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Guests are willing to pay up to a 30% premium for Lifestyle Hotels, says CBRE

When selecting hotels, guests show they would be willing to pay on average a 16% premium for a lifestyle property over a traditional one, with some guests willing to pay up to 30% more, latest CBRE research finds.

As the proliferation of lifestyle hotels continues to accelerate, CBRE explored the key pillars which define lifestyle hotels and end-users’ demand profiles in order to see what drives guest behaviors, surveying over 50 Middle East based respondents representing over 20 nationalities.

Among the key findings is the visual identification of the lifestyle hotel concept. Most traditional definitions of lifestyle hotels tend to revolve around the notion of design-driven hotels with distinct characteristics that offer the benefits and perks typically expected from large chains. Other core elements include strong visual identity, casual laid back service, integration of local culture and smaller rooms in favor of more collaborative public spaces. Interestingly, although only 63% of respondents were able to put forward a definition of a lifestyle hotel when prompted, 87% of respondents agreed about what a lifestyle hotel looked like, indicating that the lifestyle concept can generally be easily identified when designed correctly.

In terms of price points, 59% of respondents indicated that they would be willing to pay a premium for a lifestyle hotel. The propensity to pay a premium was spread-out over demographics, with the youngest respondents unanimously willing to pay a premium while the oldest respondents were the most unwilling to pay any sort of premium. Once the unwilling were removed from the sample, the remaining respondents averaged a 16% premium with most willing to pay between 15% to 20%.

Another key question was whether or not brand familiarity is important for lifestyle properties, as developers tend to be hesitant in choosing lifestyle brands for their schemes, in the belief that a lack of a sizable global footprint is reflective of an inability to attract potential guests. The responses were very much at odds with this view and instead an affirmation that the concept did not have to be widely known in order to attract the target market. When presented with a list of lifestyle hotel brands, respondents were asked to identify names that they recognized and then separately asked whether or not they preferred lifestyle hotels over traditional ones. Ultimately it was the demographic groups that were least familiar with the brands themselves, with brand recognition ranging from 7%-17%, who unanimously preferred lifestyle hotels, and those who were older and more familiar who did not. A such, it was clear that brand recognition was not as important for lifestyle hotels as it may be for traditional ones.

Ali Manzoor, Head of Hotels & Tourism – MENA at CBRE in Dubai, comments: “Lifestyle hotels are sought after by the target market on a regional basis, and unlike traditional brands, do not necessarily need to have a large global footprint. Instead, market reach should take a back seat to a culturally authentic and visually differentiated offerings, as these elements are the most important to potential guests. That said, these concepts should be adapted to the local market, and the idea that smaller rooms will be accepted due to the provision of a vibrant collaborative space does not hold true within the Middle East.”

Rooms sizes should generally align with market norms, and this concession will have a direct impact on potential development cost savings embedded within the DNA of lifestyle offerings. Nonetheless, given that guests are willing to pay premiums in relation to their traditional counterparts, this cost can potentially be offset by the guests’ propensity to pay over and above the market so long as the brand has a solid value proposition.

Click here to view and download the report.

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