In The Mix
The math is not especially difficult. When a developer considers whether or not to include a hotel in a mixed-use lifestyle development, it simply comes down to this: Success is enhanced by attracting an endless stream of “live-in” customers from the outside, rather than just drawing customers from the immediate region. A development can obviously be more profitable by increasing the customer pool instead of just relying on the limited local population. The Urban Land Institute says “in some markets, 25 to 35 percent of retail sales must come from housing close to shops for the shops to be successful.” It follows that this housing may be in the form of condominiums or apartments, but also in the form of steadily occupied hotels. Therefore, mixed-use lifestyle developments should consider hotels as an important “use” to include.
A well-planned development includes recreation, entertainment, cultural venues, civic activities, residences (as in condominiums), offices, commerce and parks. Hotels add to a development's synergy by introducing around-the-clock elements.
That synergy can be vital to the hotel's success. A diverse development brings in different customers at different times of the year for different events, which can go a long way in evening out the peaks and valleys of a hotel's occupancy rate.
Similarly, a hotel's presence in a development can provide other tenants with a potentially vital flow of out-of-town customers throughout the year. Once people travel to an area for one use of a development (such as the hotel), they are more likely to stay for a longer time if there are other attractive venues, perhaps even returning in the future.
Consider a businessperson who travels with a family to capitalize on the recreational, entertainment and shopping opportunities near the hotel. Or consider the traveler who chooses a certain hotel because of its proximity to other services and venues.
In both cases, the hotel and other tenants benefit from each other. Those other tenants could be simple restaurants and bars, or grandiose large theme parks or other recreational destinations.
DESTINATION IN ITSELF
Corporate travelers can choose a property for its relative centrality or business-meeting features. Pleasure travelers may go to a hotel for the mere joy of getting away and enjoying something as simple as not having to clean up after themselves.
Nonetheless, hoteliers and developers also need to recognize that guests ultimately want more than just a destination. Business travelers need places near a hotel to hold off-site business dinners or buy a fresh shirt while in town. Pleasure travelers are more likely to choose a property with uses for the entire family. These include boutique shopping, cultural venues, cinema and recreational options.
Project developers need to ask, “Where will out-of-towners stay if we entice them to patronize our destination?” Hoteliers need to ask, “What will our business travelers, who have come just for in-hotel meetings, do with their disposable time between functions?”
A hotel that aesthetically invites guests to stroll safely about the development can provide an exciting sense of discovery. A mixed-use locale allows travelers to choose a destination within an action- and fun-filled area.
A hotel also can provide quantifiable tangibles to the overall success of the development. For example, shared parking is a natural fit with daytime parking for office space and parking at night for hotel occupants. The hotel's restaurants and coffee shops can provide additional eating options to residents within the development or other local visitors.
A hotel can promote itself and benefit the development by positioning itself as a central location for an external event. It could be the headquarters for a local sports tournament or the start/end point of a benefit marathon. The added visibility and people — both locals and out-of-towners — will be a boon to the hotel and the rest of the development.
WHAT KIND OF PROPERTY?
Once developers conclude that a hotel should be in the mix of their development, they need to determine what type of hotel to construct. A facility with rooms in a traditional arrangement (sleeping area and bathroom) may be the right choice, unless, say, the local market is already saturated with such properties. In that case, an extended-stay property, which could be relatively rare locally, may be the better choice. A larger hotel with meeting and convention facilities may be the best option, as those additional facilities do more than just boost sleeping-room sales. These properties can host events that draw visitors into both the hotel and surrounding development, while also serving as meeting and conference space for local businesses.
Developers should consider placing a new hotel near a transportation hub. An airport hotel is an obvious example, but any active vehicular hub can be a good spot. Such a location can draw people who do not have or want access to personal transportation while traveling.
In the end, developers need to make their final decisions about what kind of property to build and where to place it based on a well-researched understanding of the demographics of those likely to patronize the entire development. Will it be mostly business travelers? Families? Seniors? Or what combination? The answers should drive the decision about what type of property to build. The more diverse a mixed-use development is, the greater diversity and number of customers it draws.
In many cases, hotels that are integrally planned and built into mixed-use lifestyle developments prove to be a wise use of upfront capital for developers and investors. They will find their lifestyle developments, where in one place visitors can experience shopping, dining and entertainment, can be even more successful when they include a place to sleep.
Doug Thimm is a vice president of MHTN Architects, Inc., in Salt Lake City. He has been with MHTN Architects for 15 years and brings 28 years experience practicing architecture. He is the director of MHTN's Resort and Mixed-Use Design Studio and can be reached at Doug.firstname.lastname@example.org.
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