The Future is Suite: The “Hotelisation” of Real Estate

As keen observers of the real estate market, a key theme that we have seen emerging in the post-pandemic landscape is the “hotelisation” of real estate assets. Commercial tenants are increasingly seeking spaces that offer more than just a place to work; they want an experience which is, in certain respects, akin to what they expect from a high-end hotel. In this blog we consider how this shift towards a hospitality service ethos, epitomised by convenience and comfort, is driving significant changes in how landlords, developers and asset managers approach the design and operation of office buildings. 

What is “hotelisation”?

The newest buzzword in real estate refers to the growing trend of incorporating hotel-like amenities into commercial and residential properties. The concept has developed from an expectation among commercial tenants for services and amenities that mirror those found in the hospitality sector. In this challenging real estate market, occupiers expect to be offered more. An office space is more attractive to a potential tenant if it provides services beyond its original purpose. Modern tenants want a multi-faceted experiential space with a premium customer experience that makes them feel valued and cared for. In short, they want faultless service and building operations. The emphasis is not simply on providing hotel-style service, but on creating a destination.

As many employers are placing increasing importance on employees returning to the office, tenants are having to give more thought to the wants and needs of their employees. The traditional model of providing floor space in return for rent is being replaced by a demand for flexible real estate with offerings and amenities built to attract and maximise the number of people in a building at any one time. The provision of co-working spaces is one element of this, but so too are add-on benefits such as concierge services, fitness areas, pop-ups, electric vehicle charging systems and green and wellbeing spaces, to name but a few examples. Upgrading spaces to include such amenities also creates the opportunity for introducing more sustainable design features, enhancing marketability and value. 

Tenants are increasingly aware of the importance of healthy and sustainable working practices, and landlords and developers are responding by integrating services into their buildings to support this. Additionally, as the line between hospitality and commercial real estate blurs, commercial asset management is now being supplemented with expertise from the hospitality sector, ensuring that service quality meets the high standards expected by commercial tenants. 

Community and cohesion

In addition to the growing importance of offering personalised services to commercial tenants, landlords and developers are also expected to capitalise on opportunities to cultivate stronger and more meaningful relationships with the local community. Provision of community spaces in new buildings or redevelopments will often be required as a condition to the grant of planning permission.  

In a previous blog, we explored how learnings and developments in the hospitality industry could help to inform the development of our future cities, including innovative hospitality companies looking to offer flexible use of space that will become a cornerstone of our cities in the near future. Expanding on this theme, creating a vibrant community spirit fosters a sense of belonging, which in turn makes buildings more attractive to potential tenants. Providing spaces and services that are open to the public, such as restaurants, lounges, recreational facilities and retail adds social capital to a building. This enhances its reputation but also increases foot traffic and diversifies potential revenue streams. This community-oriented approach represents a strategic shift in value creation in the commercial real estate sector.

To highlight a few recent examples: 22 Bishopsgate in London offers free tickets to Europe’s highest viewing platform, but with the ability to spend money at the top on food and beverages. The owners also created a further revenue stream by permitting private hiring of the area as a premium event space. The Cube in Birmingham contains office units, but additionally a boutique bowling alley and various dining options. The Social Hub’s hybrid co-working / accommodation offerings across Europe are focussed on fostering genuine community connection through specifically curated spaces, and such spaces are proliferating, with The Social Hub reportedly looking to spend some £250m on building its UK portfolio through the acquisition of distressed office assets in the near future.  

Do you want fries with that? 

“Hotelisation” goes hand-in-hand with the “digitalisation” of commercial real estate and is revolutionising the tenant experience. The demand for highly personalised experiences is supported by the integration of smart technology into office buildings which provides real-time data insight on occupier behaviour. This allows for tailored amenity offerings which cater to individual preference. 

Artificial Intelligence (AI) is unsurprisingly playing a pivotal role in personalising customer experience. RENAI by Renaissance (part of Mariott Bonvoy’s portfolio), an AI-powered concierge at select Renaissance hotels, provides tailored dining recommendations and local attraction suggestions to guests. Such tools represent a new frontier for guest experiences, with similar developments likely soon to follow in the commercial real estate sector. Such developments will, no doubt, provide a premium experience where designed to supplement and support human interaction and genuine social connection in commercial buildings. The key to success is likely to involve finding the right balance between people and technology and mastering how the two can be aligned to provide a seamless service.  

Closing thoughts

The Slough branch of the fictional paper company Wernham Hogg as portrayed in “The Office” is close to being unrecognisable to today’s commercial tenant. Employees no longer see “the office” simply as a monotone and utilitarian workplace. The hotelisation of real estate represents a shift towards creating working and living spaces that reproduce the comfort and convenience of hotels. Inflexible space let on rigid terms no longer cuts the mustard - tenants want a customer-focused, dynamic environment that promotes social cohesion with high quality amenity offerings. The hospitality industry has been at the forefront of such innovations in recent years, and landlords and developers are looking to the experience of those innovators to reconceptualise their space as a service.