AUGUST 2010 |
www.opp.org.uk WORDS | Proskauer Rose
BRANDS
MEDIA & MARKETING Hotels & resorts | 53 Developer profi le What’s in a name?
The last 20 years or so have seen a sea-change in the way overseas property professionals work with the world’s biggest branded hotel operating groups. There has been an explosion in new real estate products for the hotel sector and a structural shift to a completely different way of thinking. James Chapman and Bernice Yung of international lawyers Proskauer Rose explain the power of the brand in the property arena.
t is a real phenomenon. Branded hotel operators around the globe have been branching out from their traditional bread-and-butter business of letting rooms for the night in recent years and getting into bed with the property sector.
I
Against the odds, the world’s top hotel groups “have permitted their carefully cultivated brand identities to be associated with (and a large percentage of their revenues to be driven by) products not previously known to the marketplace,” says a new report out this month from lawyers Proskauer Rose.
“These include various ‘for sale’ real estate products such as branded residences, whole ownership rental products, shared ownership products (e.g. timeshare, fractional and private residence clubs - PRCs) and club or membership products (commonly referred to as destination clubs)” says the report’s authors James Chapman and Bernice Yung.
Hotels have also branched out into serviced apartments … a rental product that is geared to longer-term occupancy rates with varying degrees of amenities. The attraction for many property
agents and developers involved in these schemes is the opportunity to benefi t from working alongside a trusted name and brand. The world’s top hotel brands are instantly recognised and trusted all around the world. There is a “halo-effect.” “Branding entails certain
characteristics,” says Proskauer Rose such as “a company recognised in the market for the delivery of certain services in accordance with established standards.” This brand identity will consist of design and operating standards, as well as names, phrases and business systems
… and it will be associated with the hotel from the pre-opening phase of development right through the end of the contractual period specified in the hotel management or license/ franchise agreement.
When the hotel is built and operated by a third party (as if often the case) the hotel has to pay a percentage of its revenues in return for using the brand … a sort of licence fee.
When a property player comes along and wants to associate a development with one of these global brands and create a “for sale” real estate product,
“What happens when the hotel brand name is withdrawn from the project?”
the project will create new issues, very different from those faced by the traditional hotel model.
“When a brand is associated with a for sale lodging product,” says the report, “the owner of the brand typically charges a fee for the use of its marks in connection with the sale of the product.” This means that the money is paid up-front before operations begin rather than as a share of the room fees once the hotel is underway. “One of the most diffi cult questions raised by these new areas of branding” says Proskauer Rose is when the hotel brand name is withdrawn from the project ... often after a dispute. “The purchaser, having paid a substantial premium for the branded for sale lodging product, can be expected to react quite strongly to the loss of the brand identity” say the lawyers. “Will this result in a lawsuit against the developer as well as the brand?” It’s a good question. And the fi rst
thing to be aware of is what you are getting into. Here is a list of the primary types of “branded” real estate products so that you don’t walk into an open trap:
Branded Residences.
These should be thought of as a true residential real estate. For example, they can be stand-alone condominiums, villas or town-houses. They can even be a free-standing single-family residence. Lines can and do get blurred though. The Ritz-Carlton, for instance, confusingly offers two options: one called “The Residences at the Ritz- Carlton” which is a product typically associated with a traditional hotel; and the other called “The Ritz-Carlton Residences” which is a residential product not typically associated with a hotel.
In essence, and in normal-speak, the former is a hotel room and the latter a real-estate project. The hotel likes this way of doing things because hotel guests and residents share certain services and facilities, even if some are
accessible only by residents. This cross- over marketing “has a powerful impact on charges to be paid by owners of branded residences,” says PR. In other words, there is more money to be made.
“Cross-over marketing has a powerful impact on charges to be paid by the owners.”
“There are numerous branded
residential projects like this underway right now” says PR … all in different stages of planning or development under a broad variety of brand names such as St. Regis, Ritz- Carlton, Mandarin Oriental, Raffles, Banyan Tree, Kempinski, Six Senses and Conrad.
Whole Ownership with a Branded Rental Programme.
“Contrary to branded residences,” says the report, “whole ownership products (i.e. a for sale real estate product in which all of the interests in the unit
Crossing the divide | Associating with a big-name brand needs careful thought
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68