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SPOTLIGHT ON Siva Selvan, Head of Global Hospitality Real Estate, Long & Foster Commercial Division

By Sharon Hirschowitz, Global Head of Media & Communications for The International Luxury Hotel Association
23 June 2022
5 min read
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Chileno Bay Resort & Residences, Auberge Resorts Collection

The luxury hotel residence model has seen a rise in popularity in recent years. Who wouldn’t want to bring the experience of living in a hotel home? Siva Selvan weighs in on this growing trend and the innovations and challenges for the luxury hotel industry. 

Has there been a shift in hospitality brands towards residential?

Hotels have observed an acceleration in residential business unit developments even a few years before the pandemic. From a guest perspective, residential business units became more desirable with the pandemic. New guests experienced with longer stays combining work and vacations with the remote work concept drove this business model and continues to be key in development projects to fund the overall development and deliver attractive returns.

The residential component of leisure hospitality has changed since people’s lifestyles have evolved. The lines between work and leisure have changed, and hotels and resorts need to adapt. There is a clear distinction between a hotel guest and a private residential guest, as their needs and spending patterns differ. Historically residential performance was trailing when compared to hotel occupancy except for holidays and festive periods.

Developers and operators are more innovative in design, concepts, and how they promote them. It’s apparent now that this trend is here to stay, and they are finding ways to adapt these to their businesses.

Hotels must be able to integrate those two guests, and the hotel guest; and the residential guest, and meet both their unique needs. Hotels were able to convince lenders and investors buy-in, despite the complexity of these assets.

How are hotel brands supporting the residential component of their hospitality projects?

Hotels leverage existing infrastructure and culture that is accustomed to providing highly personalized service. Today, hotels have a dedicated residential team that handles owner relations and financial support to seek these assets’ highest and best use.

Branded residences emerged as a real estate market segment about 20 years ago, when hotel brands started creating mixed-use developments. Adding a residential element to hospitality projects made it easier for developers to get financing and a more immediate return on investment while simultaneously benefiting from a long-term revenue stream on the hotel side.

For hotel companies, branded residences were a natural brand extension for luxury groups like Aman, Four Seasons, Ritz Carlton, Rosewood, Auberge, Mandarin Oriental, Peninsula and Montage trading on a tradition of hospitality, service, and high-end amenities. After all, who wouldn’t enjoy living in a place that shared concierges, housekeepers, celebrity chefs, and spas with the most discerning hotel guests? Simply put: “The concept of branded residences, from its inception, has been based on the provision of services and facilities that one would typically find in a hotel.”

Aman New York Residences

Are they able to operate at the same standards with the current staffing challenges?

During the challenging time, hotels have received great responses from private residential homeowners. They have been delighted to stay in the residential units they own, and many have used their homes even more than in the past. Hotels have also improved owner satisfaction during these past two years. 

In these conditions, it is becoming more and more challenging to attract and retain quality hospitality staff to service these long-stay residential guests. While many hotel restaurants have been able to reopen, they can only offer a limited-service capacity with lengthened wait times. This consistently challenges their ability to deliver world-class guest experience 24 hours a day, seven days a week to these guests and usually spends a significant portion towards ancillary hotel revenue. These challenges continue to grow, creating complex working environments for the remaining hotel staff and making it tougher to maintain profit margins. 

What have hotel operators learned from the last two years, and how will it impact future strategies? 

Residential will become increasingly important. Sales of projects are at record pricing and pace. Many new homeowners see the benefits of owning homes that are part of a branded hotel project. More than anything, it has further validated hotels’ business proposition and belief in residential. 

Understanding human capital’s return on investment (ROI) is the first step toward overcoming hotel staffing challenges. Hotels must develop more cost-effective and efficient practices that increase staff retention, customer satisfaction, and improved long-term profitability. According to the Bureau of Labor Statistics, the Hospitality sector has an annual turnover rate of 73.8% – worse than ever due to COVID. In other words, more than 6% of staff will leave their job every month. Understanding the ROI of staff retention is essential for boosting (or even maintaining) your profit margins and business economics. 

Rosewood, Washington D.C.
The Ocean Club Bahamas – A Four Seasons Resort

To figure out the ROI of improving staff retention, the organization will want to have a clear understanding of the following three key performance indicators (KPIs):

Human Capital ROI = (Revenue – Operating Costs – Employee Compensation) / Employee Compensation.

Training Investment Value = Total Training Investment Headcount.

Turnover Rate = (# of Separations / Average # of Employees) X 100.

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