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Hospitality Bites: Rise of the Branded Residences

Branded residences are quickly gaining ground in Asia. Is this just a hype or is there value to be unlocked?


Welcome to the first edition of Hospitality Bites – a new bimonthly blog that offers insights into Asia’s hospitality and leisure sector.

As the world gears up for the much-awaited reopening of borders and demand for prime residential property remains strong, it is perhaps a good time to also look at hotel brands from a whole new perspective and how branded residential properties have enhanced the value of real estate. In this edition, we focus on the burgeoning use of branded residences, and discuss what value they bring to operators and developers.

Branded residences – a growing trend in Asia’s prime residences market


The concept of branded residences may have come late to the party for Asia, but it is certainly gaining ground quickly. Branded residences started as additions to luxury hotels, but they have now developed into standalone products, and are also supporting five-star mixed-use developments.

Is this worth the hype, or would using a white label which avoids licensing and brand costs be a smarter choice? Does the ‘brand’ in branded residences actually add to the value of these properties?

Colliers Hospitality Bites_Living room n branded residence with luxurious furnishings
A growing trend in the residential property market: Branded residences offer the comfort of a home, with the full benefits and integrated services of a luxury hotel

 

Faster payback


We know that luxury hotels could take between 20 and 25 years to get to the point of payback, while five-star properties could take between 15 and 20 years.

Branded residences offer an alternative way of bringing forward this payback. This is obtained via the premium in price per square meter above those of traditional residential or white label offerings.

Premiums vary with markets


So, how attractive is the premium? Evidence suggests that price premiums for both luxury and five-star products, can be anything between 20% and 30% above the prices of ‘similar’ non-branded products.

 

"To achieve the highest possible price premium... Consideration must definitely be given to product placement."

 

However, these premiums, which could even be higher for some developments, are primarily seen in markets where high-end residences are not widely available or perceived to be uncommon.

For example, high premiums can be seen in Bangkok, Phuket, Kyoto and Niseko, whereas markets such as Singapore, Tokyo and Hong Kong, where the luxury residences market is well established, generally see lower premiums of between 5% and 10%.

In the lower premium markets, brands and owners need to be creative to increase product differentiation, and this has been achieved.

In the established markets, operators and developers of branded residences include add-ons in the form of upgraded services, such as lifetime concierge services and access to the hotel’s facilities – sometimes even globally, which can be priced into a product. Having a brand also undoubtedly enhances the rate of absorption.

Colliers blog hospitality bites branded residences in singapore
An established market for luxury properties, Singapore is home to well-known branded residences such as The St Regis Residences, The Ritz-Carlton Residences and soon, Pullman Residences


Not all branded residences are created equal


So, are branded residences worth the hype? Should developers and owners invest in branded residences?

The short answer is “yes”.

Nevertheless, to achieve the highest possible price premium, developers need to remember that not all brands are created equal. Consideration must definitely be given to product placement, which will vary from destination to destination, and indeed, scheme to scheme.

 

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Govinda Singh

Executive Director | Asia

Valuation & Advisory Services

Singapore

Govinda, a member of RICS and registered valuer, is a chartered certified accountant with a postgraduate diploma in economics and a certificate in business valuations, who began his career at Pricewaterhouse in audit and tax advisory.

Having worked as an Operations Manager for Hilton, he was the Financial Controller at the luxury Lanesborough Hotel, at which time he worked closely with the Rosewood and Starwood hotel groups at both the local and corporate level.

Govinda joined PKF in London in 2005 where he was a Managing Consultant within the Hotels and Leisure Valuation and Consulting  practice. He subsequently joined BDO’s Real Estate Valuation and Consulting  team in 2012, where he was a Director responsible for the EMEA, Caribbean and Asia-Pac regions.

Govinda joined Cushman & Wakefield Singapore in 2015 where he was a Director within the Asia-Pac Valuation and Advisory team.

He is now an Executive Director at Colliers International advising on, and valuing investments involving mixed-use, specialist and alternative asset classes across Asia and further afield.

He is also one of Colliers’ dedicated specialist portfolio advisors and valuers in the region, and globally.

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