Branded Residences Sector More Diversified Than Ever Before

New research from Savills shows new brands are entering the sector and how hoteliers can benefit

The branded residences sector has experienced an extraordinary decade of growth with the number of branded residences increasing by 170%.

2020, in spite of the pandemic and wider economic situation, is set to be another record year with over 100 schemes opening.

The pipeline is more diverse and exciting than ever. A new wave of brands are emerging from the art, design, culinary and celebrity worlds including the likes of Nobu, Tonino Lamborghini and Pharrell Williams.

Non-hotel brands are a growing segment of the market. Over the past 10 years, the growth of such schemes has outpaced hoteliers, rising from 11% of the total market in 2010 to 16% in 2020. Eleven new non-hotelier brands are expected to enter the market by 2025.

However, hotel brands still dominate and account for 84% of current schemes and 88% of the pipeline.  Marriott, whose brands include W, The Ritz-Carlton and St Regis, is by far the leader in the sector and is set to remain so

Riyan Itani, head of international development consultancy, Savills, said, “We are seeing hoteliers bringing more of their brands into the sector. The diversified income stream that the branded sector provides is more valuable than ever as the hospitality sector faces its challenges.

“In the longer term, the sector could also benefit from the behavioural changes we are seeing. More flexible working practices could mean that owners make greater use of what are often second properties. There may also be increased demand to rent hotel-branded residences from tourists seeking self-contained accommodation yet with the amenities that a hotel offers.”

Paul Tostevin, director, Savills World Research, said, “This mixture of emerging and established prime markets illustrates the ever-widening reach of the sector today. Now a proven formula, brands are confident entering new territories.”

When it comes to price, branded residences achieve a premium, on average, of 31% over equivalent non-branded properties, although this figure can vary significantly by location.  The highest brand premiums are achieved in the emerging markets. Recently established markets such as Bangkok, Beijing and Phuket achieve premiums between 40% and 45%, comparatively higher than more mature markets.

Truly emerging markets which few branded properties can command prices that are double to non-branded stock as demonstrated by Almaty and Belgrade with premiums of 150% and 120% respectively.