Mr. Green

Development & Construction

A Limited-Service Hotel With Unlimited Connections

Critical Elements of Choosing an Environment That Complements Limited-Service Hotel Brands

By Jeff Green, President and CEO, Jeff Green Partners

Co-authored by Jerry Hoffman, President and CEO of Nebraska based Hoffman Strategy Group

In biology, symbiotic mutualism describes a dynamic where two species living in close proximity to one another engage in a mutually beneficial relationship. Iconic examples include the oxpecker-small birds that feed on ticks and other parasites found on large mammals-and the clownfish, which live in and around sea anemones, enjoying the protection afforded by their stinging tentacles while providing the anemone with nutrients, and predator and parasite defense.

The commercial real estate market is filled with a number of similarly structured relationships: mutually beneficial connections that serve to raise interest, drive traffic, provide resources and conveniences for shoppers and guests, and ultimately create a positive feedback loop that has a meaningful and sustained impact on the bottom line-for all parties. Those interactions can exist between places and brands, between different retailers, and, most commonly, between different uses in the same commercial space. The dynamism and appeal of well-conceived and thoughtfully designed mixed-use environments is driving an experiential renaissance across the industry.

For limited service hotels, those relationships-and the dynamics that define them-are critically important. Choosing an environment that complements a limited-service hotel brand can literally make the difference between success and failure. From the contours of the marketplace, to the considerations of co-tenancy, hotel decision-makers should have a keen grasp of the mutually beneficial drivers that make or break limited-service hospitality.

Natural Selection

The first step in the process of understanding what limited-service hotels should be prioritizing in terms of market dynamics and co-tenancy is understanding how and why those symbiotic and mutually beneficial relationships are so important. And to do that, we need to get inside the head of the hotel guest.

From a guest's perspective, the trade-off of the limited service hotel model is typically one of price versus convenience. Guests booking a room in a limited service property are not looking for luxury or in-house dining, but they are looking for a safe, clean, comfortable, and efficient place to stay at a reasonable price point. But if the missing piece of that puzzle, the dining and dynamism that some full-service properties offer, is available right outside the door of the hotel, that can be a game-changer for many guests. Why pay more for culinary and experiential bells and whistles when there's a range of other options available to you?

It is appealing for another reason besides price as well: choice-sometimes lots of it. While a stand-alone full-service hotel may have few if any dining options beyond the bar and grill in the lobby, a limited-service hotel that is part of a social and commercial powerhouse of a project can offer a diverse and extensive list of dining and entertainment possibilities to its guests. Also, fairly or unfairly, there is a perception (particularly among frequent travelers) that hotel restaurants are not of the same caliber as independent dining options. While this is obviously a generalization and hotels are doing what they can to push back against this, it persists, and it gives limited-service hotels yet another reason to appreciate the value that ready access to outside dining can provide. Retail is a true amenity to the hotel guest, and therefore the limited service hotel that positions itself in the right place and project can establish a defining difference compared to its competitors both inside and outside the limited service category that fail to do so effectively.

Community Connection

On the flip side, the hotel guest in a hotel that is connected to or adjacent to retail becomes an additional demand component for that retail. In other words, retail and restaurant brands are in many cases more likely to benefit from the presence of a limited service hotel that does not have a sit-down restaurant integrated into the building.

From the point of view of a community, it is extremely beneficial to have guests venturing outside the confines of the hotel to participate in the economic and social transactions that keep that community alive and flourishing. Whether it is a BBQ restaurant in Williston, North Dakota, or a hip new dining destination in Hyde Park Chicago, the mutually beneficial presence of a limited service hotel is an appealing and potentially lucrative piece of the mixed-use puzzle. As we see clearly demonstrated in markets big and small across the country, a rising tide of potential guests/consumers lifts all boats.

At a time when we hear a great deal of talk about placemaking, it is important to note that limited service hotels can be an essential part of that phenomenon. It has been said that public spaces are defined not by the contours of the built environment, but by the human energy and activity that activates that space. Limited service hotels can be key contributors to that activity, as they play host to a broad swath of ages and demographics: from middle-aged business travelers, to younger Millennials looking for something more experiential. It is interesting to note that, as hotels recognize the importance of those younger travelers to that mixed-use dynamic, the next generation of limited service hotels tend to have very strong common areas and tech-friendly amenities-both designed to appeal to that coveted Millennial demographic.

Specific Considerations

There is a long list of specific factors and considerations that limited-service hotel decision-makers should be taking into account when evaluating potential locations for their property (and considering how to make their property successful in the long term). Among the most important of these are the following:

Entertainment

The entertainment factor looms large, and is playing an increasingly prominent role in many new projects and redevelopment efforts around the country. From luxury movie theaters to concepts like Punchbowl Social, Topgolf and Pinstrikes Bowling, the range of new and expanding entertainment options speaks to the growing popularity of entertainment in a commercial setting. From a hotelier's perspective, a robust slate of entertainment options provide attractive destinations for evening activities that are sure to appeal to guests (and potential guests).

Walkability

When it comes to picking the right place and project, it is not just about looking at the tenant roster: the design and layout of a commercial center is critically important to the prospects of a hotel located within or adjacent to that center. Walkability is hugely important, both from a practical standpoint and from the point of view of encouraging a lively and activated street scene. While a direct connection to a nearby restaurant is not necessary (although some hotels have taken things to the next level by sharing entrances or having a connection to a neighboring restaurant right in the lobby), it is important that guests do not have to work too hard to access these other options. Developments such as Virginia Beach Town Center provide an environment that facilitates and even encourages walking and exploration, and successfully accommodates both a full service Westin and limited service Hilton Garden Inn amidst a sea of retail and restaurant options for shoppers and guests to choose from. As the Virginia Beach Town Center illustrates clearly, full-service hotels service a distinctly different market, and are not generally in competition with their limited service counterparts.

Mixing it Up

Whenever possible, limited service hoteliers should prioritize projects that provide them with the broadest possible mix of options-helping to appeal to different demographics and different interests. Some guests will appreciate the familiarity of The Cheesecake Factory, while others are more likely to be on the lookout for more adventurous and independent dining options. Hotels that can provide both categories will be setting themselves up for success.

Neighborhood Dynamics

Whether it has been carefully designed or has evolved organically over time, every neighborhood has its own unique character and composition that can affect whether or not a hotel is a good fit, and, if so, where that hotel should be located for optimum mutual benefit. There are significant differences between a distinctive urban neighborhood and a more traditional suburban experience. The dining destinations will be different and the options guests have for moving through the space will be very different. Determining the right location for your limited service hotel is key and should complement the current dynamics of the neighborhood.

Additional Drivers

Be aware of any other nearby attraction, facilities or demand drivers that could also serve as a complementary factor in the market demand equation. Hotels positioned near a research campus, a medical center, a university or other education institution, and even a nearby office park will be in position to benefit from-and provide a resource for-those looking to live, work or visit those destinations.

It is a testament to the popularity and success of the limited service hotel model that virtually every major hotel corporation is rolling out new limited service concepts (many of them designed to provide an appealingly hip new option for Millennials). Aloft and Hyatt Place are well established, Best Western has unveiled Glo and Vib, and Tru Hilton has made headlines. Even Motel 6 has an interesting new model for a limited service economy hotel, and Moxy Hotels from Marriott is bringing a successful Millennial-focused European concept to the U.S. market.

Hotel owners and operators with all of these brands will find that they can apply these principles and perspectives to their own operations to ensure that their next investment serves as an anchor to communities of place-and that they and their guests derive maximum benefit from the mutually beneficial social and commercial dynamic that their presence inspires.

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Jerry Hoffman co-authored this article. Mr. Hoffman is President and CEO of Nebraska-based Hoffman Strategy Group, an urban real estate consultant who provides services to publicly-traded and privately-held real estate investment trusts; and owners/developers of shopping malls, centers and commercial properties. He specializes in market and feasibility analysis on the integration of retail, residential and hospitality in urban mixed-use environments. Hoffman's analyses are grounded in a deep understanding of the practical considerations, economic realities and real-world circumstances that drive commercial development and project feasibility. He provides market patterns in terms of master plans; tenant and merchandising mix; highest and best uses; and tenant leasing strategies. Hoffman examines the interaction between real estate and local demographic, psychographic and market forces, and details how various demand components will impact the leasing plan for projects that include everything from multi-million-square foot office parks and regional malls, to public projects and a wide range of retail and mixed-use development opportunities. For more information, visit www.hoffmanstrategygroup.com.

Jeff Green, president and CEO of Jeff Green Partners, combines more than 30 years of retail industry experience to provide comprehensive consulting services to national retailers, developers, shopping centers and health care facilities. Jeff Green Partners was founded in May of 2004 in response to a growing demand for a new level of expert consulting services in the retail real estate marketplace. Jeff Green Partners provides a full spectrum of analytical and interpretive services for property owners and developers. With over 30 years of experience in the real estate industry, Jeff Green has had extensive consulting experience on a wide range of research projects. Mr. Green can be contacted at 602-795-8351 or jgreen@jeffgreenpartners.com Please visit http://jeffgreenpartners.com for more information. Extended Bio...

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