WEALTH

Branded Residences: Balancing Profit and Risk

Despite the onslaught of COVID-19, one asset class that has remained resilient in the face of adversity, is real estate. With the rich relatively unscathed by the economic devastation, and some billionaires like Jeff Bezos who even saw his wealth continue to increase during the crisis, the demand for luxury properties are expected to pick up gradually after the cessation of lockdowns, with Asia taking the lead.

One particular property sector that has been gathering interest even before the COVID-19 is that of hotel-branded luxury residences, which have seen a steady upward trajectory over the last couple of years, with various hotel brands such as the Ritz-Carlton, Mandarin Oriental and Four Seasons expanding their residential portfolios worldwide, with a strong focus on Asia Pacific.

The demand for upscale and luxury hotel branded residences is riding on the wave of the rapid rise in the number of affluent individuals over the recent years. Within Asia, pipeline projects in upscale to luxury segments are highly concentrated in Southeast Asia, which accounts for more than 90 per cent of total pipeline stock. Almost 50 per cent of the upcoming launches are associated with luxury hotel brands.

Many high net worth investors in Asia, particularly in Thailand, Vietnam, and the Philippines, see the vast potential in branded hotel residences because these premier serviced residences replicate the hotel-quality services and luxury amenities that many condominiums may not have, not to mention the sublime experience of waking up in a luxury hotel every day. It is therefore hardly surprising that Thailand leads the region by boasting a total of 30 projects and more than 4,700 units, accounting for 29 per cent of the total upcoming residential units. Philippines and Vietnam are just behind Thailand with 12 and 8 projects, respectively.

Outside of Asia Pacific, Latin America is another major growth market. The number of branded residence projects in Mexico is set to more than double in the coming years as Marriott International, Accor and Hyatt are poised to launch new projects in both resort and city locations.

Luxury branded developments are also attractive to investors because they come with intrinsic value built into the proposition: Extensive amenities, attentive service, lifestyle benefits, and the backing of internationally recognised hospitality brands. Moreover, such properties will almost certainly be situated at or near a prime location, so that enhances the price premium for resale and rental yields.

Besides the limited supply of branded residences, which protects the prices of the investments, there is also the advantage of being easier for owners to rent out their apartments in hotel-branded residences, given the brand recognition, and also the fact that many of them will have their own rental pools or programmes already set up along with an existing pool of potential clients with an affinity for the brand. Moreover, there is also the assurance that investors get from buying a branded product in unfamiliar markets.

So the next time you are thinking of investing in luxury properties in unfamiliar or unchartered territories, leveraging the trusted brand name of the Ritz Carlton or Four Seasons might just be the perfect balance between risk and profit.