Developers Jump on the AC Hotels Brand Bandwagon

With the opening of the first AC Hotel by Marriott in North America under its belt in New Orleans, the brand is moving quickly toward a possible 150 to 200 hotels in the not too distant future, according to Toni Stoeckl, vice president of lifestyle brands for Marriott. And there seems to be a sizable pool of developers eager to jump on the brand bandwagon, perceiving a product with strong appeal to a new generation of travelers.

Marriott entered a joint venture in 2011 to develop the brand globally. At that time, there were 90 AC properties in Europe, promising a European-influenced lifestyle hotel that focused on design. Just ahead, according to Stoeckl, are openings in Kansas City in early 2015, as well as Miami and Washington, D.C., in the spring. “These are all in locations where we want to be,” he said. “For this brand, it’s really important to be in the heart of it all because that is where the consumer wants to be.”

AC Hotels is looking ahead to the shape of the industry in 10 years, Stoeckl said, when younger travelers want to live and do business in cities—and will seek a hotel that fits their sensibilities. The pipeline is a mix of new builds and conversions.

Marriott is leveraging a lot of the owners it has worked with before, Stoeckl said. “We have close to 60 approved deals, all in the Americas, with a few in Latin America. We expect the first opening outside the U.S. sometime next year.” Beyond the Americas, Stoeckl said nothing is confirmed, but Marriott is closely monitoring where else it can take the brand, including Asia.

Stoeckl described AC Hotels as a new segment that bumps up against full service without being full service. “It is hard to compare with any existing brand. For developers, we offer a combination of the strong engines of Marriott—with the ability to attract new customers. We feel we can connect with the customer at the emotional level. They can rave about their experience, and that’s what we would love to see happen. And if you make a personal connection to a brand, you are willing to pay more for it.”

The developer of the first AC in the United States—as well as two others with more projects in the works—told Lodging the company perceives a tremendous potential for the brand because it fills a gap in the marketplace with a fresh concept. “This is a high-end lifestyle product that caters to everybody because it’s not really funky,” said Mehul Patel, CEO of NewcrestImage, which developed AC Hotel New Orleans Bourbon/French Quarter Area. “It has appeal to business travelers and families as well as millennials.”

The fact that New Orleans has so much European history lent even more appeal to the project, Patel said. ”We thought it would really fit in New Orleans, and since we have such a strong relationship with Marriott, we ended up being the pioneer for the brand here.” The New Orleans property is in the Old New Orleans Cotton Exchange building, which, Patel said, “added to the historical flavor.”

In the weeks since opening, Patel said the hotel has been receiving positive reviews. It’s currently ranked No. 28 on TripAdvisor out of 154 hotels in the city. “The hotel creates a welcoming culture that showcases New Orleans,” he said.

NewcrestImage is developing another AC in Bricktown (Oklahoma City), and the company will be looking elsewhere for opportunities, Patel said. “This is a proven product that we don’t have to go through a learning curve.”

At Marcus Hotels & Resorts, COO Joe Khairallah said the company is converting a Four Points a block from Michigan Avenue in Chicago to an AC Hotel. “The catalyst was Marriott,” Khairallah said. “We own and manage The Cornhusker, a Marriott Hotel in Lincoln, Neb., and they brought up AC in our conversations. We felt that AC is the kind of lifestyle hotel that is among the fastest growing sectors in the industry. Some of our colleagues went to Spain, met the team there, and visited hotels. We didn’t really have anything in that category and wanted to move in that direction.

“As opposed to a lot of lifestyle product that is on the luxury side, this is on the limited-service side and should provide an excellent ROI,” Khairallah continued. “The emphasis on beverage and other attributes of the brand should be a home run for Chicago because it’s a hip city where this will fit. We are doing this conversion right and spending $11.5 million on the redo.”

Ben Brunt, principal and executive vice president for acquisitions and development for Noble Investment Group, said the company has two AC projects in the works—one a conversion of an independent hotel in Kansas City opening in early 2015; and the other a new build at Phipps Plaza, an upscale shopping center in Atlanta, which is scheduled to open in spring of 2016.

Brunt said his company is impressed by AC and another designed-focused brand from Marriott called Moxy. Noble is developing a Moxy in New Orleans, which may be the first to open in the United States. “We have a strong interest in the Marriott brands and reservations system and have made good investments through that relationship,” Brunt said. “These new brands are opportunities to do Marriotts in markets where there may not be opportunities for existing brands.”

Noble likes the opportunity to be first to market with a new brand so it can help shape the customer’s mindset, Brunt added. “We think it makes sense in urban, pedestrian-oriented settings to have hotels like AC and Moxy. We also like the fact that we will be catering to transient business and leisure travelers, with limited group facilities.

“We will still seek opportunities with Starwood, Hyatt, Hilton, and IHG,” Brunt said, “but these new brands represent another arrow in our quiver.”