Commercial Leases: Making the Most of Retail Space

By Andrew Glincher Office Managing Partner, Nixon Peabody LLP | October 28, 2008

Most managers are very conscious of maintaining the correct balance for their property. But what are the best techniques for achieving that?

The process starts with consideration of how to create a mix of shops and services that complements the needs of the hotel - to serve its clients and to create an image in the outside world. But they should also complement each other. For example, a large property may want to have more than one clothing retailer, but you would want them to specialize in different types of fashions. You might want to have multiple restaurants, but it might be a problem if more than one served Chinese food.

There are more subtle issues along these lines as well. What if, for example, a hair and nail salon in the hotel starts offering massages - thus competing with the massage services offered by your spa?

The way of dealing with issues like these is during the initial lease negotiations. Property managers should have as much control as possible and should negotiate use clauses that are very precise and try to anticipate future issues that may arise. Obviously, a lease for a retailer should dictate that the space be used only for retail purposes. But it should go further than that.

From the property's point of view, you would want to specify everything from the types of merchandise that will be sold to the types of displays the store contains. A restaurant lease would state the types of food that could be served. A spa or salon lease would include a list of services that would be permitted there.

Just as the management of the hotel is going to want to be as restrictive as possible, the tenant is going to want as much flexibility as possible. A restaurant owner will want the ability to change from a seafood restaurant to a steakhouse if the former is not successful. A high-end retailer will want the ability to offer lower priced merchandise if he finds a demand for that. How far you can go depends on the lease negotiations - how badly do you want that tenant and how badly does the tenant want to be at your location?

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Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.