Famed bespoke luxury resort operators Six Senses and Aman are pivoting as the ‘small is better’ mantra has died. Bill Barnett, managing director, C9 Hotelworks based in Phuket, thinks this is “a profound shift”, based on the strategies of the two bespoke groups
Starting with Six Senses and viewing its ownership, the private equity group Pegasus, money is never meant to sleep and there is clearly mounting pressure to value up the chain. This month marks the operator’s entry into Singapore, with twinned properties the 49-room Duxton and 120-key Maxwell set to address a new segment for the brand.
Looking further afield, in the pipeline is New York City, where a 137-room property will also feature 240 condominium residences.
Branded real estate is a key element in the luxury hotel group’s pipeline.
Six Senses is not the only top-end brand to understand the importance of branded real estate to chains. Look no further than to global leaders like Four Seasons and Ritz-Carlton whose upcoming projects have a significant number of mixed-use and hotel residence developments.
IHG’s recent transaction with Regent was strongly underwritten on the growth strategy of new hotel residential projects and using that as a means to achieve broader brand penetration.
Shifting over to post-Zecha Aman, owner Vladislav Doronin is looking to unlock the group’s value and clearly this also lies in urban branded real estate. A New York hotel with 83 rooms and 20 residences is a key part of the chain’s move from being resort-centric.
What is challenging though is the relegation of the old-school Amanjunkies and the challenge to reinvent the dynamics with a more commercially-oriented approach.
An interesting facet of branded real estate is the licence or royalty fees for hotel residences. In broad terms these average three to five per cent of residential sales at the top end of the luxury tiers for global brands, yet the niche for bespoke players often sees fees at five-10 per cent which, given the high pricing points of the real estate, can equate to enormous revenue.
Yet, looking at a group such as Six Senses, chain value equates long-term revenue stream and this means a greater reliance on scale. It’s doubtful companies can focus on lifestyle, bucket list 20-40 key properties in the middle of nowhere. Aman’s storybook transaction history is testament to that flawed approach.
I recall seeing Alila’s founder Mark Edleson speak on a operators panel about the painful realisation that yes, scale does matter and getting properties up over 100-keys is essential to a financial lifeline for management.