Real Estate

Competition has heated up significantly in the hospitality business.

Competition has heated up significantly in the hospitality business. West Elm, Virgin, Equinox, Shinola, Restoration Hardware and several other players have started to brand new hotel developments. Not sure if this will ultimately be sustainable.‬

West Elm branded Hotels will be in markets that don’t already have design centric experiences like Indianapolis. Shinola’s first hotel is in their hometown of Detroit. Equinox is looking to capture fitness oriented consumers. Even though these brands may have a unique angle in approaching the consumer I do not believe this trend will supply those companies with a sustainable stream of revenue.

In a September 2016 article for Bloomberg Bjorn Hanson is quoted as saying:

he’s seen upwards of 40 retail and entertainment brands pursue hotel projects — only to abandon them down the line. For some companies, hotel projects ultimately “felt like too much of a risk” or a “distraction from the core business.”

And they are risky distractions largely born out of an attempt to mimic what another brand is doing. What’s worse is that cities are often left holding the bag after forays into low-hanging rent seeking by national brands is abandoned.

Dallas has two of these branded hotels opening by 2020. Virgin is opening a hotel in the Design District and Restoration Hardware is opening on Knox. Each of these hotels have giant footprints. In the event that consumers decline to embrace either of these options large craters in commercial districts will form. Might I suggest an alternative?

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