6 factors to consider when developing an adaptive-reuse project

Cultivating a travel destination is no simple feat, and hoteliers looking to capitalize on an emerging market should do so with a few tips in mind.
When planning an adaptive-reuse project, developers need to consider a multitude of factors, including how they are going to present the property's "story." Photo credit: Getty Images/kasto80

Adaptive-reuse hospitality projects in global cities such as London, Paris, Rome and New York have increased in recent years. Examples include The Ned in London, the Ace Hotel Downtown Los Angeles and the Wythe Hotel in Brooklyn. Whether former bank buildings, theaters, industrial warehouses or other underutilized commercial spaces, adapting them for hotel use can offer real estate developers and investors an opportunity to reimagine the story of these properties in a financially accretive manner. Done right, a rich, multilayered story can unfold, built on the foundation of a space’s intriguing historical features and transformed through a thoughtful adaptation and redesign that appeals to modern urban travelers. 

Creating and telling that story requires collaboration across a wide variety of disciplines—architecture, design, art, branding, sustainability, technology, legal, finance, construction, historical preservation and planning. When these varied threads are woven together into a coherent, compelling story, adaptive-reuse hospitality projects can offer real estate investors outsized investment returns. 

At a high level, one must first answer key questions to lay the groundwork for a compelling hospitality adaptive reuse story:

  • What is the history of the building, why is it interesting and valuable and how can it become part of a new identity as a hotel?
  • What is the next chapter in the building’s story? What are the key physical elements and ideas necessary to tell this new chapter?
  • How, through art, design, architecture and the guest experience, will guests understand the identity and story of the hotel?

Once these high-level questions have been explored and some initial answers discovered, the stakeholders need to zoom in on myriad other factors to determine whether a compelling new story can be shaped for a successful adaptive-reuse hospitality project. Importantly, these additional factors are not mutually exclusive and, in many cases, will need to be considered together—this puts a premium on harnessing effective cross-disciplinary collaboration and communication as the new story is developed. 

The factors include the following:

1. Defining the Master Story and Identity of the Project

This critical process should be orchestrated by a chief storyteller, an often-overlooked consultant. The primary role of the storyteller is to create compelling, authentic stories for the property while effectively calibrating and weaving together input from a number of creative disciplines, including architecture, design, historical preservation and art curation. The storyteller’s role, working closely with the developer and investors early in the process (even before or at least concurrently with the development of the design concept), is to take the building’s history, its previous role in the city or its neighborhood and the hotel’s differentiation strategy and develop a new story for the building that will guide the efforts of the wider creative team as the story is further written through the design, development, construction and operational phases of the project. The creative team will focus on sharpening the story and sketching out a path to effectively distill the central theme(s) and how that story can be told from a physical and operational standpoint. The storyteller will work with the developer and investors throughout the process to help ensure the story is told coherently and consistently through the various work streams of the creative team.

2. Stress Testing the Master Story: Planning

From a planning perspective (including historical preservation and zoning requirements), can the space be adapted in a manner that will be supported by local authorities and other key constituents such as historical preservation groups and the general public? These factors should be assessed early on because delays caused by planning objections or other public resistance can increase overall investment costs and jeopardize the ability to deliver on the essence of the new story.  The legal team, working alongside the creative team, will play a central role at this stage translating the central story in a manner that respects and fulfills the requirements of the local planning/zoning authorities. This is a delicate process because a variety of factors need to be balanced, including historical preservation, cost management and the operational demands of a hotel.

3. Stress Testing the Master Story: Infrastructure and Sustainability

In parallel with the planning considerations noted above, building engineers and related technical experts should be engaged to assess the quality and caliber of the building’s infrastructure, including the mechanical, electrical, plumbing and technological components, to determine if, and to what extent, the infrastructure would need to be upgraded, replaced and/or adapted to the new hospitality use. Needless to say, the infrastructure demands for a thriving, modern hospitality operation are far different from other commercial uses, particularly for historically significant buildings. The level of required infrastructure investment will be a key stage gate in determining whether the new story can be told in a financially accretive manner. The requirements to re-gear a historical building’s infrastructure may prove to be a threshold item that cannot be cost-effectively overcome. Hence, this item should receive early and comprehensive focus. In addition, the building engineers and related technical experts should assess how the existing space measures up from a sustainability perspective—can existing materials be recycled and/or up-cycled? What measures would be required to bring the space into harmony with modern sustainability expectations without unduly sacrificing the historical underpinnings of the existing space? Beyond the increased focus from governments and the general public on sustainability matters, a thoughtful and creative approach on these issues can drive operational efficiencies and, therefore, enhance the financial returns from the project. 

4. Defining the Key Components of the Story to Drive Financial Performance

What is the optimal number of guestrooms/suites and food-and-beverage outlets? What additional components should be included—spa, fitness center, retail facilities, meeting/ballroom space and/or other components such as residential or co-working space? The answers to these questions will be informed by many factors, including the story being told, the physical realities of the space and the financial expectations of the developer and investors. Once the thinking on these items has advanced, the core question becomes: can these components be integrated into the space in a thoughtful, compelling and cost-effective manner?

5. Assessing Whether a Brand and/or Operator is Necessary to Bring the Story to Life to Guests and Visitors

Should a third-party operator and/or brand be a part of the story? A critical judgment that should (a) be made early on in the process and (b) consider, among other things, the in-house operating expertise and capabilities of the developer, the alignment between the new story being created and the ethos of the potential brand and/or operator and whether the hotel operator/brand is well positioned to drive operational performance at a level that meets/exceeds investment expectations. Not surprisingly, potential hotel operators and brands will have a strong desire to participate in the development of the story on a variety of levels, including creative design, operations and financial. This involvement should be welcomed early in the process because it will assist all stakeholders in making an assessment regarding alignment between the expectations of the developer/investors and any potential hotel operators and/or brands. Furthermore, an early understanding of the financial expectations of any hotel operator and/or brand (both from a fee and overall profitability standpoint) will flesh out whether the involvement of these parties is likely to support the overall financial underwriting of the project.

6. Preparing to Deliver the Story

It is crucial to plan for how the story will be told to guests and visitors because they typically do not expect a hotel to tell a story—a key differentiating factor of a hospitality adaptive-reuse project. Beyond the physical attributes, the story can be further amplified through written materials (such as books, pamphlets, guides and plaques), videos, guided tours or through interactions with the hotel team that tell the story or describe the art, design or other important information relevant to understanding the story. This should be planned in detail well in advance of the hotel opening as an integral part of the guest experience. In addition to the onsite storytelling, the story of the hotel to the offsite audience also should be carefully considered and executed, including press releases, social media, digital/print marketing and sales collateral.  

The design, development, financial and operational elements of hospitality adaptive-reuse projects demand thoughtful consideration from all stakeholders, particularly early in the process when significant investment decisions are made. The process is fluid and multifaceted. If approached with creativity, discipline and rigor by a collaborative, cross-disciplinary team, an adaptive-reuse hospitality project can tell a great new story and unlock strong financial performance.

Matthew G. Pohlman is a partner at Goodwin Procter. Alex Toledano serves as president of Visto Images.