ALIS development panel IDs best opportunities

LOS ANGELES – What is going to drive development in 2025? That was the overarching question at an ALIS panel that featured chief development officers from Aimbridge, Best Western, Sonesta, Accor and IHG.

The tone in late-January was not surprisingly optimistic with the caveats that the economy keeps humming, inflation remains in check and experiences is what drives spending.

Everyone on the panel said they want to create hotels that are even more experiential that court next-generation travelers. For full-service properties, more emphasis is being placed on food and beverage. The darling for development remains extended-stay.

Moderated by Hodges Ward Elliott Managing Director Alexandra Lalos Church, the panel also suggested international opportunities are getting more of their attention.

Here is a snapshot of the highlights from the session:

Extended-stay

BWH Hotels Chief Development Officer and Senior Vice President Brad LeBlanc: We’re on the cusp of what I believe is an energy bomb. I think the new administration will step in and unleash energy. We’ve seen it before. I’m a Baton Rouge [Louisiana] native. When things are rolling in energy, everything across the South is rolling, and that’s obviously extended-stay.

Sonesta International Hotels Corp. Chief Development Officer Brian Quinn: Not only are you reacting to the consumer need, but with all the pressure on the operating mode in the hotel space, that business model continues to be the most efficient one out there.

Lifestyle, luxury

Quinn: You also have an aspiration to travel in the U.S. that is off the charts. When people travel, they’re also looking for quality, and they’re also treating themselves… Now I have a 22-year-old that only wants to go to the lounges and have cocktails… The hotel lobby is back and that creates revenue opportunities… The ability for people to play in that space and spend in that space, if you can capture them at that price point and then have them for a lifetime, it can be incredible for the for the brands… The debt and equity is gravitating toward that space, as well.

Aimbridge Hospitality Chief Global Growth Officer Eric Jacobs: Soft branding leads that whole category today. People want an experience… It works. It’s just a way to plug into a distribution system and deliver a hyper local experience.

Accor Senior Vice President of Development Edouard Schwob: In 2024, I think about 70% of the deals that we signed in the U.S. were soft brands, and franchise. It is definitely the trend as it brings an answer to all the independents and what they want, which is this activation of distribution.”

Jacobs: We need to start looking at total revenue per available square foot – almost like a retailer might think about it. How much will we drive into that public space and stop just looking at the room revenue. What are those ancillary businesses that you can build into that model?... It does feel like that attention on food and beverage is really going to lead that way in this space.

International growth

Jacobs: It feels like 1995 all over again, where the big brands have built their management – I’ll call it the hub, and now they're going to spoke through franchising. And every one of the major brands is asking us to get offices in certain parts of the world because they have numerous opportunities… I went to the HICAP conference in Singapore and there was a session about how to hire a third-party manager… It’s early innings over there. If you were to go to Dubai, for instance, where probably 90% of the hotels are brand managed today, the pipeline is just the opposite. So, the big brands are moving towards the franchise model. They’d rather see more franchising. It's a more efficient model for them to grow.

IHG Hotels & Resorts Chief Development Officer Julienne Smith: About 15% of our open estate in the Americas is managed, but only about 5% of our pipeline is, and part of that is in 2018 we came out with a franchising program for InterContinental and Kimpton because we have operators like Aimbridge who have the wherewithal to be able to operate, and owners are often wanting to have that type of partnership…Globally, we’re about 30% of the pipeline managed. There are some markets where that just seems to still be the growth priority.

Key money

Schwob: Key money has become extremely competitive and then there’s different deal structures where operators have been very creative in terms of loan structures and things that were not being done just 5-10 years ago. There are lot of different ways of being agile and adapting to the needs of the capital stack.

Smith: Everybody does it for most segments. It is owners being savvy and knowing they can call the brands and work out a deal. It’s a very competitive environment right now, especially with conversions, with the lack of financing or struggling for financing for new construction. So, it is also owner driven, relative to competition.

LeBlanc: Lenders are helping drive it. We’re using our balance sheet, whether it is key money, debt guarantees, revolving line of credits – whatever it is to help a developer get a deal done. Today, we’re putting our balance sheet to work. Now, I don’t have as big a number as some, but we are being strategic about it in key markets.

Quinn: Each project is a journey. Sometimes it’s key money, sometimes it’s fees, sometimes it’s investments, and sometimes it’s the asset’s geography that will drive that. When debt is more expensive, you have to become more creative and help make the projects happen.

Outdoor hospitality

LeBlanc: I think glamping is absolutely going to skyrocket, not only in this country, but it’s already a much larger piece of business worldwide. We open our first one in Zion [National Park] three months ago with 150 glamping tents and it’s phenomenal. It’s an easy entry into a lot of these markets where you're not building the infrastructure and the hardscape…If you have a 20-acre parcel of land with a view of something, start thinking about it. It’s coming like a freight train.

Jacobs: Labor is a challenge in those remote locations. You have to build in the thought about associate housing… Sometimes, there’s infrastructure challenges…Some of these brands like AutoCamp got out there ahead of everybody and it’s been slow growth because they have found out that it’s not as easy as it looks.

LeBlanc: Let the hoteliers walk into it, figure out how to get it done and do it more economically, and it’s going to work.

LATAM

Schwob: We’re spending a lot of time in the ‘smile states,’ and Mexico is on fire. It’s booming. You charge in dollars. You have a very sound economic model, very profitable for owners… All-inclusive is being done better. It carried a lot of bias in the past, and now the perception has changed. Bringing that to the Caribbean, to the Mexico-Cancun area has created lot of opportunities.

Quinn: I echo the comments on Mexico. I think that’s a hidden opportunity. Mexico made a different choice during the pandemic to keep travel open. And as soon as a destination gets into someone’ diary they usually go back two more times and tell seven friends… Anybody who’s been to Mexico City, it is unbelievable what’s going on there with world-class restaurant, 5-star hotels... Other markets to watch are Argentina, Chile, Brazil. Each has some unique challenges that they’re going through right now, but they have very young populations that are highly educated and going to start to travel and demand more and more branded experiences. So, they’ll be opportunities for all of us.