Incorporating high-end branded residences within luxury hotel developments has been a growing hospitality trend for more than two decades. This partnership between hospitality and residential created a seamless way to transition guests from staying to owning, thereby further expanding a hotel company’s brand loyalty while improving its overall bottom line and return on investment.
Luxury hotel brands such as Marriott International’s Ritz-Carlton and St. Regis, along with Four Seasons, have been the pioneers and leaders of the branded residential sector. For example, the Four Seasons Residences in Miami debuted in 2003 with a combination of privately owned condo-hotel units, condominium residences and penthouses. Similarly, in 2006, the St. Regis New York introduced its Residence Club along with its midtown hotel.
The surge in wealthy consumers seeking experiential luxury with an integration of lifestyle and technology has now caught the attention of luxury consumer brands eager to find new verticals. While upscale hotels have long housed luxury retail, the two sectors are beginning to leverage the benefits of cross marketing between their respective client bases. Bulgari and Marriott were the first to identify this opportunity when they launched their first hotel together in 2001. Over the past five years, there has been an acceleration of these high-profile, luxury consumer brands entering the hospitality and residential markets.
Currently, consumer brands that are leading the trend are automobile and fashion companies. Aston Martin, Bugatti, Lamborghini, Mercedes-Benz and Porsche have all launched projects in recent years, while fashion companies such as Armani, Louis Vuitton, Bvlgari, Versace, Fendi and Missoni have projects either open or in their development pipelines. For these luxury consumer brands, expanding into the hospitality and residential markets provides a natural path in which to grow and diversify their income streams.
Luxury by Location
On a geographical basis, JLL has observed that many projects are concentrated in two markets: Miami and Dubai. Both markets share similar characteristics including a saturation of well-known existing luxury hotel brands, a deep base of affluent consumers and leading real estate investment markets. Luxury consumer brands bring their unique design, amenities and service offerings to differentiate themselves from traditional luxury hotel brands.
With luxury consumer brands entering the space with vast levels of customer experience and reputation, it is critical that their hospitality and residential developments ensure excellence around the guest experience. Their new verticals come with the inherent risk of falling short of expectations and not delivering on the brand’s promises. Poor quality and execution can quickly erode brand loyalty. Therefore, it’s key to have an experienced operating platform or partner to manage the properties with the brand experience that consumers have come to expect.
Some significant projects currently underway include:
- Baccarat, a leading jewelry and fashion brand, has partnered with SH Hotels & Resorts on the development of three major developments in Miami, New York and Dubai scheduled for delivery in 2006, 2025 and 2026, respectively.
- Bentley Automotive has partnered with developer Binghatti Properties for a 100-story residence in Dubai. Delivery is slated for 2028.
- Cavalli, a leading fashion and jewelry brand, has partnered with DAMAC Properties for a 12-story tower in the Dubai marina. Delivery is slated for 2025.
- Mercedes-Benz has partnered with Binghatti Properties on the development of a new state-of-the-art luxury residential tower at the Meydan Hotel in Dubai, scheduled for delivery in 2026.
Looking Ahead
Hotel brands will continue to stay true to their core focus and remain dedicated to guest accommodations and experiences. But at the same time, hotel companies are adding value through these new ventures that enrich the guest experience and build loyalty.
For luxury consumer brands, moving into the hospitality and residential industries will allow them to enhance offerings for their customers and attract future luxury clientele. It’s about extending the brand experience and enhancing it at every touchpoint of the customer journey. Going forward, it will be critical that new consumer brand companies that enter the hospitality and residential spaces either establish platforms or develop partnerships to deliver the brand experience that consumers have come to expect.
This article was originally published in the October edition of Hotel Management magazine. Subscribe here.