Airbnb and other companies operating in the sharing economy are spearheading a major cultural change that is also having a significant effect on the hotel market. This change has led to the emergence of new and exciting accommodation concepts and investment products. Broadly speaking, for many of its users Airbnb is about adventure, individuality and the opportunity to experience a new city in an authentic way. The promise of a unique experience is proving popular, especially among the younger generation.
At the same time, the imposition of standards regarding safety and hygiene, for example, as well as calls for proper taxation are limiting the growth of sharing-economy platforms. Some cities and communities are also cracking down on the spread of Airbnb, with many arguing that it exacerbates the shortage of housing in the area. This cultural change is having a noticeable effect on the hotel industry, as evidenced by a significant increase in the number of lifestyle hotels. Huge growth in the serviced apartments sector is another related factor.
The lifestyle hotel segment is characterised by its strong emphasis on distinctive styles in terms of furnishings and overall design.
This style is often individual, while at the same time following an overarching theme. In the best examples, design flair is combined with a range of amenities that are made possible by digitisation. Some of the most recognisable lifestyle hotel brands in Europe, with sustained success that makes them attractive to investors with a long-term horizon, are citizenM, Moxy by Marriott, 25hours and Ruby. In the US, Union Investment has secured a new Thompson Hotel in Washington, DC, which is also positioned in the lifestyle segment.
The 12,000m2 boutique hotel is scheduled to open at the beginning of 2020 and is expected to offer 225 guest rooms. It will reflect the unique atmosphere of its surroundings in the Navy Yards district, a former industrial port area.
The lifestyle hotel concept translates equally well to the budget and mid-scale categories. This is demonstrated by well-established, largely standardised brands such as Holiday Inn, Motel One and ibis. These companies are increasingly moving towards designing their accommodation in line with a particular theme or capturing the typical atmosphere of a hotel's location in order to personalise and enrich the guest experience. Having said this, modern lifestyle concepts are not restricted to new builds. An existing hotel property in Union Investment's portfolio, the Porter Hotel in Portland, Oregon, recently partly reinvented itself and now features a bolder look based on a consistent design concept.
The growth in serviced apartments is partly driven by the innovative, flexiblespace concepts and furnishings now being supplied by the interiors industry. Examples of these smart-space concepts include Vision Apartments and Adina Apartment Hotels.
It is also interesting to note that large hotel chains have started rolling out their serviced apartment concepts in Europe, such as Hyatt with its Hyatt House brand, and Marriott with its Residence Inn and Element brands. The introduction of such concepts has thus far been a resounding success. Generally, investors will find it worthwhile to closely monitor this development and add this growth segment to their existing hotel portfolio, where appropriate.
Investors should take advantage of the diverse new offerings in the hospitality market. The new opportunities described above can be regarded as proof that the sharing economy - with Airbnb as the best-known example - has challenged the hotel industry, and the sector is now responding with exciting new concepts.
Ultimately, all market players are currently benefitting from growing mobility and guests' increasing interest in a distinctive hotel experience. This opens up new opportunities for investors, which should be carefully considered on a case-by- case basis according to established financial criteria.