Anyone with a few million dollars to spare might consider an apartment on sale in
Bahrain, a short drive from the airport and with waterfront views. It’s lushly appointed
— lots of hand-carved blonde wood panelling and marble kitchen-tops — with its 1000sqm-plus of space spread over two floors, with a lift for those who can’t take the stairs. So far, so HNWI-ish.
But what’s perhaps strange about this apartment is that, like your clothes or your car, it comes with a brand: just over a private bridge is the Four Seasons Bahrain Bay Hotel – a property that opened in 2015, with new Private Residences being added later this year. And its management is ready to provide the owner of this apartment — one of 112 of various sizes in the building — with anything it might provide one of its hotel guests, and then some.
These are boom times for what’s known as the branded residence, 30% of which are located in the EMEA region alone, according to the realtor Savills. It’s already home to some 200 such schemes, with at least the same again expected to open by the end of the decade, with the number globally likewise predicted to almost double to well over 1,000 within the next couple of years. Some 30 years ago there were just 15.
Indeed, this has become a frenzied market. It can seem that just about every high-end brand is partnering with a property developer to get in on this act, from Fendi to Versace and Dolce & Gabbana, Bulgari to Missoni and Armani, Bugatti to Bentley, Mercedes-Benz, Porsche and Aston Martin. The latter two have apartment blocks in Miami — after the EMEA currently the second biggest location for these kinds of properties — with Porsche recently having announced plans to open in Bangkok too. According to Savills it’s an idea that’s spreading geographically too: expect on-the-up cities the likes of Muscat, Cairo or Doha, or the coastal beauty of Croatia or Montenegro, to be coming hotspots.
Clearly there’s money to be made here. Developers do not sniff at the potential premium. Partnering with a brand — and a hospitality brand especially — doesn’t just accelerate sales but makes the economics much more sound. He reckons the premium from selling with a brand is up to 35% compared with a development of the same quality and location without it.
That goes for the buyers as well: at these rarefied prices, it’s not about speculation exactly, but a branded residence — especially one at a resort — might well be expected to be not just a safe, but a lucrative bet, should it come to resale or rental: the likes of Four Seasons will even manage your rental for you. Competition for even the biggest penthouses can be intense given the broad social trends driving the market. The very wealthy have always been so-called global citizens, but the pandemic — and maybe more recent political upheavals around the world — have underpinned the idea of remote working. So why not do that from a hotel residence? The whole idea of renting or chartering to save on the hassles of ownership has growing credibility too.
They are also, argues Paco Underhill, founder of the brand research agency Envirosell, cash rich but time poor. If hotel services can get your laundry sorted, or arrange a kid’s birthday party, get you access to special events, just fill your fridge ready for your arrival, or generally take out the stress of home ownership, that’s a serious bonus. And then there’s the fact that, at this moment in history, more people are richer younger — and young people are more likely to be enamoured of hotels. They like the idea that when they leave one hotel, the home they return is, in effect, another hotel.
“The definition of luxury is changing to be less about possessions so much as about experiences and I think that’s where a lot of luxury brands are going,” argues Stefano Saporetti, director of brand diversification for Aston Martin, which is pondering further opportunities in residences, with the likes of Bali and Mykonos in its sights.
“Luxury consumers, especially in the west, might not want to make their luxury consumption so evident to others now, but do still want to live within the eco-system of a brand. There’s that blurring of lines that I think is now allowing a carmaker with a strong design heritage to move from car manufacture to real estate,” he adds. “It’s about proposing something different, at least to high net worth individuals. But it’s also about [a brand like ours] claiming a new space with a new generation of consumers, and [maybe] a new generation that uses social media to show off their lifestyle”.
Of course, these branded residences are typically not primary homes for many owners, but just one of their portfolio, ideal for the business type who has to make regular short stays or perhaps the head of a family working through a long-term contract.
Yet for all that brands generate the kind of weird loyalty that psychologists have been trying to explain since Theodore Veblen and his ideas of “conspicuous consumption” in the late 19th century, isn’t the idea of buying a branded home from a carmaker or a fashion company just a little odd? Arguably a home, after all, is a core expression of one’s individuality, not of the taste of some or other company.
But that, argues Underhill, is the point. Much as with our clothes or our car, a branded residence brings the same kind of reassurance. Not for nothing does some research suggest that that the appeal is stronger among buyers from American and the Middle East, over those from western Europe, which may suggest a divide in aspirations between new and old money.
“Partly what we’re looking at here is the impact of new money, which looks for some reassurance that what’s its buying has value and status. New money just has a very different set of values to old money and maybe feels a sense of vulnerability that branded products – and that now includes homes – reduces. Brands are something they can trust,” he explains.
“Brands also have an advantage when your customer is maybe buying at a distance. If you’re buying a third home on the other side of the world, a brand can be very comforting.”
That reassurance is perhaps especially strong when the brand behind your residence has, well, long experience of actually looking after people in homes-from-home.
Indeed, while Four Seasons can claim to be a latter-day pioneer in this space — it opened its first residences 40 years ago this year, which saw it open in Qatar too — the likes of Fairmont, Raffles, Mandarin Oriental, Ritz-Carlton, Belmond and Accor are all in on the game.
The allure of the hospitality branded residence is less the swankily designed turnkey home, so much as the service around it. You’re not buying just bricks and mortar, but — albeit usually for an additional monthly fee — an on-tap lifestyle package, or ‘serviced living’ as it’s sometimes now called: the use of the hotel amenities, of course, be that gym, pool, restaurant or in some cases beach resort, but also the security, maintenance, community and culture. You have your privacy – even your own lobby and dedicated staff — but also loads of perks. Consequently it’s hotel brands that, so far at least, account for over 80% of branded residence schemes and most of those in the pipeline.
“The hotel sector understands service in the way I’m not sure can be said of a car company, for all that they may make a phenomenal car,” argues Chris Meredith, one-time property developer and now group head of residential business for Four Seasons.
“Of course, you need to provide first class amenities, but anyone with the right capital can do that. And the fundamentals of real estate still apply – you still have to be in the right location, for example. Sure, for a lot of people living at a branded address is a badge of honour. But I think what matters is having a service culture behind it all. We’re offering people the chance to live in a hotel as they stay in one. Think about it that way at the appeal is pretty obvious.
“That matters to developers too,” he adds. “If their competitor is next door with the same budget, same great architect and so on, where can they find that point of difference? When going into a market like the Middle East it becomes very tough to get [prospective buyers] through the door without differentiating yourself in some way.”
Many people salivate over the very idea of a luxury hotel — and for some it’s much more important than where the hotel actually is. But ‘hotel culture’ is a real factor here. Indeed, although the last two decades have seen the branded residence market really take off, this is far from a new idea. There may be a less savoury aspect to the concept of hotel living — at different times and in different places, and right now with Europe’s migration crisis in particular, hotels have become dumping grounds for the newly homeless and rootless. But the flip-side has been the well-to-do seeing hotels as the definitive places to live in.
If, almost a century ago, in 1927, the Sherry Netherland Hotel in Manhattan opened the world’s first mix of apartments and hotel suites, by then the idea of hotel living wasn’t just already well-established, especially in the United States, it came with instant social status and instant access to high society’s movers and shakers. As early as the 1860s the best hotels were not only many a city’s most important landmarks, but synonymous with extreme comfort and creative cooking too — the Waldorf salad, Parker House rolls, Maxwell House coffee and the Manhattan cocktail all originate with hotels. Such was the demand from families that hotels began to install kindergartens and arrange children’s programmes.
“New money has a different set of values to old money, buying branded products (including homes) helps reduce any existing sense of vulnerability”
The rich — and especially the new self-made entrepreneurial class, wealthy through retail, investment and industry — saw hotel living for them and their families as cheaper and easier than maintaining a mansion of their own, and all the more so since good domestic staff were becoming increasingly hard to employ. “A suite at the luxurious Westwood Ho! [hotel] will serve all your housekeeping problems,” as one ad of the time put it. “We’re glad to do your hiring and firing”. They also enjoyed being able to dip into the gregariousness of lobby life but retreat upstairs at any time to carefully screened seclusion. No wonder, in 1912, did Alfred Vanderbilt — then one of the world’s richest men — demolish his family home on New York’s Park Avenue, build a hotel on the spot and then live in the top two floors.
Any number of luminaries have chosen hotels as places not just to stay in but live in for months at a time, or permanently: celebrated wits H.L. Mencken, Dorothy Parker and Oscar Wilde (“this wallpaper will be the death of me. One of us will have to go,” as he quipped of Paris’ Hotel d’Alsace), while Coco Chanel declared “the Ritz is my home”. Ernest Hemingway joked that F. Scott Fitzgerald should bequeath his heart to the New York Plaza. Arthur Miller and Arthur C. Clarke both lived in the city’s venerable Chelsea Hotel, Clarke writing 2001 A Space Odyssey while in residence.
“If you’re paying the mortgage on a home, you can’t ask the bank manger to fetch you a pint,” as the actor — and enthusiastic drinker — Richard Harris explained of his living in The Savoy in London. He would also, near death and being stretchered from the hotel, announce to the gathering crowd that “it was the food”.
Developers concede that branded residences work particularly well in emerging locations. Too off the beaten track and a branded residence struggles to find buyers – though catch that location on the rise and the right brand can alleviate a potential buyer’s doubts; and, although they exist and are in very high demand — something famed Waldorf Astoria aims to tap when, after an epic refurbishment, it opens with 375 residences next year — there’s less need for branded residences in global hubs the likes of New York or London.
Frankly, a luxury apartment made over by a hot interior designer and overlooking Central Park likely needs no brand support for a developer to command a premium, especially if it signs up a third party to provide concierge-like services too. Four Seasons might well argue it could nudge that premium up further still, such is the demand.
Such is the demand that the idea of branded residences has the potential to completely rewire the hotel sector — with residences less an add-on for hotel brands, so much as residences becoming their primary business. Four Seasons is already there: residences now account for 65% of its portfolio and are being regarded as the basis of the company’s future growth. If a developer has a good opportunity in terms of location, their experience, their capitalisation, then Four Seasons is all ears. Among that portfolio is a number of stand-alone residential properties — in London, in Austin — offering hotel services but with no hotel in sight. This all makes sense, not least because it provides better financial security for a sector badly burnt by Covid. Some 70% of luxury hotel developments have some kind of residential component.
Yet what of the non-hospitality brands — do they have future in residences? Can we expect every lifestyle-oriented brand to push into this space? For the time being at least, demand is there too, not least because hospitality brands operate with what are called ‘radius restrictions’, which is to say they can’t open a property too close to each other. That leaves developers looking to other brands that can do.
As one anonymous developer puts it, on the one hand “brands in general are evolving from giving people an attachment to one kind of product to defining an entire lifestyle. But on the other hand there’s a feeling that some brands outside of hospitality are just riding the wave”.
Four Seasons’ Chris Meredith is more certain: he reckons a consolidation is coming, both because there aren’t many markets where there’s room for multiple brands to jostle alongside each other, but also as people experience branded residences and find their expectations aren’t quite being met. In theory you can, he says, put almost any brand up on the front of a building. The only barrier is the (not inconsiderable) construction cost.
“But try selling at an elevated price without an elevated brand,” he offers. “It’s also actually very difficult to service a residential project well and we’re lucky enough to be able to draw on a huge pool of talent. I think a lot of brands [moving into residences] will find they don’t have the resonance that they think they do”.
That’s fighting talk. Which luxury brands check out first perhaps only the concierge can tell, for a decent tip at least.