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Hotel-Retail mixed-use: hospitality industry trend for 2013.

17 December 2012

A wave of “hotel-retail mixed-use” is coming. It may mark the rebirth of bricks and mortar.

Put on the back burner by the Great Recession, the hotel-retail mixed-use development is back in play. Virtually every major shopping center and mall owner is exploring whether it makes sense to add a hotel component to existing projects, and are checking feasibility for new ones. Some new hotel-retail projects are underway, and many others are in the planning stage.
What’s behind this trend is a simple and powerful driver: The right hotel added to the right project can boost retail sales by 20-40%! And the retail shopping can boost hotel RevPAR by a comparable amount over the competitive set.

My partner, Guy Maisnik, and I were asked by Globe St to write a guest column for their publication on the hotel-retail trend. It is reprinted below, with permission.


Hotel-Retail Mixed-Use: The rebirth of bricks and mortar

by
Jim Butler and Guy Maisnik

Many major shopping center and mall owners were in various stages of adding hotels to their projects in 2006 and 2007. But when Lehman Brothers filed bankruptcy on September 15, 2008, virtually all new projects were put in cold storage. The retail industry — like many other sectors — hunkered down in survival mode.

Over the past 5 years, the retail sector has improved substantially, along with the economy. We are now at the dawning of a renaissance in retail, which includes adding a hotel mixed-use component to shopping centers and malls. An important part of this revival is rediscovering and remembering the compelling analyses and technology that has been largely set aside or forgotten in the wake of the Great Recession.

Adding the right hotel component to retail, in a well-structured hotel-retail project, can provide a powerful competitive advantages for both the retail and the hotel components. The competitive nature of retail demands that owners and managers implement strategies that entice customers to their locations for a unique shopping experience where they can enjoy the latest consumer trends. Competition for consumer shopping is not only with other retailers but extends to internet sellers.

Just before the Great Recession, our hospitality and real estate lawyers were working with one of the nation’s largest retail center owner-developers, which had studied the hotel-retail synergies very carefully.

Compelling examples and studies

Just before the Great Recession, our hospitality and real estate lawyers were working with one of the nation’s largest retail center owner-developers, which had studied the hotel-retail synergies very carefully.

The client had 6 major projects and master planned communities where it could study the impact of hotels on the shopping centers and malls. Some of the projects included the Ritz-Carlton Tysons Corner Galleria, Westin Dallas Galleria, and Ritz-Carlton Water Tower Place. Its findings were compelling. After a multi-year study, the company concluded that its 200 property portfolio was “capable of supporting 80 near term hotel developments ranging from extended stay to select and full service product.” They found that a hotel adjacent to retail results in a substantial boost to both the hotel and retail components — the increase in revenues ranged from 20-40%!

They found that a hotel adjacent to retail results in a substantial boost to both the hotel and retail components — the increase in revenues ranged from 20-40%!

It’s difficult to ascertain exactly what accounts for this revenue increase. But according to the U.S. Travel Association, more than 3 out of every 4 (77%) U.S. domestic trips are for leisure, and for many years, “shopping” has been the #1 or #2 travel activity for leisure travelers (others in the top 5 are visiting relatives, visiting friends, sightseeing, and beaches). And a hotel-retail center creates more excitement, synergy, and a greater sense of destination, then “just going to the mall.”

A major hotel-retail trend is underway

The revival of hotel-retail mixed use is underway. In appropriate projects, this renaissance offers powerful enhancement for competition with other retail sites as well as internet sellers. It may be a significant factor in revival of brick and mortar retail. In the next few months we will see some of the biggest names in the industry announce hotel-retail projects, both adding a hotel component to existing shopping centers and malls, and new ground up construction. For both hotel and retail owners and operators, it’s time to take a look at this trend.

A final caution

Retailers should understand that “hotels are different”. The hospitality industry has its own norms, customs, players and practices. Developers need to get experienced hotel advisors to guide them through the exploration and execution of any hotel strategies.

This article first appeared in the December 17, 2013 edition of Globe St (www.globestreet.com). Click here to see the original.


This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $60 billion of hotel transactions and have developed innovative solutions to help investors be successful in bidding for hotel acquisitions, and helping investors and lenders to unlock value from troubled hotel transactions. Who’s your hotel lawyer?


Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,300 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or +1 (310) 201-3526.

Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” and you will see why.

Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.