I will start out with the answer and then break aspects of the decision process apart. The answer is, "It depends."
There are many factors - who is your competition, how much real estate are you trying to sell, what can you afford to pay in terms of real estate fees to the brand (yes, the brand gets a fee on each real estate sale for attaching their name to the property), is the brand's client right for your destination/property, can you afford to build and operate a hotel and residences that conform to the brand's standards, can you even get the hotel financed, are you looking to sell the hotel at a later date or will it stay in your portfolio and lastly, can the end-users afford the rates charged by the brand? All good questions that must be answered by the developer and the brand that will ultimately be chosen.
Hospitality brands are like most other brands. They offer us a perception of quality, fashion, being different than the masses (status), leading to increased perceived value, increased usage of the product, and increased emotional attachment. This strong attachment develops brand loyalty and the ability for the brand to charge a premium over similar products. Every developer wants the above benefits when looking for a hotel operator/management company. The question we are asking is, are the ultimate benefits worth it?
Some of the wealthiest families from the United States and around the world own hotel brands - example - Hilton/Hilton; Pritzker/Hyatt. So, there is very good money in hotels, but their fortunes were made decades ago, not in these times. The industry has changed, many new brands have emerged from the US, Canada, Mexico, Europe and Asia. The advent of the boutique hotel brand (Morgan's, KOR Hotel, Ian Schraeger) has also added some much-needed flavor to the industry. And, now you build the hotel and the brand just manages it for a fee + a share of revenue. And, the contracts span decades. The risk is all the developer's. Still interested?
OK, now that you have agreed on terms with your chosen brand, the real negotiating begins. Agreement after agreement to be negotiated point by point. It is very tedious but extremely important, as the brand will take every advantage. Once done and you have recovered from that hangover, they now want a hand in all hotel, amenity and residential designs, marketing programs, sales programs, pr, you name it they want to have approval rights. No matter if that is the best thing for your property or not. Don't get me wrong, everyone has the same goal in mind, however the developer and hotel brand often go at the goal in opposite directions as each has different interests along the way. Still interested?
If so, now you get to start selling real estate and building the hotel. When you sell real estate, don't forget to price in another 3-7% to cover brand fees. To put that in perspective, it adds $3-7million dollars onto every $100 million in sales, and most properties sell-out value today are estimated between $300 million and $1 billion dollars. That means $9 million on the low end and $70 million on the top end. Still interested? I know a few hotel brands, which are interested.
Long story short, much work needs to go into the decision to pick a brand - more than just the clientele it can bring. The decision is the developer’s as to the brand, and the buyers will ultimately decide if the product is worth the cost.
Let me know if you need help selecting a brand.
www.resorttopia.com
There are many factors - who is your competition, how much real estate are you trying to sell, what can you afford to pay in terms of real estate fees to the brand (yes, the brand gets a fee on each real estate sale for attaching their name to the property), is the brand's client right for your destination/property, can you afford to build and operate a hotel and residences that conform to the brand's standards, can you even get the hotel financed, are you looking to sell the hotel at a later date or will it stay in your portfolio and lastly, can the end-users afford the rates charged by the brand? All good questions that must be answered by the developer and the brand that will ultimately be chosen.
Hospitality brands are like most other brands. They offer us a perception of quality, fashion, being different than the masses (status), leading to increased perceived value, increased usage of the product, and increased emotional attachment. This strong attachment develops brand loyalty and the ability for the brand to charge a premium over similar products. Every developer wants the above benefits when looking for a hotel operator/management company. The question we are asking is, are the ultimate benefits worth it?
Some of the wealthiest families from the United States and around the world own hotel brands - example - Hilton/Hilton; Pritzker/Hyatt. So, there is very good money in hotels, but their fortunes were made decades ago, not in these times. The industry has changed, many new brands have emerged from the US, Canada, Mexico, Europe and Asia. The advent of the boutique hotel brand (Morgan's, KOR Hotel, Ian Schraeger) has also added some much-needed flavor to the industry. And, now you build the hotel and the brand just manages it for a fee + a share of revenue. And, the contracts span decades. The risk is all the developer's. Still interested?
OK, now that you have agreed on terms with your chosen brand, the real negotiating begins. Agreement after agreement to be negotiated point by point. It is very tedious but extremely important, as the brand will take every advantage. Once done and you have recovered from that hangover, they now want a hand in all hotel, amenity and residential designs, marketing programs, sales programs, pr, you name it they want to have approval rights. No matter if that is the best thing for your property or not. Don't get me wrong, everyone has the same goal in mind, however the developer and hotel brand often go at the goal in opposite directions as each has different interests along the way. Still interested?
If so, now you get to start selling real estate and building the hotel. When you sell real estate, don't forget to price in another 3-7% to cover brand fees. To put that in perspective, it adds $3-7million dollars onto every $100 million in sales, and most properties sell-out value today are estimated between $300 million and $1 billion dollars. That means $9 million on the low end and $70 million on the top end. Still interested? I know a few hotel brands, which are interested.
Long story short, much work needs to go into the decision to pick a brand - more than just the clientele it can bring. The decision is the developer’s as to the brand, and the buyers will ultimately decide if the product is worth the cost.
Let me know if you need help selecting a brand.
www.resorttopia.com
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