The
hospitality company that leans heavily into lifestyle and F&B is leveraging
its strengths with a new Apartments by Marriott Bonvoy project in Savannah,
Georgia. We dig into the details of the deal.
SAVANNAH, Georgia — In the
blurring of the lines between hospitality and residential, especially in the
luxury and lifestyle segment, Sage Hospitality Group thinks it’s found a new
concept that could be core to its future growth.
On Tuesday, the Denver-based
company announced it was partnering with New York City and Charleston, South Carolina-based Tidal
Real Estate Partners to add the 157-key The Ann Savannah to Sage’s portfolio of
lifestyle properties. The property in Savannah, Georgia, will be one of the first Apartments by
Marriott Bonvoy to open in the U.S. when the conversion is finished in early
2025. Marriott announced the concept in January when it opened its first
property in Puerto Rico and other projects are underway in Detroit and St.
Louis, Missouri as well as in Italy and Saudi Arabia.
Dean Stambules, managing
director of growth and investments at Sage Hospitality, said Sage thinks of the
property not as a short-term rental (which has a cap in Savannah) or a branded
residence. He considers it more of a lifestyle extended-stay property.
“It’s really more hotel in the
way that we would describe it to the market or our guests,” he said. “This
apartment-style living accommodation with fully furnished units, we think in
certain markets, particularly Savannah… This is a compelling product.”
Sage has worked with Tidal Real
Estate Partners before (it was an original investor in the Perry Lane Hotel, a
Luxury Collection Hotel project in Savannah which opened in 2018. Tidal later
sold its stake, but Sage is still involved in the project) and was happy to
work with the company again on this project.
The project, which was formerly
called the Ann Street Lofts, was previously used for student housing for SCAD
(Savannah College of Art and Design) and was vacated in July. That left the
building effectively vacant, which Stambules said created a unique opportunity
to make some “modest” capital improvements and recapitalize the project under
the lens of an apartment hotel versus just apartments.
Sage Hospitality has some
experience with this concept because its Catbird property in Denver is zoned
for apartments and a hotel.
“Over the last couple of years,
we’re starting to see that first trend of lifestyle in extended-stay and we
feel like Catbird was a little bit ahead of the trend,” Stambules said. “[This
project] is a really compelling next step for us, where we feel like we know
the operating model and understand the revenue management strategy. But now
have the power of Marriott Bonvoy behind us as well, which is exciting.”
Stambules said Sage isn’t
anticipating as many long-term stays as the company has at the Catbird in
Denver (he anticipates a three-to-four-day average length of stay for The Ann
Savannah with an ADR in the $275-325 range). He thinks most of its business will
be under that 30-day mark, with some executive relocations, small group
components and SMERF (social, military, education, religious and fraternal)
business, as well.
As for the joint venture, Sage
declined to speak to the exact ownership percentage, but Stambules said Sage is
usually no more than a 50-50 partner and often takes a minority (25% to 30%)
position on transactions, in addition to being involved with the operation and
management of the hotel.
Converting to a
hotel
Stambules said the conversion
process with Marriott has been a great collaborative process and is going
smoothly. He said Sage is in the process of ordering FF&E and is hoping for
a January opening.
“This project worked well
because… we were able to turn over the whole project at once versus having to
wait for tenants to leave or leases not to renew, which made it a clean
transition for us,” he said.
There are some nuances from
converting traditional apartments to a hotel (things like housekeeping closets
and storage on floors). Still, he said that because the project was originally
conceived as a hotel, things like trash and linen shoots already existed.
A big part of the conversion is
happening on the ground level, including adding a lobby experience and turning
a vacant corner retail spot into a standalone restaurant.
Adding F&B
Stambules said the restaurant is
additive overall, especially with Sage’s extensive F&B experience. He
anticipates 50% of its business coming from outside the hotel, especially
because of the existing foot traffic from SCAD.
We’re approaching that as a standalone F&B operation… and taking that mindset of independent food and beverage, but having that be part of the guest experience, which creates a real halo in the lifestyle space.
Dean Stambules
“I would say the buildout of the
food and beverage has probably been where we’ve put the most emphasis during
the conversation,” he said. “We’re approaching that as a
standalone F&B operation… and taking that mindset of independent food and
beverage, but having that be part of the guest experience, which creates a real halo
in the lifestyle space.”
The approach, which Stambules
said required a waiver from Marriott because it isn’t core to the Apartments by
Marriott brand, will also operate as a standalone restaurant in terms of its
labor model but still be involved in the guest experience.
“We felt it was really important
to activate that as part of our whole guest experience and provide a light
bites cafe in the morning and then have a Happy Hour type of cocktail lounge in
the evening.”
But he said Sage will operate
the restaurant as if it were a lease. “We think we have a great
outside capture opportunity.”
Stambules said there are
built-in synergies with having another hotel in Savannah, but he thinks the
model works with or without that because of the lean staffing structure
Marriott requires for that brand (a general manager and 24/7 front desk
staffing plus housekeeping on a weekly basis or at checkout).
“On the capital side, we’ve been
focused on OS&E type of stuff, like providing extra linens, extra towels
and having the rooms fully furnished with those extra operating supplies, so to
speak, because it will be a much more efficient labor model,” he said.
More in the
pipeline?
Stambules said he would like to
see more of these apartment-hotel deals in Sage’s future, whether with Marriott
or as an independent.
We think this is a core to our growth strategy. We’re seeing more and more of these luxury brands announce residential partnerships.
Dean Stambules
“We think this is a core to our growth strategy.
We’re seeing more and more of these luxury brands announce residential
partnerships,” he said. “This is a really compelling business line for
the guest and the consumer today, but where we are as an industry has been a
little behind in making these [concepts] feel a little bit more lifestyle or
unique.”
Stambules said one of the things
he loves about the Apartments by Marriott product is its ability to serve as a
soft brand that can be unique to the community. “In these neighborhoods that are
maybe very trendy and hip and cool but don’t support the fundamentals of
traditional hotel development, this is maybe an area where you can make the
numbers work and create something really compelling, both on the investment
side, but for guests too,” he said.