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Why investors are checking into double-decker hotels

Why investors are checking into double-decker hotels

LinkedIn blog by Eduard Elias, Cycas co-founder:

Increased business and leisure travel – and the blurring lines between the two – has given the hotel sector a welcome boost in recent years, and the growing popularity of dual-branded hotels is one of the most exciting results of this.

With 50 of these projects – representing 100 hotels and more than 16,000 rooms – due to open across Europe and the US by December 2018, there’s no doubt the double-decker concept is gaining momentum as hoteliers and developers recognise the benefits of pairing hotels.

It’s not always easy for investors to find the right opportunities, as land and construction costs continue to rise and spaces suitable for hotel development become harder to locate. The benefits of scale and streamlined building costs associated with dual-branded hotels have therefore helped them become an increasingly attractive proposition over the last decade.

What’s more, bringing together two distinct but complementary brands under one roof can also reduce potential risk by avoiding over-reliance on one particular market sector. Instead, double-decker hotels can help investors capture a wider market share while providing a better match between supply and demand. For example, whilst a site might not be able to support a 400-room upmarket hotel, it could suit a luxury hotel combined with an extended-stay hotel, each with 200 rooms. As a result, carefully combining brands that target a different consumer group can help investors unlock locations that might not otherwise have been viable.

From an operational perspective, there are lots more synergies to enjoy too. When we opened London’s first double-decker hotel in Stratford just before the 2012 Olympics, there was a good reason we paired Holiday Inn with Staybridge Suites. At that time we already recognised that many back-of-house operations, from staff areas to kitchens, would benefit from consolidation and that certain job roles could also be combined and shared. This ensured we could maximise efficiency and minimise staffing costs, leading to more profitable hotels. In fact, operational savings can be around 10-15% for double-decker hotels thanks to shared staff plus lower maintenance and other running expenses.

These shared efficiencies also stretch to customer benefits and our Staybridge Suites guests in Stratford are able to make full use of the Holiday Inn facilities. This added-value is ideal for them and being able to reduce our building footprint is great for the investor too.

It’s no coincidence that the majority of projects in Cycas’s pipeline are dual-branded. From working with Marriott in Amsterdam and Slough to Hyatt in Paris, we know selecting the right mix of brands for each location is essential for each project’s success. A winning formula is the pairing of a full-service hotel with an extended-stay one; hotels which have different facilities but, in terms of market segment, are not conflicting.

When our new Manchester property opens this September, we know its position – along the Oxford Road Corridor innovation district and by the university – will appeal strongly to individuals and groups looking for accommodation in that part of the city. The two brands we’ve chosen there with IHG will allow us to capture a broader range of the market at different price points. Not only does this avoid the risk of cannibalising each other’s business, but – with 328 rooms between them – it also recognises how much harder it could be to maintain high-occupancy rates for two larger, separate hotels. Furthermore, the brand combination should hopefully put off other developers from building new properties nearby.

So, whilst our Manchester property will be the first dual-branded hotel in the north of England, we’re sure it won’t be long before other hoteliers and developers recognise the power and potential of packing two well-known hotel flags into one fantastic location.

Over the years we’ve learned the importance of getting the right management in place. And it takes a special kind of operator to understand the challenges of successfully running a dual-branded hotel. With six of our ten years of trading dedicated to this unique asset, we know how best to train and develop our team to ensure they appreciate the different customer segments and we can consistently exceed our guest expectations.

In short, double-decker hotels provide investors with safer returns from their assets, but the design and management must be carefully implemented to deliver on the dual-branded potential. It’s something we, at Cycas, specialise in. If you want more information about the way we work with our investors and operate our hotels or have a dual-branded opportunity we might be able to help you fulfil, please get in touch.

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