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Are these ‘entry’ level?

In the first six-plus months of 2013, our industry has held six major conferences (ALIS, IHIF, CHIC, AHIC, CHRIS/HOLA, NYU) on three continents, covering almost all global markets. These events have attracted — as they always do — the leading investment firms, development groups, operating companies and hotel brands in search of the next (big) deal. 

What’s the direction of our industry? Who has the (cheap) capital to move mountains? How quickly will things improve? Are we ever going to see pre-crisis numbers again?

While continued and emphatic focus remains to be placed on emerging global markets with incredible surges in middle-class populations and upswings in social mobility and demographic statistical bases, the “niche” focus seems to have shifted to generational guest capture. This idea is based on the creation/launch of complementary brands that not only create vertical price-point/product-segment integration (e.g., luxury, upper-upscale, upscale, focused service, economy/budget, extended stay, etc.), but also focus on the particular guest dynamics inherent in fundamental shifts in traveler/consumer behavior.

We have seen the launch of several new brands and/or concept/product offerings that have started to push the envelope of the “next generation” of traveler. I may have been a fan of “Star Trek,” am a firm believer in the X Prize trials and have immense respect for almost everything being undertaken by Sir Richard Branson, but space tourism is not where I’m headed today.

My focus of inquiry and investigation, opportunistically determinable, remains on Generation Y, a.k.a. the Millennial Generation. In my post back in January, the concept of an entry-level/starter brand for hotel brand/management companies was on the precipice of becoming a global fad. Since then, I have come across around 10 properties/concepts that have either been recently launched or have received such incredible press coverage to be considered “in the now” even if they were opened previously.

In real estate and banking terms, the term “entry level” has come to describe almost all roles that come prior to being named a vice president/director (depending on the organizational structure of the firm). Does this suggest that all hotel brands that fall below the upper-upscale segment would be considered “entry level”?

As it could probably be assumed, many of these “new” brands and/or concepts/products have been created/developed by teams of individuals with experience in the “lifestyle” segment. Here’s my list of innovative concepts/products currently in the market:

Focused service

  • citizenM Hotels (citizen/KRC Capital)
  • Moxy Hotels (Marriott International)
  • Public (Ian Schrager)
  • The Redbury (SBE/Larry Levy)
  • Tommie (Commune Hotels/Thompson Hotels & Resorts)

Hostels

  • The Bowery House (Z/K Hospitality)
  • Freehand Miami (Sydell Group)
  • Generator (Patron Capital)

Pod/micro hotels

  • Pod Hotels 39 & 51 (BD Hotels)
  • Yotel (Yo! Group)

Adaptive reuse/infrastructure hotels

  • First Container (Collision Works)
  • Desparkhotel (Andreas Strauss)
  • TuboHotel (T3ARC)

Based on recent investment trends seeking to capitalize on the growing travel demographic in search of products that are priced between traditional hostels and midscale hotels, I believe the above list of properties/categories will be the focus of emerging concepts in the near- to medium-term planning horizon.

In their own way, each category/product reflects a stripped down service model of more luxurious lifestyle products, representing a niche product that caters to the young, style-conscious budget traveler.

Additionally, the required capital deployment to push these concepts forward combined with the reduced operating costs create exceptionally opportunistic strategies for investment firms and operating companies to join forces and be the next “business disruptors” of our industry.

Let’s see what the rest of us have up our proverbial sleeves …

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