones. Some speakers, however, emphasized the connection between new brands and the focus on Millennials (the generation of people born in the 1980s or 1990s), particularly as these travelers tend to be aligned with brand concepts such as health and wellness and lifestyle hotels.

The “soft brand” concept, currently represented by Marriott’s Autograph Collection and the Curio – A Collection by Hilton, among others, will soon include a new competitor. Michael Palmeri, Senior Vice President of Acquisition and Development for Loews Hotels & Resorts, announced the company will be rolling out a new soft brand in the first quarter of 2015. These “soft brands” or collections of hotels offer travelers looking for cultural experiences in unique destinations the security of basic brand standards; they also offer owners the benefits of brand affiliation, especially distribution and reservation channels. Other supply trends noted at NATHIC included the growth of ground-up developments versus conversions and the increasing development of urban extended-stay properties.

Although new brands, independent hotels, lifestyle concepts, and softbranded hotels tend to target customers from specific segments, the number of emerging brands and concepts was on the minds of many attendees. During the panel on extended-stay hotels, Diane Mayer, Vice President & Global Brand Manager with Marriott International, stated that “as [the number of] brands proliferate, they get harder and harder to differentiate.” Hence, while many new brands are emerging in the market, the lack of brand recognition can hinder their acceptance by customers, especially as, from the perspective of guests, discernible differences or advantages among the newer concepts are less evident when compared with those among existing brands.

Millennials and the Content Generation
The shear size, youth, and technological savvy of the Millennial generation makes it a key target demographic in today’s hospitality market. Many NATHIC attendees and speakers recognized that no one brand is likely to corner the market on Millennials, which are composed of a great many physiographic segments. Still, even if brands targeting Millennials capture only a small, like-minded portion of the approximately 80 million members of the generation, this still presents a very substantial potential customer base.

Millennials represent a sort of paradox when it comes to what they want in a hotel. They have high expectations when it comes to lodging, but look for sleekness and simplicity in the experience as well. Millennials also favor innovative design at every price point, and they’re tech-savvy yet value driven. The term Generation C (or the “Content Generation”) was also used to capture the physiographic of customers at all ages who create and share content through YouTube, blogs, and other online avenues; the members of Generation C, which may extend even more widely than the Millennial generation, hone in intensely on hotel options that allow them to access and share content during their stay. No matter the term, the importance of offering exactly what the customer wants, without all the extras they don’t want to pay for, is key.


Higher Spends, Longer Stays, and Limited New Supply Boost Optimism

Hotel performance so far into 2014 has exceeded expectations and will likely end on a high note, with all segments anticipated to exceed RevPAR levels in 2007 (the pre-recession peak) and 2013. Overall, occupancy for 2014 is projected to reach 64.6% and to surpass 65% in 2015; STR Analytics noted occupancy hasn’t been so high since the 1990s. Average rates in 2015 are expected to experience all-time highs as well.

Increased consumer confidence, longer stays with higher spending per stay, and limited new supply have all contributed to increasing occupancy and strong average rate. As the Great Recession becomes a thing of the past, consumers are willing to pay a premium for additional amenities and convenience. There was also discussion of the linkage between these trends and the aforementioned tendencies among Millennials and Generation C. Many spoke to how today’s consumers are extending their travel periods, most notably through an added Thursday or Sunday night to create an extended weekend. These longer traveling periods are becoming more prevalent in today’s hotel industry, and it was also recognized that many customers are willing to spend more on each day of their trip.

Lodging Econometrics reported that the U.S. hotel industry entered the expansion phase of the lodging real estate cycle in 2014. However, supply growth is expected to be approximately 1.3% and 1.6% in 2014 and 2015, respectively, which is notably below the 20-year average of roughly 2.0%. Conversely, the exit of hotel rooms is also below the industry average, according to Lodging Econometrics. Year-to-date through October of 2014, approximately 19,500 rooms have left the supply report, with approximately 4,000 of those located in Atlantic City. The industry average of hotel rooms leaving the system is approximately 35,000 per year.


Outlook
NATHIC 2014 made it clear that the optimistic outlook for the next several years, especially 2015, is well deserved. The potential impact of new legislature, such as the Living Wage Law, along with the influx of new brands, is important to consider going forward. Overall, however, the fulcrum of the hospitality industry is on the upswing.

Office Real Estate Trends In Vogue Right Now

The commercial property market of the United States has made a significant comeback. But along with the recovery, came several changes that have now become trends in the industry.

In the 48th annual conference for the National Association of Real Estate Editors, experts discussed the various trends office building are adopting to become more attractive. Culture Map compiled a list of the most interesting trends that are taking over the real estate market and we sieved through the list to bring out the commercial real estate developments.

1. Bike Racks

As more companies strive towards hiring millennials (people aged between 18 and 33) bike racks have become an office building staple.

2. Pet Facilities

Pet friendly buildings have become all the rage, not only in multifamily structures but office buildings too. Dog-walking and pet-sitting services have become much popular with prominent developers adding these facilities to office buildings.

3. Fitness Facilities and Environment

With a large number of Americans struggling with obesity and other lifestyle-related health problems, access to fitness facilities and indoor work environment quality has become important. Most office building these days have gym facilities and access to parks and greener areas nearby. Indoor air-quality and temperature regulation have also become vital.

While these were some of the popular tangible trends taking over the office real estate market, a prior report by Urban Land Institute and PWC forecasted some emerging trends that will take over the commercial real estate market in 2014.

"Commercial real estate is reaching an inflection point" where "valuations will no longer be driven by capital markets," the report stated.

It also added that industry bigwigs believe, 2014 will be a year of "space market fundamentals and property enhancements."

Indeed, commercial real estate market has come roaring back in most of the states and experts expect it to keep mapping a steady growth.

"Money has come back into the real estate market," Bob Solfelt, vice president and general manager with Golden Valley-based Mortenson Development, a partner on the Mall of America project told Minnesota Post.

"There are investment partners, both equity and debt, that make some of these projects feasible."

Living with Gen Y: Trends in Multifamily Development

All eyes are on the Millennials as a new generation of consumers whose unique mindset is impacting all industries, from housing to environment, infrastructure, media and retailing.

Anton Menlo in Menlo Park, CA. Designed by KTGY, this $120 million sustainable mixed-use community serves Gen Y professionals in the walkable, transit-oriented neighborhood of Menlo Park.

Key characteristics of Gen Y

Also known as Generation Y, Millennials are fundamentally different from their Baby Boomer fathers and mothers. For one thing, Millennials (those in their 20s and early 30s) have been forged in the Great Recession, they know the risks of adventurous investments and financial escapades, they are burdened with student loans but highly educated and place a great deal of importance on sustainability. Unlike their parents, they delay some of the rites of passage into adulthood such as purchasing a house or getting married, precisely because they want to do things right. Young people move back with their parents or dive into renting not because they abandoned the American dream, but because they appreciate flexibility and seek financial stability before pursuing homeownership.

As of 2013, it is estimated that there are approximately 86 million Millennials residing in the United States. Over the next twenty years, this demographic group is expected to grow exponentially as immigrant counterparts continue to make America their home.

Impact on multi-family design

Partly due to the Millennials’ surge, apartment demand in most markets has climbed as well. Acknowledging Gen Y’s preference for urban living, mixed-use developments and walkable environments, multifamily operators have embraced innovation and new residential design trends have emerged. Car and bike sharing services, electric vehicle charging stations, community kitchens and farms are now an integral part of apartment communities.

“Multifamily developers and designers have been inspired by high-end amenities found at resort hotels and expensive membership health clubs as well as those amenities that single-family home owners would want,” said Rohit Anand, AIA, NCARB and managing principal in the Tyson, Va. office of the award-winning national firm, KTGY Group, Inc., Architecture + Planning, in a written statement.

“These amenities include resort-inspired pools, large spaces for vegetable and fruit gardens, additional storage closets off the patio/balcony and/or in the parking garage, bicycle storage and repair, jamming/recording studio, a large fitness center with lots of windows, a Pilates/Yoga studio, and big screen TVs or even individual screens on each tread mill or stair climber. Some developers are including a training facility with personal training in their membership-quality gyms.”

One other thing that multifamily operators should not disregard when devising retention strategies is technology and Millennials’ preference for digitalized environments. The members of this cohort grew up texting and socializing on Twitter and Facebook, they acquire everything online, from groceries to insurance policies and services, and don’t mind sharing when it comes to transportation and housing. Consumer-generated media, online reviews, rankings and opinion polling are a part of their daily existence. They like to make themselves heard and expect feedback, whether at work, within their communities or in their group of friends. Understanding the Millennial mindset and what the members of this demographic expect from their place of residence will allow property managers to better position their assets and cash out on their investments.

“Understanding the wants and needs of your primary target market is critical to success. Going the extra mile to provide amenities that are unique to the marketplace will give you a real marketing advantage in the process,” observed Anand.

“Today, amenities and technology, both low tech and high tech, are being leveraged to provide apartment residents with a convenient lifestyle free from the burdens and responsibilities of home ownership,” he added. “One of the advantages of apartment living near transit in urban, walkable communities is that residents can more easily do without owning a car. Car sharing businesses like Zipcar and Buzzcar have increased in popularity. Bike sharing, first made popular on college campuses, has moved off campus as well.”

In addition to tech offerings, Gen Y-ers expect their apartments to accommodate their lifestyle needs, such as socializing, shopping and entertainment. During the selection process, chances are that prospects will place as much emphasis on location as on rental rates and unit size.

“Location is everything. What’s in the neighborhood within walking distance is the most important amenity. Where services are missing from the neighborhood, developers might incorporate ground floor retail/services to include a ‘grab & go’ convenience store, dry cleaning, nail (and hair) salon, sports pub and/or cafe. Investors are snapping up these “retail condominiums” at premium prices in high traffic, urban infill areas,” Anand explained.

One simple step to improve chances of success in attracting and retaining residents is offering a wide amenity package, to cater to all renter types. Whereas proximity to parks and recreation spaces will act as leverage when it comes to attracting outdoorsy types, pet-friendliness in a community will serve as a retention driver for pet-owners and animal lovers. You just have to know your target well and align your offerings with the prospects’ needs.

“As Gen Y loves their pets, savvy apartment developers are including grooming stations, a bark park or doggie run, and even doggie day care with pet walking services,” Anand pointed out. “Veterinary care and training might also be included.”

As to where these Gen-Y-centered apartments should be located, news organization Vocativ has compiled a list of cities where young Americans would feel more at ease in terms of job opportunities, quality of life, green, and general atmosphere.

Vocativ based their ranking on traditional data like average salary, employment rates, and the cost of rent and utilities measured against everyday factors like bike lanes for commuting, low-cost broadband and the availability of good, cheap takeout. What’s more interesting though is that they also included some quirky yet “all-important” lifestyle metrics in the study like the price of a pint of beer and an ounce of high-quality weed, as well as the level of access to live music, coffee shops and vintage clothing stores.

As it turns out, if you’re in your twenties, eco-minded, struggling to make ends meet and looking to put down roots in a city that won’t suppress your dreams, Portland, Austin, San Francisco, Seattle and Minneapolis are your best bets. See the complete ranking here.

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