Anchoring a hotel to a shopping center allows operators to target a wide audience of consumers and typically leads to boosted performance for both the retail outlet and the hotel.
GLOBAL REPORT—One common thread many travelers worldwide share is the penchant for shopping—a demand which hoteliers, particularly those in the Middle East and Asia, are happy to oblige by connecting new hotel developments to retail outlets and malls.
“This hasn’t been a foreign concept for the past ten years overseas, but in the past five years, there has been an incredible amount of development to create lifestyle centers,” said Ben Flournoy, VP of the Asia Pacific region for LRA Worldwide, a customer experience management consulting firm.
Flournoy said brands scramble for prime space near existing malls or by building vertical lifestyle centers in densely populated Asia due to the fact there is only room for one hotel in a given region.
“That makes it a highly competitive and aggressive market and a lot more costly to develop,” he said. “In an Asian city, especially, it comes down to convenience. It’s ideal to be built in proximity to the shopping and entertainment.”
Novotel Bangkok Platinum, owned by SPT Management, opened in November 2011 and is located above the Platinum Fashion Mall in Bangkok, Thailand. Also operated by SPT, the mall is one of the largest wholesale and retail fashion malls in the country, with more than 2,500 stores. The hotel is within two minutes of Pratunam, the heart of the largest shopping and entertainment district in Southeast Asia.
“The synergy between the mall and the hotel allows a new marketing approach with a larger target market,” said Astrid Hebert, director of sales and marketing at the Novotel. “The hotel and mall become a destination itself, making it a unique selling point.”
Hebert declined to discuss development costs but said the hotel averaged 80% occupancy during its first full year in operation, with higher figures projected for 2013.
The Sheraton Bali Kuta Resort opened in December with 203 guestrooms, each with a balcony overlooking Kuta Beach and Bali Strait with panoramic views of the Indian Ocean. But it may not be the views that draw the crowds.
The hotel also is connected to Beachwalk, a luxurious retail, entertainment and dining destination in Bali that offers more than 200 retail outlets.
“Sheraton Kuta Bali Resort chose to build in conjunction with Beachwalk in order to reshape and reinvigorate the destination of Kuta,” said Dario Orsini, GM of the hotel. “Kuta was the first tourism destination in Bali prior to the development of other areas, but (it) has lost some of it popularity over the years because of the robust development taking place in other regions. By opening Sheraton Bali Kuta Resort in conjunction with Beachwalk, our hope is to attract tourists as well as local residents in order to revive Kuta’s image.”
Orsini said the hotel has reported “solid” occupancy since opening late in 2012, fueled both by domestic and Australian tourists.
The location of the resort caters to all kinds of demographics, including families, couples, girlfriend getaways and business travelers, he added.
“Because of the audience and positioning, there is a natural synergy between Sheraton and retail, which is also universal,” Orsini said. “The decision to connect a hotel to a shopping mall is not necessarily a fit for every hotel or brand, particularly very exclusive or luxurious properties. This concept, however, works very well for Sheraton because the brand’s positioning is centered on connectedness and appealing to the public.”
One of the challenges, he said, is traffic congestion since the surrounding roads are not designed to accommodate heavy traffic. The hotel is working with local authorities to help relieve that issue.
Traffic also might be a challenge at the $133-million Radisson Blu Mall of America, connected to the Mall of America in Bloomington, Minnesota. The 500-room hotel, which opened this month, is the only hotel connected to the mall, allowing guests to shop and go back to their hotel room without ever having to go outside—a major advantage during Minnesota winters.
The Radisson Blu Mall of America has 500 allotted parking spaces under the hotel, but with more than 20 weddings already booked this year and a 80% to 90% projected weekend occupancy, GM Harry Gorstayn said the only challenge he foresees could be parking.
“If you do the math, 500 spots are not very much if we have a weekend where we have 400 guests for a wedding,” Gorstayn said. “That’s really the only concern I have right now.”
Gorstayn declined to comment on land development costs for connecting to the Mall of America, but he said the room rates at the hotel will run between $210 and $250 per night. Other hotels in the area of the mall run as low as $99 per night.
The hotel offers the brand many benefits, including attracting some of the 44 million shoppers who visit the mall each year, as well as the highly sought after international travelers who are accustomed to such destination hotels overseas.
International travelers represent a key demographic for The Westin Gaslamp Quarter in San Diego. The hotel is adjacent to the Westfield Horton Plaza, which has more than 100 retail stores and the Gaslight Quarter entertainment district.
“We attract the international traveler, and since San Diego is not very seasonal we can attract visitors year around,” said Keri Robinson, GM.
The 450-room hotel underwent a $25-million renovation last year and is averaging 80% occupancy.
Shopping sees a boost
Hoteliers aren’t the only beneficiaries of the synergy that can exist between a shopping district and adjacent hotel.
One major shopping center owner conducted a multi-year study on its 200-plus properties and concluded the right hotel/shopping center connection can boost gross sales at the centers by 20% to 40%, reported the Global Hospitality Group of law firm Jeffer Mangels Butler & Mitchell.
The report also lists the 10 biggest mistakes shopping centers make when adding a hotel, which includes trying for a major brand rather than the right brand.
Done right, the associated hotels can see a 30% to 40% boost in revenue per available room over their competition, the report said.