BENEFITS FOR ALL
For developers and owners, these projects can be a kind of bonanza, assuming the brands are the right fit, the location is high traffic and a variety of demand generators are nearby. Transient business travelers can fill the select-service component during the week to be replaced by transient leisure guests on the weekends, while the long-term stays—typically corporate—take advantage of the residential features of the extended-stay component.
But owners also benefit from the operational savings, which can be considerable. One executive team, rather than two, often is sufficient and the same applies to the engineering, housekeeping and security teams. Likewise, one business center and one fitness center will suffice.
The select-service brand brings not only the appeal of its name to the project, but the food-and-beverage element in the form of a two-meal-a-day or even three-meal-a-day restaurant. For its part, the extended-stay component is likely to offer only a complimentary breakfast and manager’s evening reception midweek.
Not only does the restaurant generate revenue from guests at the select-service hotel, but given that it’s right on the premises, it’s likely to draw a fair share of extended-stay guests looking for dinner. So the owners see their revenues soar.
As a lodging industry sector, select service has thrived in recent years. Analysts predict that occupancy in the segment (also known as upper-midscale) will reach 63.9 percent in 2015, a 1.9-percent increase over 2014. Average daily rate and revenue per available room are both expected to increase year-over-year this year as well, 5.1 percent and 7.1 percent, respectively.
When it comes to profitability, it’s not just owners of dual-brand hotels that find themselves well positioned. After all, the 7.1 percent rise in RevPAR for select-service assets generally beats the 6.6 percent average RevPAR increase that all U.S. hotels can expect to earn this year.
IN THE WORKS
High-profile recent dual-brand projects include the Courtyard and Residence Inn combination at LA Live in downtown Los Angeles. The 174-room Courtyard and 219-suite Residence Inn complement the luxury dual-brand hotel directly across the street that combines a 1,000-room J.W. Marriott and a 123-suite Ritz-Carlton.
The $170-million Courtyard/Residence Inn was developed by American Life and Williams & Dame Development. The partners financed the project with an increasingly popular funding vehicle known as EB-5.
Under development for a 2017 opening, a dual-brand project with two Starwood Hotels & Resorts Worldwide brands (a 145-room Aloft and a 114-suite Element) will be located in the Columbus, Ohio, suburb of Grandview Heights. The hotel is a centerpiece of a mixed-use development that includes residential, retail and office components in addition to lodging.
Columbus-based Indus Hotels is developing the $38-million project, counting on the nearby campus of Ohio State University and local corporate offices to generate demand for guestrooms.
With dual-brand projects gaining widespread acceptance, it didn’t take long for an adventurous developer to ask, “Why not try a tri-brand?” White Lodging did exactly that in downtown Chicago’s River North neighborhood, combining two select-service brands (a 272-room Aloft and a 212-room Hyatt Place) with a limited-service brand (a 180-room Fairfield Inn & Suites by Marriott).
In addition to the extra operational complications of adding a third brand to the mix, White Lodging pushed the envelope in another way. Unlike the Courtyard/Residence Inn and Aloft/Element combinations, where both brands are part of the same hotel company, the Chicago “three pack” brings together three different companies.