Floating hotels riding high-performance wave
 
Floating hotels riding high-performance wave
19 NOVEMBER 2014 7:03 AM
Maritime hotels have carved a niche in some regions, but it’s unlikely these types of hotels will flood the market.
GLOBAL REPORT—Different concepts of maritime hotels have been floated around the world for decades. Some have ended up dead in the water, but others seem to flourish, indicating that a lucrative niche can be carved, hospitality experts said.  
 
Existing floating hotel accommodations anchored on the water have their place in the market, but they are far and few in between and usually either converted or boutique. 
 
A moveable hybrid yacht-hotel concept has emerged at the dawn of the millennium with enough success to encourage developer Sunborn Hotels to expand its existing fleet of three to more than 10 within five years.  
 
“The financial crisis put a stop to expansion, but today is the right time to look for new partners, private and government, to invest together in what up to now has been a family business drawing on some bank finance,” said Hans Niemi, executive director at Sunborn Hotels.
 
Filippo Sona, director and head of hotels in the MENA region at Colliers International, isn’t convinced that simply anchoring cruise ships couldn’t replicate the model.
 
Niemi said the company’s Yacht Hotels are different, purpose-built to emulate the experience of being on a super yacht with a bespoke service, featuring all the elements of a typical land-based hotel. 
 
The nearly 120-meter (394-foot) yacht-hotels also are designed to remain in one place. They have approximately 180 guestrooms and suites—more like a hotel than a cabin, with rooms featuring their own terraces. The appeal is that the concept affords those who can’t buy or charter a super yacht the prestige of staying in one, Niemi said. 
 
“We have different models, what we call a 4-star deluxe, which can be moved via propulsion with a cargo vessel from Asia to Europe within 20 days, and 5-star products with their own engine; they can be employed as standalone hotels or as an extension of an existing resort,” Niemi said. 
 
John Podaras, partner at Hotel Development Resources, said the product is similar to a Sheraton- or Marriott-branded hotel with Four Seasons service.
“Which makes more sense than the super yacht epithet, because the market has to be in the $500 to $600 per night rather than the $1 million per week that the true super yacht costs,” he said.
 
Sunborn charges about the same rates as comparable hotels on land. “Whilst we enter the market below average room rates, in Gibraltar, for example we tripled them within eight months, similar to 5-star land hotels,” Niemi said, adding its “water” products tend to fetch a higher return on investment than its land hotels. 
 
The cost
The yacht-hotel isn’t a cheap concept, Niemi said. “You need a large capital outlay, sometimes complicated by the need for hybrid—moveable versus fixed asset—financing.” 
 
He said his company could develop cheaper than others at $130-million-plus, thanks to several decades of expertise standing with one foot on land as hoteliers and the other in the water as ship builders, which he believes would also keep competition at bay. 
 
“There have been several attempts to copy, but it is far too expensive to order one of these from a typical shipyard,” Niemi said. 
 
Podaras pointed to the development challenges, such as the need to reach agreements with the local authorities to allow mooring, supply of services and utilities, adhering to land and maritime regulations and so on at a reasonable cost.
 
“The thing is that despite not having to pay for the land, the concept is inherently more expensive. In addition to the accommodation, you also need to allow for a propulsion unit and everything that come with. Your building envelope sits in an aggressive environment that requires accelerated maintenance,” he added. 
 
While Niemi isn’t concerned about the mooring fees, alluding to them being low once a city wants the product, he said the legwork to explain the hybrid model costs considerable time and money. 
 
“Its more difficult to open than a normal hotel as local authorities can’t put it in a box in terms of local red tape, but maritime regulations once licensed apply internationally, and we only need to use propulsion or a crew when we move it, which happens rarely,” he said.  
 
Performance and ideal locations
Sona believes, although complementary, this product has a strategic competitive advantage in urban cities over other hotels, as it could give the customer the look and feel of an escape from the city.  
 
According to Niemi, the concept would never replace traditional hotels, but in a direct waterfront situation some investors might be swayed by its performance. 
 
“We find we do better in (revenue per available room), in London as much as 40% higher than comparable hotels in the market, as well as occupancy,” he said. 
 
He said frequent guests include: international leisure travelers and weekend residents, often for weddings, in its Gibraltar location; and corporate and convention clients particularly in its London Docklands location close to the exhibition center.
 
“Imagine there are a million hotels around the world, but there are only two of these—a competitive advantage,” Niemi said, adding he isn’t concerned about the novelty wearing off. 
 
“In 10 years operating in Finland, it hasn’t. On the contrary there has been a constant increase in occupancy and rates,” he said. However, he added there would be some sort of critical mass reached one day, for it to stay niche and successful. 
 
Locations where the model could thrive include: those with scarcity of land; building restrictions due to heritage or the environment; countries with political or economic risks; regions prone to natural disasters, as they could be moved quickly either temporarily or permanently. 
 
Podaras believes the yacht-hotel concept is a viable high-quality product, allowing for some economy of scale with its 130 to 190 keys.
 
“The sexy superstructure really helps. It will work well in locations that experience severe shortages of hotel products. This may be during specific events, which also takes away the risk of being stuck with excess hotel inventory after the event, which then takes years to be absorbed or simply locations where, they’ve run out of suitable space,” he said. 
 
However, the concept can’t be rolled out everywhere. Land prices need to be high to make sense in a prime metropolitan city, such as Hong Kong, Tokyo, London or New York City, according to Niemi. 
 
“If you take it to Antwerp (Belgium) it doesn’t necessarily work because you can build a hotel on the waterfront anyways,” he said.
 
Niemi cites Gibraltar as the perfect example where trade restrictions, and scarcity of land, played into company executives’ hands. 
 
“Land is very scarce and expensive, (Ministry of Defence) regulations mean you can’t build high, and you have a trade barrier with Spain, the perfect location for us. We placed the product there very quickly with government support,” he said, adding it’s a safe and flexible investment. 
 
“Time is money; you can get a yacht-hotel delivered within three months. And let’s say you reach your 80% occupancy within five years, you can replace it with a bigger one and again you don’t have to build for two years,” he said. 
 
While Sunborn is preparing a permanent home for its next yacht-hotel in Barcelona, it would need to move hotels more often when it targets mega-event candidates in the Gulf, Qatar or Dubai. 
 
“We hope that we’re going to build a product now that will be free for these kinds of strategic locations,” said Niemi, who is also speaking to officials in Abu Dhabi. 
 
Future competition here could come in the form of luxury floating hotels, not in a yacht but building form, which could be dragged into place as a finished product. Its developer Admares also promotes land scarcity and the temporary need concept Qatar has reportedly shown an interest in. 
 

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  • Anonymous January 8, 2015 4:31 AM

    Terrific article

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