Brand prototypes under scrutiny to drive value
26 JUNE 2015 7:55 AM
Every square foot matters in today’s high-cost development landscape. Brands are responding with prototypes that yield more revenue than ever before.
REPORT FROM THE U.S.—Judiciously mapping out revenue-generating spaces in new hotels—whether repurposed or new builds—has become an imperative amid increases in inflation and construction costs, sources said.
For owners, offsetting these high expenditures to drive healthy returns on investment is a balancing act that begins with both the structural and interior design phases of each property.
“The stronger an area’s economy, the faster costs go up … and that’s creating a need to maximize the value side of development,” said Suzanne Mellen, senior managing director, consulting and valuation at business consultancy HVS.
Branded hotel companies such as Best Western International and La Quinta Inns & Suites already are appealing to potential owners with new products intended to drive long-term value.
La Quinta’s new Del Sol prototype, which debuted earlier this month in College Station, Texas, was designed to maximize revenue per square foot, with construction costs running about $85,000 per key on a standard 80-room hotel.
Gone are the previous prototype’s two-bedroom suites, which were not yielding the same annual revenue as a single room and which suffered low demand. The new design also includes a gathering space where guests can work, relax or purchase food.
“We worked to come up with a design that is cost-neutral, keeping in mind changes in inflation and construction costs,” said Rajiv Trivedi, executive VP and chief development officer at La Quinta.
Best Western’s new Vib brand, announced last October, was designed as the solution to many an owners’ conundrum: to build a branded or a boutique hotel without breaking the bank.
“If you go with a branded prototype, you have more control over your product as far as what the end result will look like and what it will cost,” Mellen said. “If you go with a boutique product, the costs are unknown and then the question becomes, ‘Can the market support it?’ It’s riskier.”
As a branded lifestyle concept, Vib is the best of both worlds, designed to aggressively drive ROI by trading room size for more rooms at a cost of about $65,000 per key in primary markets, said Ron Pohl, Best Western’s senior VP, brand management and member services.
“Where we make the most money in the hotel business is on the room side. So by reducing the size of a standard 300-square-foot guestroom by 30%, we can get 30% more rooms into the same size building without losing the rate,” Pohl said.
The Vib prototype was designed to accommodate 112 rooms into 40,000 square feet spread between five floors.
Its rooms’ platform beds eliminate the need for box spring purchases and the zip-off pillow-tops for mattresses can be laundered rather than replaced when soiled. Flooring in guest rooms is a composite surface that requires less time to clean, allowing housekeeping to move through the building more quickly.
“Labor is the most expensive part of our business,” Pohl said.
Lobbies as revenue centers
Lobby schematics also were created so that staff can be cross-utilized throughout the space: checking guests in; making a latte at the café; or pouring beer or wine at the lounge, which Pohl is quick to note can have a rooftop location at some properties as the space otherwise will go unused.
“Today’s travelers want to spend more time in public spaces, so we’ve included these additional F&B features because they are highly profitable,” he said.
Adding a coffee kiosk to the lobby might seem like a dicey investment, but Warren Feldman, principal of Rockville, Maryland-based HVS Design, a division of HVS, said otherwise.
“When the option was a $25 breakfast buffet, guests would leave the property. But by giving them the option to buy a cup of coffee and a pastry, the money is spent internally,” he said.
Bars or lounges can be equally as profitable as guests often will meet in the lobby both before and after dinner for drinks, even in urban locations.
“There are times when a revitalized public space can capture guests who are staying with you but who are spending money elsewhere,” Feldman said.
A fireplace also encourages guests to spend time congregating in Vib’s lobbies, as does a 700-square-foot “Zen Zone” and “Gaming Pods” with comfortable seating. Business centers are now part of the lobby, with a dedicated area for computers and printers.
Vib’s first two North American properties are slated to break ground in Miami and Chicago before year-end.
The Del Sol prototype features a similar communal lobby concept with a grab-and-go shop for light meals, ample outlets and check-in “pods” that replace the front desk.