There are lots of trends in current hotel development worth covering, but many of them can best to described by analyzing one specific project to see how the developers and owners are applying this trend on the ground and in a practical manner. The one word to wrap your head around for this is ‘flexibility’ wherein developers are looking to adapt room configurations, onsite facilities and ongoing operations to better accommodate a wider variety of guest types while simultaneously value-adding their experiences for greater overall folios.
This flexibility in design, amenities and operational practices often translates into higher ADRs, generating more franchise fees from the uptick in gross revenues and a greater contribution to EBITDA for ownership. From the guest’s perspective, they can feel this uniqueness in design and execution, and whether for leisure or group block they crave it even more nowadays as encapsulated by the term ‘the experience economy’.
Soft brands strive on flexibility. It’s these inherent advantages for multiple stakeholders that have propelled the likes of Autograph (Marriott), Curio (Hilton), MGallery (Accor), Ascend (Choice), Unbound (Hyatt), Vignette (IHG), Premier (Best Western), Tapestry (Hilton), Trademark (Wyndham), Tribute (Marriott), Handwritten (Accor), Joie de Vivre or JdV (Hyatt), Registry (Wyndham) and numerous others. Still, every project has its quirks, and there’s a lot that can be gleaned by understanding how a veteran developer and long-term hotel ownership group approaches a soft brand conversion.
In focus is the Faro Blanco Resort & Yacht Club, a recently opened 124-key Curio Collection property in Marathon, Florida developed by Prime Group as a $14 million conversion and now managed by Shaner Hotel Group. Through an in-depth interview with Heather Strauss, Director of Hotel Asset Management at Prime Group, we were able to distill some powerful lessons that highlight why this resort will stand the test of time and what all developers, owners or managers should note.
Overdevelop for Long-Term Asset Appreciation
The Florida Keys aren’t an easy place to build a hotel. The state of Florida and Monroe County have controlled demand by capping the total number of hotel rooms and vacation rental units. Thus, the incentivize nowadays is to acquire and uplevel into upper-upscale or luxury for greater total revenue off the same number of keys. This is where the multi-decade experience from Prime Group comes into play; they were able to envision this conversion and smoothly navigate the entitlement process to mitigate cost overruns.
Despite the perennial mandate to control costs, a central philosophy of Prime Group founders, Fred Abbo, Chairman, and Larry Abbo, CEO, has always been to position the property in the upper scale of the market sector in order to maintain a higher degree of flexibility to accommodate future industry trends and curtail the need for more frequent renovations. As Venezuelan immigrants, the Abbo family is driven by the desire to steward the local community; they are highly involved, long-term real estate owners who have realized that stable ownership and really caring about a property results in more job security and higher employee retention.
Specifically for Faro Blanco, the principle of upscale proposition today to reduce maintenance and renovation costs tomorrow can be seen in the area planning and scope of amenities – four outdoor pools in total, full spa (with its own separate pool), dedicated wellness room types, yacht club at the Faro Blanco Marina managed by SunTex Marinas with 74 slips accommodating up to 120 boats, preserving the historic Parrish House, 40,000 square feet of indoor and outdoor meeting space with a marina-facing event lawn and an elaborate assortment of activities or experiences.
Even Groups Want Great Onsite Experiences
A megatrend worth dwelling on is the group segment and MICE boom. This is largely a result of the post-pandemic acceptance of hybrid and remote work; without people regularly gathering in the office, they need meeting sites to periodically regroup, whether for a conference or a ‘project sprint’ denoting a period of intensive, collaborative work to reach a specific milestone. In many cases, events act as a team retention, but only if they are highly experiential – fun and dynamic with multiple venues and great F&B throughout.
Two property features at the Faro Blanco Resort illustrate how to engineer a hotel for an increased likelihood of winning over groups and greater total contract value. First, outdoor event spaces are in demand, especially for a climate like Florida. Descendants of the family that actually built the town of Marathon worked on this hotel project to restore the on-premises Parrish House, a two-bedroom historic bungalow with the adjacent Parrish Lawn, both of which will be available for groups. The result is that a group can stay onsite for several days without ever being in the same space twice. And to top it all off, the onsite team has set up a fireworks amenity for events or celebrations that run into the evenings.
Besides dynamic venue spaces and multiple pools so that guests are constantly engaged with their surroundings, room refurbishment and offering more variety in the room configurations was another big emphasis. While many oceanside hotels are set up with ‘garden view’ and the upsold ‘ocean view’ rooms, Prime Group designed the property in a way so that there are now ‘spa view rooms’ facing onto the noise-sequestered spa courtyard and spa pool in addition to upgrades to other rooms into their own ’wellness room’ category.
To give you a sense of what’s in the wellness room type, here are some features:
Relaxing sound machine
Aroma diffusion system
Luxurious robes
Daily turndown service
Access to spa amenities
Views facing the spa courtyard pool
With the PIP budgeted at $14 million, Abbo, Strauss and the rest of the team still had to be smart about where to deploy capex. Taken together, it’s these sorts of in-room experiences combined with enhanced amenities on premises that allow a hotel to grow nightly rates and generate strong returns.
Mixed Use Real Estate Favors Upmarket Soft Brands
The proliferation of soft brands over the last few years is strongly associated with the recent uptick in mixed-use developments that incorporate an amenity-rich hotel because of the synergies for each component within a master plan. Residents or offices can benefit from hospitality services provided by the hotel; retail, restaurants, spa or other businesses get increased foot traffic; and the hotel is easier to get off the ground due to unit sales providing preconstruction capital.
While the Faro Blanco Resort & Yacht Club does not include branded residences, the hotel nonetheless embodies this real estate evolution. As a soft brand repositioning, there’s more flexibility in crafting a unique onsite experience. Specifically, Prime Group was able to redraw the property’s layout so that the new arrival experience brings visitors off the state road onto a long driveaway terminating in a seaside rotunda for access to the yacht club, the main hotel lobby for checking in and the signature restaurant, Lighthouse Kitchen + Bar, which spills out onto the terrace overlooking the eponymous Faro Blanco Lighthouse (‘faro’ is Spanish for lighthouse) and the marina.
Inviting to locals and reassuring to hotel guests, Strauss emphasized that an arrival experience acts as a psychological ‘threshold’ or divide; even if only several hundred feet away from the highway, people feel transported to a more pastoral, tranquil place. Importantly, such experiential thresholds work unconsciously to reinforce guest satisfaction and, ultimately, ADR. No capex table will be able to quantify the justification for the extra cost of creating an incredible arrival experience, and yet it’s something that great developers and designers understand.
Beyond these key onsite amenities, Prime Group also owns the property next door – the 124-room Courtyard Faro Blanco Resort. Being able to now tap into Hilton’s distribution system for the luxury property while the Courtyard accessed Marriott’s was a key determinant in opting for Curio over Autograph, and yet they still have a few shared facilities such as four of the pools in order to distribute costs and generate more throughput. Guests at the Courtyard are also able to partake in the myriad of experiences that have been rolled out with the luxury resort launch, including boat charters, seaplanes, guided snorkelling, sportfishing or tours of the Butterfly Meadow – all of which have frictionless booking and payment rails via Prime Group’s proprietary Experiences platform that was developed in-house.
Beyond the Faro Blanco project, Strauss offered several other examples where mixed-use real estate is adding value to all stakeholders and creating stronger communities. In Fort Lauderdale, the company has a multifamily development with a Courtyard by Marriott at its center that can offer room service and bar cart delivery to condo owners who can also access the hotel’s rooftop pool or rent one of the floating cabanas. In Daytona, Prime Group has partnered with NASCAR to theme a residential project.
A Direct, Decades-Long Relationship with Customers
Many developers are incentivized to have a ‘build it and leave it’ mentality. This isn’t to say that they don’t care about constructing great properties (their reputation depends on it!) but that they often can’t glean critical information about the people their buildings serve by being on the ground with them over the course of years or decades after opening. Being a hands-on owner means that Prime Group has a direct relationship with residents and hotel guests, and that they are able to observe how individual spatial needs change as people progress through the various phases of their lives.
This closeness to the information can give a developer, owner, brand or manager an edge by helping them anticipate where the real estate market is headed, especially if this involves specific design features, mixed use developments with commercial or multifamily units, or, in this case, the envisioning of a soft brand hotel and all that that flexibility provides.
Larry MogelonskyHotel Mogel Consulting Limited
