Investment in Uber-Lux Hotels Ramps Up

Travelers’ increased desire for a unique hotel experience has given way to the uber-lux hotel, a brand-associated luxury property that provides guests with a distinct stay. Teresa Goebel, a partner in Goodwin Procter’s Business Law Department and a member of the Real Estate, REITs & Real Estate Capital Markets Group, is an industry expert on asset and portfolio acquisitions and dispositions, corporate IPOs and M&A transactions, and more. She recently sat down with LODGING to discuss investors’ growing interest in the unconventional hotel.

What is an uber-lux hotel, and why are these types of hotels becoming so popular?
Luxury hotels have existed in the past, but these new uber-lux hotels associate themselves with a brand. For example, [French crystal maker] Baccarat, which opened its first hotel in Manhattan earlier this year. Normally when people think of Baccarat, they think of jewelry, but now the company is starting to create hotel experiences. The Four Seasons has a private jet that will fly guests around the world, and as guests travel they will stay in various Four Seasons hotels. In uber-lux hotels, a guest’s stay becomes focused around the hotel and the experience the hotel can offer. Some offer rooftop pools and bars that are open to the public where guests can meet new and local people in the area they are staying. Uber-lux hotels do away with the idea that the hotel is just a place to sleep and eat.

Why do you think investors are attracted to these types of hotels?
Investors are highly attracted to the rate of return these properties have. Right now, there is a focus on two different types of demographics in the market: Millennials and baby boomers. Millennials are starting to travel more, and they are looking for a unique and fun experience that can’t be found anywhere else. Baby boomers now have more leisure time to travel and are therefore branching out from traditional hotels. Because both of these demographics are interested in uber-lux hotels, investors expect to see growth over the next 10 years.

What is the downside to investing in uber-lux properties?
Well, there are cons with any industry. The hospitality industry is cyclical, so there are going to be points where there is less travel. Investors must plan ahead for bad times. With uber-lux hotels, it is critical that properties stay fresh and updated, so they are going to have to renovate and change things up more often, which requires more investment.

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