This hotel CEO sees a niche for cool brands in small towns

Skift take

Residents of small towns still have money to spend in trendy bars and restaurants. There’s a new playbook for upscale lifestyle hotels that don’t need a massive global city to usher in success.

Cameron Sperance

There are more places than Dubai, London or New York to open a trendy hotel, despite what the big brands indicate through their portfolios.

Lifestyle hotels, a new generation of upscale hotels that cater more to local traffic, typically focus on some of the world’s largest cities. Ennismore – which encompasses the Hoxton and Gleneagles brands as well as some of the Accor lifestyle brands like SLS and Mondrian – largely pursues projects in major cities like London, Paris and Dubai as well as resort destinations.

But a smaller player sees a lot of growth potential away from global gateway cities.

“Ten years ago, if you were talking to the big lifestyle hotel companies, they would say, ‘I have to be in San Francisco, New York, Miami, LA and London,” said Jay Stein, CEO of Dream Hotel Group. an interview with Skift. “We see Central America. “

First of all, Dream Hotel Group does not ignore big cities. The company has hotels in New York City, Los Angeles, Miami and Bangkok – to name a few – and another is slated to open in Doha, Qatar, next year.

But it’s the large pipeline of hotels in small US towns that could raise eyebrows in an industry that appears to be focused on exclusivity and higher rates.

Dream Hotel Group operates an Unscripted branded hotel in Durham, NC Dream Hotels in Memphis, Tenn .; Cleveland, Ohio; Oklahoma City, Oklahoma; San Antonio, Texas; and Louisville, Kentucky, are slated to open within the next four years.

The business will probably not stop there.

“I can name 25 other major markets where my brands would be a great fit,” said Stein.

Putting so much inventory in small towns is unusual, especially for a small business like Dream Hotel Group that doesn’t have the distribution reach of companies like Hilton or Marriott.

Accor CEO Sébastien Bazin defines lifestyle hotels as those that derive more than half of their income from local traffic frequenting the property for uses beyond a bed and breakfast, such as visiting restaurants and restaurants. bars or the use of an on-site coworking space.

Large cities would be the logical first choice to pursue this type of development, as lenders would be more comfortable with the idea that a larger city has the population to support a lifestyle hotel. But Stein says working with developers with strong relationships with local banks in smaller markets can put an end to traditional financial ideology, especially in an age when construction finance is hard to come by for many. projects.

“We usually do passionate projects for local owners in their market,” said Stein. “They want to do something that makes a different statement in the market, and they usually have their lenders that they work with, usually local banks funding projects like this. It is not the same as construction finance has dried up. These guys are different. They have relationships and these are more unique type projects.

Stein also notes that most of the “smaller” cities Dream Hotel Group envisions are only small in size compared to New York or London, each with metropolitan areas home to tens of millions of people each.

Places like Oklahoma City, Memphis, and Louisville may not be considered global gateways, but they each have a sizable metropolitan population of over a million people.

“A million people live [in Louisville] and having some great restaurants and some great hotels where the smartest people say, “Where’s a great place to go,” Stein said. “People everywhere love to party. It is not a mystery.

Autonomous or sitting duck

Dream Hotel Group currently has 10 hotels across its four brands – Chatwal Hotels, Dream Hotels, Unscripted Hotels and By Dream Hotel Group – but 19 are under development.

The question that always arises with a company like this, similar to others like Standard International, is whether the executives plan to remain independent or if they would one day consider partnering with one of the conglomerates. worldwide like Accor or IHG.

Accor has an appetite for growth in the United States, and a company like Dream fits the bill for its most likely path to growth. The Paris-based company expects lifestyle hotels to eventually account for up to 40% of its total fee volume, Bazin told the Skift Global Forum earlier this year.

IHG and Choice Hotels are among many hotel giants that have entered the lifestyle business in recent years, and an acquisition would allow for a rapid rise. The common ideology in the industry is that future M&A activity is likely to result from “tuck-in” deals that fill a brand or a geographic hole in a company’s network.

Stein admits he’s been intrigued by takeovers in the past, and he’s not ruling it out in the future – without providing much detail.

“It’s not necessarily our goal to never be swallowed up. We had fished in those waters about four years ago and felt we had more work to do to bring value to where we thought it would make more sense to look at an option like this, ”a- he added. “There is nothing that I am ready to declare and say [whether] we’re going to do this or that.


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