It’s no surprise that developers are buzzing about millennials. Based on size alone, millennials will soon dominate both the retail and hospitality markets, and they’ve got the money to command attention.Experts say Gen Yers are already responsible for a collective $1.3 trillion in annual spending, a number destined to increase as they reach peak earning age.To tap into those dollars, however, developers have to first understand how millennials differ from their older Gen X and Baby Boomer counterparts, and how those differences affect their lodging choices in particular.
Millennials are far less loyal to particular brands than older generations have been. They’re driven instead by their individual desires for rich, personal experiences. Brand names mean much less to millennials who don’t need the “insurance” on their choices that a known name affords. Rather than stick with a familiar hotel or restaurant, they go online to get instant tips from their peers on what’s new, interesting and trendy. They will take more risk, looking less for the safety and security of a brand name and more for the upside in new experiences, interactions with their peers, and the ability to project a certain self-image associated with those experiences and surroundings.
When it comes to lodging, millennials demand more personalized, more casual and more rewarding choices than their older peers. In anticipation of these demands, the lodging industry has created a dizzying variety of “lifestyle hotel” choices over the last 15 years. Even the most mainstream hotel brands have unveiled their own lifestyle concepts, sometimes together with edgier partners who create emotional, even visceral experiences for guests.
Experience is King
“Lifestyle” hotels mean different things to different developers, but in general a lifestyle or boutique hotel provides the guest an experience that goes beyond just clean, comfortable surroundings and convenient food and drink. You know you’re at a lifestyle property when you see unique décor ranging from high-tech to recycled industrial coupled with inventive food and beverage offerings. There will be a “buzz” in the lobby as locals and visitors alike connect with one another in inviting surroundings rich with local culture and nouveau architecture.
Of course, the lifestyle hotel offers accommodations that provide the basics of comfort and safety, but it goes well beyond the well-known bland, corporate look, enhancing the experience with:
- Designs that reflect the unique history and culture of the surrounding area
- Sophisticated furnishings and appointments – especially those involving the latest technology – but not necessarily large amounts of room space
- A high-energy social environment with live music, drinks and comfortable, inviting common spaces in which to socialize
- Amenities that cater to Gen Y’s desire for healthy, authentic experiences ranging from loaner bicycles to vegetarian or vegan food
Obviously, creating a lifestyle atmosphere requires some new skills. And since so much of the experience is about the surrounding area, the wise developer will pay sharp attention to local lore, eye-catching oddities and uniquely memorable pursuits available nearby.
To get a feel for how this works, look at The Wharf, a 50-acre redevelopment project in Washington, D.C., being co-developed by Madison Marquette and PN Hoffman & Associates. This development will revitalize the last remaining waterfront property in one of the nation’s top tourist areas by incorporating elements of a lifestyle destination in its featured hotels as well as in the overall design and selection of both its retail and its food and beverage offerings.
The Wharf will appeal to residential customers drawn by the waterfront location and the proximity to the Federal Triangle South complex of federal offices near the National Mall, but it will also be equally appealing to business travelers and tourists.
According to Daniel McCahan, Senior Vice President, Project Management with Madison Marquette, the key to the development is making The Wharf a lifestyle destination that will draw local residents whose very presence will make it more attractive to tourists and business travelers. The draws will include a rich mix of retail, food and beverage options as well as a 6,000-seat performing arts building that can double as a convention center.
The developers of The Wharf tweaked the design to create “found spaces” like those comfortable nooks in an older city, something which Brant Snyder, Madison Marquette Development Manager, describes as “cool side streets with a more intimate environment.” Additionally, Madison Marquette is working with the operators of the 9:30 Club, a highly popular club in northwest Washington, to recreate that experience in a larger physical space at The Wharf. Snyder says Madison Marquette wants to make The Wharf attractive to people from Maryland or Virginia as well as Washington, D.C. – anyone who wants a night on the town or to go to a show or just take a walk along the water. “Because the locals will think it’s cool, people both in the region and nationally are going to want to come here,” Snyder explains.
For a different experience, a ferry will take visitors across the Potomac River to East Potomac Park which features a golf course, a tennis facility and paths for running, walking and cycling. McCahan says the goal with The Wharf is to allow people to model it to their lifestyle: “It will be different things to different people from the extroverted tenant to the introverted tenant, the business traveler and the tourist.”
The developers are also investing more money up front to create spaces that can be easily converted to other purposes, such as a pier that can be used as either a boat landing or a restaurant. Loews’ lifestyle brand, the OE Collection, would have been a perfect fit for The Wharf, and if the OE Collection had been launched a year or two earlier, we would have competed for a site in The Wharf to complement our more traditional DC offering, Loews Madison Hotel.
Making Lifestyle Work
Making the lifestyle concept work requires careful choices as well as some tradeoffs. For example, The Wharf will include an InterContinental Hotel serving a high-end clientele as well as two less extravagant hotels – one an extended stay, the other a lifestyle – with a combined 400 beds.
So how does one pick the right lifestyle hotel for a given project’s desired look and feel? According to McCahan, it takes many rounds of interviews with various brands and operators. The hotel brands selected had aesthetics that matched the developers’ vision, including designs that look like a redeveloped older industrial space rather than a brand-new concept.
According to McCahan, one important clue that a hotel operator understood the experience The Wharf’s developers wanted to achieve was when the hotel operator mentioned a retailer it hoped to attract – the same retailer McCahan was already luring into a prominent project location.
Step Out of the Box
Rather than focusing leasing efforts on national chain restaurants, to draw the kind of lifestyle-oriented diners The Wharf wants, Snyder says the developers focused their attention and negotiations on a variety of best-in-class local restaurants with star chefs at varying price points. The idea is to offer a variety of styles from white tablecloth to sit-down to more casual atmospheres. Similarly, the hotel development plan is to provide more than the familiar standard brands.
Retail and lodging are both areas where a lifestyle developer might need to be flexible and look past standard economic rules-of-thumb and expectations. An example of that flexibility might be accepting a slightly lower rent to secure a retailer who will help create the “buzz” that will draw large numbers of visitors, something which justifies higher rental rates for other properties in the development. In the hospitality realm, the best example may be Ace Hotel in New York, where the developer went with finishes and furnishings well beneath any four-star standards but has ended up with revenues dramatically higher than nearby four-star competitors. “Retail drives the lifestyle concept and it’s how people are going to experience the site,” Snyder says. “You need a mix of users to unlock the overall value. That means you can’t be locked into what you had in the pro forma that projected the financial return or your original plan. To create a place people want to come to – whether it’s to shop or to stay overnight – you’ve got to be especially creative with the retail.”
Finally, developers need to walk a fine line between being trendy enough to draw attention from millennials, but not so far out that they turn off more mainstream or older customers. Snyder says the developers aren’t going for the safety and security of large national chains, but generally speaking, they are looking to work with people who have proven concepts and a track record of success: “It’s a balancing act. If you want something that’s more exciting, there is a little bit more risk, so you have to be diligent about who you partner with.”
The rise of the millennials and the subsequent need to change how we think about development is certainly a challenge. But it also brings some excitement and creativity to our vision for Loews Hotels and our ever-increasing focus on being a key part of great multi-use developments. Above all, millennials are our future customer base, and the developers that meet their needs soonest and most effectively will reap the highest rewards.