Heading toward the fourth quarter of the year, the luxury and lifestyle lodging segment continues to perform strongly. Consequently, the positive performance picture is giving owners, developers and investors the confidence to green light an increasing number of new construction luxury and lifestyle projects, not only in the U.S., but globally.
Luxury projects tend to be expensive to build, especially when you factor in a spa and multiple food and beverage outlets. That means financing can be tricky to secure, even in today’s strong post-recession environment. Luxury projects also require prime locations, which tend to be in short supply in many luxury destinations, and face high barriers to entry, including zoning restrictions.
Adding to the Luxury Pipeline
Nonetheless, according to Lodging Econometrics, at the end of the second quarter of the year, there were 42 luxury projects in the U.S. construction pipeline, accounting for 11,785 rooms. To put these numbers in context, there were 460 luxury properties open and operating at the end of the quarter, representing 150,848 rooms. So the 42 projects in the various stages of the pipeline equal close to 10 percent of the current luxury inventory.
Like many major multibrand hotel companies, Starwood Hotels & Resorts Worldwide is heavily invested in the luxury and lifestyle segment. Three of its 10 brands (St. Regis Hotels & Resorts, W Hotels and Luxury Collection) have played squarely in the space for a number of years and a fourth brand (Sheraton Hotels & Resorts) this year launched an upper-upscale sub-brand (Sheraton Grand), comprised of hotels it considers “exceptional” and “standouts.”
In North America, the brands have growing distribution in Mexico and Canada in addition to the core U.S. market. W Hotels, for example, has hotels in Mexico City and Montreal with two more coming in Mexico in two resort destinations: Punta Mita and Riviera Maya. St. Regis, likewise, has urban hotels and resorts in Mexico City and Punta Mita, respectively. Luxury Collection, however, has the largest distribution in Mexico: six properties, all resorts, including four in the Yucatan and two in Campeche.
Given Starwood’s ongoing commitment to the luxury segment, it’s not surprising that each of the four brands unveiled development news worldwide in the past seven weeks.
Certainly, Marriott International, Hilton Worldwide and other multibrand companies have targeted Asia and particularly China as a luxury destination, but Starwood has also been aggressive in the region.
In late July, both Luxury Collection and St. Regis announced news in China: Luxury Collection opened the 158-room Grand Mansion in Nanjing, known as one of China’s four great ancient cities. For its part, St. Regis reported the signing of an agreement to open a 242-room hotel in the coastal city of Qingdao. Set to open in 2020, the hotel will be a component in a 70-story, mixed-use project that will be the city’s tallest tower.
In mid-August, the hip and fashionable W Hotel chain unveiled plans for a third hotel in Los Angeles. Also part of a mixed-use development, the 250-room W Los Angeles Downtown will join W properties in West Beverly Hills and Hollywood in 2019.
Sheraton’s New Sub-Brand
With 430 hotels in 75 countries, Sheraton is both Starwood’s largest and most global brand. In creating the Sheraton Grand sub-brand, Starwood sought to highlight the best of the hotels for their location, design and level of service. In mid-August, the company unveiled the names of the first 10. Locations range from Scotland to India to Dubai.
None are in North America. But that is likely to be addressed when the names of 40 more Grands are unveiled by the end of the year. An additional 50 will be chosen by early 2017.