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Burt: lifestyle hotels the 2014 trend

Stephen Burt

Colliers International’s Stephen Burt says 2014 will be the year of lifestyle hotels and office conversions.

Here is his hotel sector forecast, released as part of Colliers International’s 2014 Property Outlook for the year ahead in Australian property

The Rise of Boutique/Lifestyle Brands
The growth of the boutique/lifestyle hotel sector is being driven by patrons looking for alternatives to standard and more traditional accommodation.

There has been a reaction by travellers against large hotels that are much the same, no matter the location. Boutique/lifestyle brands provide more focus on individual hotels and the experience they offer. Unique design features are also a big drawcard for this type of accommodation.

Boutique hotels have more flexibility in terms of brand criteria as they do not have to comply with the standards of large hotel chains which, for example, can specify the size and features of guest rooms. Therefore, developers can more easily convert an existing structure like an office building into a hotel.
Boutique hotels will continue to evolve and are now represented among the major hotel operators.

Apart from conventional high-quality hotel services like round the clock room service, guest parking, rooms for storing valuables, spas, health centres and meeting rooms – the new wave of boutique hotels emphasises modern surrounding, high-tech electronics, works-of-art and a focus on the individual features of the property.

We expect that big hotel chains and smaller boutique brands will open more of these establishments over the next few years.

Office Conversion Opportunities
A shortage of hotel investment opportunities together with the difficulty of new build has resulted in hotel investors looking at the option of converting well located B-grade and lower grade office buildings to hotel accommodation.

There is presently a window of opportunity for office conversion due to hotel values rising relative to lower grade office space, which is suffering from rising vacancy, escalating incentives and obsolete design. The feasibility of office conversion is particularly attractive in Brisbane and Sydney.

Not all office buildings will make good hotel conversions, but key factors include floor height, lift location, light access, and general access.

A good test of the office conversion market will be the NSW Government’s forthcoming offering of two heritage buildings in Bridge Street, Sydney. Both these buildings have great presence and will attract interest from the luxury brands.

This is anticipated to be a good outcome for Sydney’s premium hotel market and will actually provide impetus for growth in average room rates.

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