_Branded Residences Report | The future outlook

What are the potential risks and rewards for developers, brands and buyers as it does so? And in an age of high customer expectation and the on-demand economy, how will branded residences meaningfully differentiate themselves from the competition?

Expansive demand

Branded residences, until the 1980s a scarce commodity, can now be found in almost every  major city and major holiday destination. Having extended its reach, the sector is growing exponentially. The major hotel brands dominate and expand. However, smaller hotel groups are entering the market and, recently, luxury brands outside hospitality have lent their names to new developments. This adds a new dimension to the concept, one with an emphasis on pure association rather than a proven service record.

The sector’s growth has been such that, in some areas, the development type has almost become ubiquitous. They were once “the exception rather than the rule,” says Chris Graham, an expert on branded residences, “but look at Thailand today, where almost 40% of all new developments are now branded.” “Marriott International sees demand for co-located residential product for the luxury and upper upscale tiers gaining traction” says Daniel von Barloewen of Marriott International. “The company expects to expand its branded residential portfolio by more than 70% in the next four years.”

From a consumer perspective, the power  of brand identification is only growing, says James Snelgar, head of business development at YOO. “The world is becoming increasingly design conscious and brand aware. We talk about appealing to ‘a tribe’ of like-minded people, people who want to live and socialise with other people with whom they share things in common,” he says.

As well as reaching into new territories, hotel developers are attempting to expand their customer base. “We are seeing an increasing demand now for a more affordable offer catering for the millennials,” says Snelgar. Resort developers in particular, says Muirden, “are looking at the behaviour of millennial parents and what they want: they really want a good, well rounded experience for their kids.”

Different offerings

Increasingly, operators are looking at experiences, rather than just services or facilities, as a way to tempt buyers. “The hospitality industry has gone very much from the tangible to the emotional. It used to be “we can offer more: bigger pool, bigger gym etc. Those features have pretty much become a given. There are only so many gold taps and marble you can put into a residence,” says Graham. Now, “it’s about creating memories and an emotional link: bringing in a celebrity chef or cocktail maker, arranging a cycle tour,” he adds. “The focus” echoes Snelgar, “is now becoming more experience orientated: for example cooking, climbing or diving.”

“As well as diversifying the activities they offer, resorts will need to differentiate themselves: they’ll need to be more eco-focused in design and operation. Branded residences will have to be far more holistic, with beautiful gardens and a wellness focus, as well as being more multi-generational,” says Muriel Muirden of WATG.

With a crowded market providing the impetus to differentiate, developers are also aligning with renowned brands for more and more aspects of any residential project. The model originated with hotels lending their name to developments. The next stage saw the arrival of designers – such as Philippe Starck, who co-founded YOO. “Following the designers have been the ‘starchitects’: Daniel Libeskind, Frank Gehry, Norman Foster and César Pelli among them. In some cases, as developers strive to raise the bar you can now end up with two or three brands on a single development. The Armani residences in Miami has Giorgio Armani doing the interiors, and Pelli doing the exterior,” says Graham.  These brands are being pushed forward as part of a scheme’s identity, rather than just a component part of the physical product.

Positive outlook

The growth of the sector will not be without potential pitfalls. There is a danger that in democratising the concept of branded residences, developers also risk devaluing it. The concept has always been aspirational. Now hotel companies are offering brands at a 4-star level also.  That risk may be unlikely to stall developers, however, with industry commentators saying that it is unlikely that we are going to move to a world where suddenly buyers are no longer concerned with the offerings of branded residences. The market will undoubtedly get more competitive, and there will be a few developers and brands squeezed out as a result, but that’s unlikely to stop them trying to capitalise on a market which still offers substantial benefits. The crucial question, as Graham puts it, is this: “the bar gets raised every year – more facilities, more experience, more tech: if everyone’s doing that, how are you going to to offer something different?”