Local and offshore operators set to spark major change in Australian hotel landscape
The Australian hotels sector is set to see a major change as operators increasingly cater to savvy travellers who are looking for a unique connection to the cities they visit.
Karen Wales, Colliers International Director of Hotels, said a new category of hotel, the lifestyle hotel, was on the rise in response to consumer demand for distinctive, character-filled accommodation that was part of a broader, vibrant city precinct.
“The growth of the boutique and lifestyle hotel sector has been as one of the most-watched global hotel trends in recent years,” Ms Wales said. “After decades of standardisation, there is growing attention to more differentiated product and boutique and lifestyle hotels have emerged as a considerable segment of the global hotel market.
“Driven by the chains, lifestyle hotels are the next generation of boutique hotels. They borrow the best elements of boutiques – small, intimate and modern – and throw in advantages only a chain can offer, like loyalty programs, distribution and economies of scale.
“As a result, lifestyle hotels are generally more affordable and accessible than boutique hotels but acknowledge that travellers are not singular in their wants and needs. Each brand has made a targeted shift to cater to guests' specific lifestyles, from tech-savvy millennials to health-conscious athletes.”
Although presentation and design differed, Ms Wales said there were consistent key elements that defined a lifestyle hotel. This included a focus on the experience rather than simply the product or service; a connection with their local environment to leverage what the precinct offers; innovative facilities and new forms of entertainment; and an enhanced online presence and aggressive marketing strategies.
“Australia has a small but growing boutique/lifestyle hotel segment with an established collection of well-known independent hotels primarily located in the major state capitals,” she said. “More recently we have seen the entrance of Asian boutique and lifestyle operators including the Unlisted Collection (Old Clare), Como Hotels from Singapore and Ovolo Hotels from Hong Kong.
“Domestic operators have also been active in this space, with Mantra acquiring the Art Series portfolio of hotels, developed by Melbourne’s Deague family, and Event developing their QT and Atura brands. New boutique/lifestyle chains are also being developed, for example Veriu, Tribe and Little National.”
Gus Moors, Colliers International National Director of Hotels, said Sydney ’s boutique and lifestyle hotel market, whilst still in its infancy, has expanded over the past six years with the opening and repositioning of nine properties and the entry of new lifestyle and soft hotel brands.
“New rooms have been fully absorbed, highlighting the appeal of this product with consumers, particularly the growing Millennial workforce,” Mr Moors said. “RevPAR growth for lifestyle hotels in Sydney has been stronger than for the broader city hotel market, making it an attractive segment for investors.
“In 2017, Sydney’s lifestyle segment achieved a RevPAR index of 1.01 when compared to the city hotel market which includes the Sydney Harbour ‘dress circle’ hotels. Occupancy levels were slightly lower, with an index of 0.96, with many properties located in the city fringe but ADR was higher, with an index of 1.05. ADR is a key driver of investment returns.
“With the evidence pointing to a potential competitive advantage, we are seeing more investors willing to consider lifestyle brands and with many new brands now offered by the major international groups.
“Lifestyle and boutique hotels currently account for around 10% of the national accommodation pipeline but we expect this to grow in the coming years.”
Mr Moors said rapidly gentrifying areas may not be ideal for legacy hotel brands, but were perfect for travellers who wanted to feel more integrated into the fabric of a city and could offer the potential for character-packed buildings.
“Lifestyle hotels are increasingly being used as ‘place makers’, leading to the creation of vibrant accommodation precincts for creatives and tech workers, and a target for visitors,” he said.
Ms Wales said luxury lifestyle and boutique hotels globally had been shown to draw a greater proportion of their revenue from food and beverage with innovative outlets driving additional patronage into hotels, whereas midscale lifestyle brands relied on the local environment to provide this amenity to guests.
“The Australian food and beverage industry has grown strongly in recent years, with an explosion of design-driven spaces which offer genuine customer service and a true point of difference,” she said. “With more people investing in experiences over material goods, consumers are paying to be enticed and taken on a journey.
“Historically Australian hotels have steered away from food and beverage with a tendency to lease out spaces or minimise operations altogether, owing to the complexities of operating in a high labour cost environment.
“Hotel operators will therefore need to adjust business models if they are to compete against an already competitive food and beverage landscape. Outlet design to maximise efficiencies and talent strategies which attract best-in-class staff will be critical if lifestyle hotels are to thrive in Australia.”