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Hotels now anchoring retail ventures

Profile Photo By: H L
October 17, 2013

Hotels now anchoring retail ventures

Mixed-use developments that include a hotel among other components have taken a new turn. In recent months the industry has seen a spike in the number of projects either under construction or on the drawing board where the other major asset class is not residential or office, but a retail shopping mall. In this model, a hotel in effect becomes the anchor tenant of the shopping center or mall, replacing what might have been a Macy?s, Bloomingdale?s or J.C. Penney.

The trend isn?t totally new. Precedents include The Ritz-Carlton, Tysons Corner in McLean, Va. (adjoins the 100-shop Tyson?s Galleria) and Hilton Short Hills in New Jersey (across from the 150-shop Mall at Short Hills and pictured here).

?The trend slowed to a crawl during the downturn, but with the lodging industry rebound it?s now regaining momentum,? said Jim Butler, chairman of the Global Hospitality Group at Jeffer Mangels Butler & Mitchell, who moderated a panel on the topic at last month?s Lodging Conference.

The timing of the re-emergence of hotels as a viable component in shopping malls is auspicious, noted panelist Tom Lander, VP and GM of Mortenson Development. ?It coincides with a retrenching in the retail sector. With large department store chains cutting back, many malls have been losing long-time anchor tenants, making land available for redevelopment.? Mortenson was the developer of the Radisson Blu in Bloomington, Minn., which connects to the Mall of America, which holds the distinction as the largest mall in the U.S.

WHY IT FITS
One of the challenges in this kind of project is matching the right hotel brand to the right mall and vice versa. ?Often an upper-end select-service brand makes the most sense,? said T. Dupree Scovell, managing director of Woodbine Investment Corp. ?Unlike full-service luxury brands, select-service brands don?t come with three-meal-a-day restaurants, bars, spas and other amenities that are expensive to operate.?

But hotel guests don?t particularly miss them because these services are likely to be available at the mall right outside the hotel?s front door.
In fact, guests may even prefer the variety of choices available at an upscale mall. ?Market studies tell us consumers want much more than a hotel alone can provide,? Scott Travis, SVP for development at the Buckingham Companies, told the audience.

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Source Hotel Management, http://www.hotelmanagement.net/investor-developer/hotels-now-anchoring-retail-ventures-25195

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