Legal, design and brand experts at the 2019 Hotel Opportunities Latin America conference shared insights on how to make the most out of a hotel project that’s part of a mixed-used development.
MIAMI—The prevalence of mixed-use developments has grown drastically in recent years, according to a panel of experts speaking at the 2019 Hotel Opportunities Latin America conference.
With hotel owners drawn by the built-in demand drivers and ability to share amenities with other real estate projects, panelists warned developers to do their homework on any hotel projects and not assume the benefits of mixed use will outweigh potential obstacles.
Here are some of the takeaways from the “Hot topics in mixed use” session:
Define ownership boundaries clearly
Few hotel developers go into a project without a plan for an exit, and that should be just as true with mixed use. But that exit can be drastically more complicated if there isn’t a clear line of demarcation between ownership of a hotel and the other real estate asset classes present, such as residential or retail, said Richard Davis, co-chair of the hospitality group for Greenberg Traurig.
“The whole idea is to separate the uses (within the project) so they are legally identifiable and conveyable,” he said.
Structuring each piece separately allows developers to sell or finance those parts in different ways while “controlling the entire project through legal means and the rights embedded in a master set of rules,” he said.
Davis added that those rules should always clearly lay out who is liable for what. If there’s a pool that has joint access from a hotel and residences, it should be clearly defined who gets to use the pool, who maintains it and if there is compensation from one entity to another.
Design to be walkable and intuitive
To get people to flow from one part of a mixed-use development to another, it’s key to make it simple and easy for them, said James Freeman, co-founder and principal of FSC Architects.
“In any good hotel or resort design, guest experience should really be the driving thing,” he said. “And that’s a pedestrian experience. It’s not just about making a pleasant place to sit and dine. There has to be a simple way for things to flow and it has to be obvious.”
Freeman noted it’s easy for developers and designers to “overcomplicate the layout” but they must keep in mind that people are apt to “take the path of least resistance.”
“If you’re not careful, especially with the retail and (food-and-beverage) components, you’ll lose customers and tenants,” he said. “We find spaces that will just never lease because retailers know they will just never work.”
The hotel should work as a stand-alone project
Nicolas Martinez, senior management of development in Mexico for Hilton, said hotel projects that are pieces of a mixed-use development have to pencil out on their own without developers making broad assumptions about how other real estate will impact performance.
“The developer needs to think more about the hotel, and not just its footprint,” he said. “It has to from the very beginning be conceived as a whole in terms of feasibility, financials and the design process.”
He said he can see why mixed-use developments are enticing, though, given their “synergies and financial benefits.”
Dana Jacobsohn, SVP of mixed-use development for Marriott International, said she always cautions developers to look at each aspect of the project individually.
“I think it’s important that each piece of a mixed-used project is feasible on its own,” she said. “We’ve had developers come saying they want to build a 50-room hotel with 300 residences and a rental program. We won’t do that project because that 50-room hotel won’t be efficient or successful in the long term.”