Source: The Times of India —
In this issue, we offer two perspectives on hospitality real estate, which has evolved from a specialist asset class to become a key component of many investor portfolios. Here we discuss the growing influence of hospitality in driving ‘mixed use’ real estate developments, as well as the changing environment for financing, with Anne-Marie Auriault, Glion Visiting Lecturer and MD of Pimlico Asset Management.
It’s easy to see why real estate investors have traditionally gravitated towards office buildings. They’re comparatively simple to build and operate; tenants sign up on long leases that pretty much guarantee an income flow; and outside of a natural disaster there’s little that can affect the long-term health of the built asset.
While office remains the dominant real estate market, recent shifts in the way we live and work – ushered in by generational change and accelerated by the pandemic – are leading to a closer convergence with the world of hospitality. The result is that the delivery of experience, as well as ‘gold-standard’ hospitality service, is becoming closely integrated within the traditional real estate model.
It’s a trend that fascinates Anne-Marie Auriault, former Director – Real Estate Advisory at UBS before becoming MD of Pimlico Asset Management, a global private client real estate advisory firm with a primary focus in hotel property.
Since September 2020, Anne-Marie has also brought her considerable expertise to Glion, as Visiting Lecturer to both our BBA specialization in International Hotel Development & Finance, and Master’s in Real Estate, Finance & Hotel Development.
“Many of the new real estate models we are seeing – whether it’s co-living, co-working, bleisure or workcations – sit at the intersection between real estate and hospitality,” she explains. “For these concepts to succeed, you have to incorporate the hospitality service and experiential elements; it’s what today’s typical customers – many of them Gen Zs – demand. At the same time, adding the hospitality element brings incremental revenue, which makes the business model very interesting from a return on investment (ROI) perspective.”
Billionaire buyers
The potential for incremental rewards is attracting some of the biggest names in the alternative investment management community, including Brookfield, which currently has more than $600 billion of assets under management and late last year invested €350m in the European hospitality operator Experimental Group. Additionally, in one of the year’s most significant hospitality transactions, Blackstone and Starwood Capital combined to buy Extended Stay America Inc. for approximately $6 billion.
The major operators, too, are flexing their balance sheet muscles; among them Hyatt Hotels Corporation, which acquired Apple Leisure Group for a reported $2.7 billion.
“For these concepts to succeed, you have to incorporate the hospitality service and experiential elements; it’s what today’s typical customers – many of them Gen Zs – demand. At the same time, adding the hospitality element brings incremental revenue, which makes the business model very interesting from a return on investment (ROI) perspective.” – Anne-Marie Auriault.
We’ve also seen newer brands – like Zoku and The Collective – offering co-living properties in major cities such as Amsterdam and London. “These products appeal to the younger generation, because everything is packaged into a monthly fee, making it easier to budget. And, of course, there is this community element which is crucial to the co-living concept,” says Anne-Marie.
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