Hyatt, Marriott Join Race to Woo Millennials With Hip High-Tech Hotel Brands

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Major Chains Hope to Lure Lucrative Generational Crowd With Rooftop Bars, Spartan Accommodations, Free WiFi

January 28, 2015

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Ah, the elusive millennial generation cohort. Employers spend millions of dollars researching millennial goals and beliefs to try and figure out what they want in a job. The housing industry can’t decide why they’re not buying houses like their parents did. (No savings for down payments? Student debt? They just prefer to rent?)

With millennial choices holding such a large sway over the economy, it’s not surprising that hotel chains have joined the rush of industries trying to crack the code and appeal to the cohort roughly defined as anyone born between the early 1980s and the early 2000s.

The latest lodging company racing to retool their portfolios to target the millennial and millennial-minded traveler is Hyatt Hotels Corp. (NYSE: H), which this week rolled out its Hyatt Centric brand. Hyatt joins a growing group of lodging companies making major changes to their hotel properties and services in hopes of capturing a bigger share of the millennial market, a customer segment that already accounts for around one-third of all business travel expenses, according to Hyatt.

This summer, the chain plans to unveil more than 15 Hyatt Centric locations, which will include already open and previously announced hotels in New York, Paris, Atlanta, Chicago and Miami, among others. Hyatt said its new brand targets “a multigenerational group comprised of travelers who view their hotel as more than a place to stay.”

“From listening to our guests, we learned there was an opportunity to better meet the needs of a large group of travelers that we call ‘modern explorers,” said Hyatt President and CEO Mark Hoplamazian. “These travelers are looking for a cosmopolitan vibe in the center of the action, so we worked to test various elements in real time, in real hotels over the past two years. Hyatt Centric is the culmination of that work.”

Hyatt’s new Centric line follows last week’s announcement of a new joint venture between Rockbridge and TPG Hospitality to develop and operate a Marriott International-flagged property in California’s Silicon Valley slated to open in 2016 targeting the same cohort. Growth plans for the AC Hotels By Marriott brand include more than 50 hotels to open within the next three years throughout the U.S. and Latin America.

Whether millennial or multigenerational, the Generation Y segment has made a strong impact on hotel design and branding over the last year, with Radisson, Marriott, Hilton, Loews, Montage and even Best Western having already unveiled brands aimed at millennials,

The new hotel brands launched by the major chains include Canopy by Hilton, Radisson Red, The Pendry, from Montage Hotels; The Vib (pronounced “vibe”) from Best Western; and OE Collection from Loews Hotels, and Marriott’s Edition boutique brand, a collaboration with famed hotelier Ian Schrager. In addition to the Marriott and Hyatt offerings, brands expected to see a big roll out in 2015 include Marriott’s new Moxy Hotels, Virgin Hotels and Tommie Hotels.

The AC Hotels brand has been around since many millennials became adults. Founded by Spanish hotelier Antonio Catalán in 1998, the chain gained a foothold in Europe and changed its name to AC Hotels By Marriott in 2011. Marriott International in mid-2013 announced it would roll out AC Hotels in North America as its first select-service introduced in the U.S. in 15 years.

Whether or not they are identified as targeting millennials in brand marketing descriptions, these new offerings are targeting cost-conscious and experience-focused younger travelers in their 20s and 30s, accustomed to staying at hostels, boutique inns and rooms booked through Airbnb and other social media.

The new hotel concepts are distinguished by smaller room sizes, many under 200 square feet, compared with the industry’s standard room size of 250 to 300 square feet, as well as spare design such as minimally adorned concrete floors, exposed columns and other structural elements, and modern “industrial-chic” furniture.

AC Hotels and other concept brands first emerged in the innovation-minded and fragmented lodging markets of Europe and Asia and have crossed the ocean to become new concepts for U.S. investors hoping to capitalize on the trend while increasing their returns, according to Howard Roth, global real estate leader for EY, and Michael Fishbin, the firm’s global hospitality and leisure leader.

Shorter construction times, smaller rooms and so-called “nontraditional spaces” can lower development costs and boost operating margins compared with traditional full-service hotels, according to Fishbin. For example, hotel chains can cut costs by reconfiguring pricy large rooms with heavy furniture and full-service restaurants, replacing them with smaller room, food options offering convenient ‘grab-and-go’ food, offering free Wi-Fi and a mobile-friendly check-in service.

The new products and concepts often emphasize lobbies and common areas, lounges and bars as focal points, creating more revenue-generating areas of the hotel outside of the rooms, with designs focused on attracting local demand, according to EY’s 2015 Global Hospitality Insights.

Low-cost hostel/lifestyle/budget concepts are now becoming available in both major markets such as New York, Los Angeles and Miami, where traditional hotel rates are prohibitively expensive, as well as in secondary markets such as Detroit, New Orleans, Nashville and Portland, where unique cultural elements can serve as a huge draw for millennials.

“Millennials demand instant gratification, including speed, efficiency and convenience,” Roth and Fishbin both said. “It trumps the importance of face-to-face contact or friendly service.”

In fact, mobile device applications such as TripAdvisor and Yelp make it more likely travelers will book their rooms at the last minute and post their experiences and complaints online, putting hotels are under the gun more than ever to deliver their best service.

Kristine Rose, vice president of brands at Hyatt, said these travelers “are truly a savvy, curious group.”

“Their expectations are simple, but their standards are high and they want their experience to be intuitive and smart,” Rose said. “They want options and all the must-haves from a full-service hotel but without any fuss or complications.”

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On a Roll, U.S. Office Market Demand Expected to Stay Strong Through 2016

Tenants and Investors Show Strong Preference for Newer Buildings in CBDs
January 28, 2015

With vacancies falling and rents rising in growing numbers of submarkets and slices within the U.S. office sector, demand for office space is expected to remain at post-recession highs for the next two years, according to CoStar Portfolio Strategy analysts recapping the office market’s past year performance.

“2014 was a great year for the office market,” said Walter Page, director of office research, during CoStar’s State of The U.S. Office Market 2014 Review and Forecast. “The keystone mark is that net absorption was up 42% from a year earlier. The fourth quarter in particular was very strong, with over 30 million square feet of net absorption.”

Net absorption of office space rose from 64 million square feet in 2013 to 91 million square feet last year, a 42% increase. Also, the amount of office space absorbed for the year was nearly double the level of new office space added to the market.

Over the next two years, CoStar expects annual absorption to be very similar to 2014, in the 90 million square foot range. The level of construction deliveries should ramp up, as rents have increased across the board and vacancy numbers have continued to tighten, helping make the case for new development.

The strong demand suggests that occupiers have gradually slowed the trend of shrinking square foot-per-employee office footprints, and the shadow supply of empty office space left over from the Great Recession is diminishing as growth moves forward at a very strong clip, added Page, who was joined in the presentation by U.S. Market Research Manager Aaron Jodka and Managing Director Hans Nordby.

The national office vacancy fell 70 basis points from 12% to 11.3% in 2014, the largest decline in office vacancy since the end of the recession.

Vacancies are declining across the board across markets, submarkets and building types and quality levels, with the exception of medical office properties, where vacancies are holding steady at a historically solid 9.6%.

Many markets are now falling below the national vacancy average, with nearly every metro showing year over year declines, with the exception of Washington, D.C., which saw a slight increase, mainly because of strong construction activity.

As demand shifted into high gear during 2014, the percentage of office submarkets with declining vacancies rose to its highest point of the recovery, Jodka said.

“It’s not just a few energy or tech markets or CBDs, this is a feel-good story across the country,” added Nordby.

The vacancy recovery has been particularly strong among newer properties seeing the highest demand by tenants, said Jodka. While buildings 2008 and newer have seen vacancies plunge from a high of 45% in 2008 to nearly 10% in the fourth quarter of 2014, older generation space from the 1980s, much of it located in less desirable outer-ring suburban submarkets, hasn’t recovered at all.

“That’s not where tenants want to be,” Nordby said. “Oftentimes, they want to be in the CBD or the very closest-in suburban submarkets.”

Markets where demand for new properties is especially strong include Minneapolis, Orange County, CA; Nashville, Dallas/Fort Worth and the East Bay area of San Francisco. New product is logging higher vacancy rates in markets where demand still isn’t quite matching the rate of new construction or are still dealing with an overhang from the last cycle, such as Miami, San Jose, Los Angeles, Washington D.C. and Portland.

Building upon that flight-to-quality thesis is the rising demand for newer 4 and 5 Star space, which is seeing double the rate of absorption of less quality space, Page said. Demand for high-quality space grew 2% from 2013 to 2014, versus 0.9% for 1, 2 and 3-star space.

“Another interesting thing is that at this point in the market cycle is that this flight to quality continues to grow,” Page said. “At this point in the previous cycle, it was not as strong. As tenant footprints shrink, it’s a lot easier to tell them, we’re going to put you in nice space rather than not-nice space.”

Another emerging trend is after seeing most of the action in suburban markets over the last few quarters, activity in CBDs is starting to pick up significant demand and grabbing its fair share of the market, Page said.

Overall demand strength has given owners the confidence to raise rental rates. Rent growth, which closed 2013 up 3.3% year over year, performed even better last year, logging 3.7% growth, nearly double the rate of inflation.

Construction continues to stay in check in most metros. Deliveries of new space rose 9% from 43 million square feet in 2013 to 47 million sf in 2014, very balanced at around half the rate of net absorption. The under-construction pipeline of 81 million square feet a year ago increased a whopping 32% in 2014 to 107 million square feet, 18 million square feet of the activity in Houston.

Don’t do any long-distance moving into a home that isn’t clean and tidy

January 27, 2015

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If you’re about to trek across state lines or even from one coast to another for a major relocation, you’ll want to minimize as much aggravation as you can. This means you need to avoid any work possible on moving day, since you and your state-to-state movers will be pretty busy unpacking and organizing. Don’t move into a messy house – make sure things are pristine when you get there.

The best way to ensure that your new digs are clean is to do it yourself. Unfortunately, this isn’t usually possible when long-distance moving is involved. If you can’t easily get to the new place, consider hiring a local cleaning company to give things a once over before you arrive with your boxes and furniture. Search online or contact your real estate agent to be certain there’s a reliable company involved with the clean up.

You can also remove the responsibility of cleaning from yourself by putting the cleanliness in writing. For instance, one of the closing stipulations can be that the old owner needs to clean (or hire cleaners) to get the house in tip-top shape before you set foot in it. Make sure to include language guaranteeing a penalty for non-compliance or else you and your movers might be kicking dust bunnies and trash out of the way to make room for your possessions.