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Covid-19 Upended a Luxury Hotel Truism

Covid-19 Upended a Luxury Hotel Truism

Covid-19 upended a luxury hotel truism in 2020, that wealthy travelers make luxury accommodations impervious to economic downturns.   Those of us involved in the hotels and resorts industry, particularly the luxury segment, well remember the longstanding promoter’s line that luxury hotel investments were among the “least risk” real estate asset classes due to their business being about the rich.

 

As of November 2020, we see that among lodging segments, luxury hotels have been the most dramatically impacted by the pandemic.   Two of the leading luxury destination markets, experienced a decline in occupancy to 37% for the March through August, 2000 reporting period (per a CBRE report).   This is a remarkable result even given the pandemic.

 

Travel restrictions, quarantines, infection rates, and safety concerns have gutted corporate travel and group business of all kinds, adding to how Covid-19 upended a luxury hotel truism in 2020.   Looking ahead, although there is some evidence that the luxury segment rebounded reasonably well after past recessions, there has been no “black swan” economic event similar to this year’s pandemic.   Luxury travel will return, whether for leisure or business, but we may also remember this year as having propelled alternate accommodations – eco resorts, glamping, and the like.

 

Ironically, that staycationing concept and the driving distance lodging distances that are implied, proved to be the winner.  California’s coastal resort segment might have been one exception to the difficulties with luxury travelers, but the additional California policies for shuttering industries (including Covid-19 restrictions for accommodations) was an additional impedance.

 

We will now remember 2020 as the year that exploded this “luxury hotels are the safe investment” myth, perhaps fallacy.   There have always been independent luxury accommodations, since those days when our ancestors traveled the early highways and inns popped up along the way.  But it is the luxury “chain” concept were the “luxury can’t fail line” really took hold.

 

Some History of the Luxury Lodging Segment

 

William B. Johnson helped to propel this promotional line, in the years following his acquisition of the Ritz-Carlton hotel brand in 1983.   Most hoteliers are unaware that part of W.B. Johnson’s legacy is the initial founding of the Hotel Asset Manager’s Association (“HAMA”).   Founding HAMA members were asset managers involved with luxury hotel investments, each of which on behalf of owners deeply unhappy with the annual coupons coming from these assets.

 

Other luxury lodging brands were getting going in those days.  Just before W.B. Johnson, Rosewood Hotels & Resorts was founded by Caroline Rose Hunt in 1979.   And although a somewhat parallel development, between 1981 and 1983 the first of the boutique hotels opened.  These included the first Kimpton Hotel and the first Morgans Hotel (in New York, an Ian Schrager and Steve Rubell creation).

 

The 1980’s saw more luxury chains take hold.  The Mandarin Oriental name was established in 1985 following the merger of Mandarin International Hotels Limited and the holding company of the hotel The Oriental.   Aman Resorts got its start in 1988, the result of Adrian Zecha’s initial interest in building a vacation home in Phuket which became a plan to open a boutique resort with Anil Thadani and others.

 

In the next decade, in 1999, Fairmont Hotels would merge with Canadian Pacific Hotels, creating the truly iconic luxury lodging brand as we know it today.

 

There are certainly predecessors to these chain roll-outs, such as Four Seasons (which took hold following Inn on the Park in 1970), and, RockResorts which dates is origin story to 1956 at Caneel Bay on St. John USVI.   Few of these founders would have believed that a day would come when luxury hotels were the emptiest of hotels, when Covid-19 upended a luxury hotel truism in 2020.

life sciences facilities directory

Life Sciences Real Estate is Hot

Life sciences real estate is hot among property developers and investors, and has emerged as a highly-desired real estate asset class.  “Life Sciences” refers to the booming industry made up of such industries as biotechnology, pharmaceuticals, biomedical devices, genetics and genomics, and research and development (R&D).

 

Life sciences real estate is exceptionally hot among investors, as 2020 heads towards year-end.   The life sciences industry was already a top economic sector as 2019 came to a close, and this Covid-19 pandemic year has only propelled investor interest in the industry.

 

Life sciences facilities are typically clustered in areas with strong university research and teaching programs in the life sciences, and situated in proximity to other facilities and their tenants.  In fact, seven of the top 10 biological science programs are at graduate universities located in the top life sciences clusters of Boston, the San Francisco Bay Area and San Diego.

 

Some of the top life sciences clusters includes the following cities and districts:

 

  • Boston-Cambridge
  • San Francisco bay area
  • San Diego
  • New Jersey
  • Raleigh-Durham
  • Washington, DC – Baltimore
  • New York City greater metro area
  • Philadelphia
  • Los Angeles
  • Chicago

 

 

Life Sciences Real Estate is Hot

Life sciences real estate is a hot real estate asset class among real estate investors and developers.

 

As part of the office and industrial real estate asset class, life sciences properties are a more specialized and generally more expensive facility than typical general-purpose office and industrial properties.    The pairing of university bio-science research with private-sector life sciences companies seeking to leverage such research, is a more fine-tuned version of the well-known Science and Technology Parks that got their start in the 1950’s.

 

For more Information

 

We track the life sciences asset class on behalf of our clients.   We maintain a summary of this tracking online, which is available by clicking here ==>  Life Sciences Facilities Directory & Industry Players

Redevelopment Project Consultants - due diligence consultants

California SB 1120 Would Allow Lot Splits and/or Duplexes on Single Family Lots

AEC’s Growth Monitor

 

UPDATED:  SB 1120 did not pass this session, failing to meet California Senate voting deadline on September 1.

 

SB 1120 is nearing approval in California that would allow existing homeowners in the state to split their lots and built duplexes on each of the resulting subdivided parcels.   Where a lot split is not possible under the law’s guidelines, that homeowner would be able to convert the existing home into a duplex or raze the house and built a new duplex.   SB 1120 is authored by Senate President Pro Tem Toni Atkins (D-San Diego), as part of an effort to bring more control of local land use planning to the state legislature.

 

State control versus local control of land use decisions is a complicated matter in California, related to the lasting protections of Proposition 13, the California Environmental Quality Act, affordable housing, community diversity and equity issues, and local municipal fiscal viability.  And overall there is the push and pull of progressive political agendas and sensibilities of suburbanites who have relied upon their local municipal general plans in shaping how their communities will develop.

 

Of interest to existing homeowners of course, is the open question as to how SB 1120 would affect the quality of life they’ve grown accustomed to (and relied upon), and the value of their properties now situated in eclectic neighborhoods with unpredictable futures.   It could work out well for all involved, but if SB 1120 is approved each municipality will have to do in balancing heights, sun/shade, setbacks, on-street parking, security, and the like, while local policing is likely also in some kind of reformation.

 

Click here to review the full bill as now drafted.

 

© Amazon - Amazon Fresh Woodland Hills

Amazon Fresh Opens in Irvine

AEC’s Consumer Product Monitor – Amazon Fresh opens in Irvine, California

Update October 22, 2020 

 

From prior article, August 27, 2020:

Amazon has announced the opening of its Amazon Fresh grocery store, in Woodland Hills, California.   The all-new operation includes the Amazon Dash Cart which allows in-store customers to skip the checkout line, and a new Alexa feature to assist customers in managing their shopping lists and in-store navigation.

 

The new Amazon grocery format is an Amazon brand extension that propels its tech prowess and further casts a bricks-and-mortar net.   But the Amazon Fresh format is also testimony to the influence of consumer interest in compelling experiential design and location-based entertainment.  The Amazon Fresh experiential design utilizes numerous customer touch-points in the guest experience, each of which reach deep into Amazon’s branded technology.

 

As well, the stores are a textbook example for establishing a personal relationship of brand to consumer, in this case bringing Alexa and Amazon Prime to out-of-home after first establishing the branded tech and services in-home.   For some consumers, finding Alexa and Amazon Prime at their grocery store, may also have even emotional resonance with regard to the brand.

 

The 35,000 SF store at 6245 Topanga Canyon Boulevard (Woodland Hills) is one of several cashier-less grocery stores the company plans to operate in Southern California.  This post is updated to note that the second Amazon Fresh opens in Irvine, California in October.

 

A recent Los Angeles Daily News article provided an excellent overview of the new Amazon offering.

 

GO to Amazon’s announcement.

 

 

Amazon Fresh Opens in Irvine. Image ©Amazon

Shown here, the all-new Amazon Fresh store in Woodland Hills, California, the giant retailer’s first unit nationwide.

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