Location, location, location... it's not that simple
We, hoteliers, know by heart an epizeuxis that can easily be seen as a mantra that we like repeating so much that we cannot help but strongly believing in. We all know that for a hotel to succeed, before anything else, we need to follow these first three rules:
Rule No. 1: Location
Rule No. 2: Location
Rule No. 3: Location
This is very true.
But in fact, it is a bit more complicated than that: The definition of ‘location’ varies if we are talking about a luxury palace or an economy backpacker property.
What’s more, the best location will not be equal for all properties within the same category. To make it simple, let’s classify them at this time only by economy (1-2*), midscale (3*), premium (4*), luxury (5*). For a much better and complete classification, you may refer to STR’.
Let’s take the example of a midscale hotel – again, I simplify to the maximum:
Is your hotel a business only property with limited food-service, or a family vacation destination?
Is it an internationally branded hotel or is it family owned and operated?
Is it an all-suite or a property with a mix of room types?
Obviously, the meaning of what defines the ‘best location’ will vary according to how you answer these questions.
But that’s not it!
What seems to be the best location at first glance may not be any more once you search deeper.
Before selecting a location for your hotel, you also need to review the city’s local urbanism plan: You might be surprised to discover that what seems to be a prime location today will become in 5 to 10 years from now an industrial zone, for instance, that will not match your property’s design and aimed market segmentations.
Take the example of the Hyatt Regency Barcelona Tower – that opened in 2006 as the Hesperia Tower. This beautiful 5* hotel is located in the Bellvitge area of Barcelona, Spain, a fine but mostly working-class neighborhood of the city. Not the kind of location where you would expect to find a luxury property – a midscale hotel at best would seem more appropriate. You may wonder why the Hesperia Tower was built in this area then… At first glance, the reason seems obvious: Bellvitge is close to the L’Hospitalet de Llobregat, the district where to find Fira Barcelona, the huge convention center home in particular to the yearly GSMA’ MWC that puts the capital city of Catalonia on the map of the world’s most important conventions. The Hesperia Tower promotors were hoping that Fira Barcelona would change the Bellvitge district, gentrifying it. It didn’t happen: A close look at L’Hospitalet de Llobregat urbanism plan would have shown that an Ikea superstore was going to be built close to Fira Barcelona, guaranty that the gentrification of the area will never happen.
If we leave the shore of the Mediterranean to the banks of the Thames river, we get a very different story with London’s Canary Wharf. What was called from the mid-19th Century the West India Docks, one of the busiest docks in the world then, became in the 1960s a waste land, home only to the poorest of the poor. After trying (and failing) to revive the area in the 1980s, a new urbanism plan was put in place in the late 1990s, with a boost in the early years of the 21st century. At first, the local population did not believe that the area would improve. Nevertheless, gentrification was on the way as the Docks were transformed, new buildings popped up, new luxury shopping areas opened, public transportation was greatly improved. Major corporations from Barclays to Reuters made Canary Wharf their head-office home. Pre-COVID, Canary Wharf was the biggest single center of employment in the United Kingdom with more than 120,000 jobs on site. (Things became a bit more difficult since COVID with the fast development of the hybrid, also called Work From Anywhere (WFA), practices)
Initially, many didn’t believe in the renewed West India Docks. Until the Novotel London Canary Wharf, nicknamed the ‘coolest hotel’ in London, opened its doors: Despite the mess that were the Docks at time of opening, the Accor group (owner of the Novotel brand) understood the area’s long-term opportunity. A successful bet. Since, from WeWork (that opened two years after the Novotel) to the London Marriott Canary Wharf, a great number of international businesses and hospitality brands opened in the area. Canary Wharf was a success that could have been foreseen only by studying carefully the district’ and Greater London’s urbanism plans.
Location, location, location. Yes, but location for what purpose?
Sometimes, selecting a location for a particular brand is a bet to the future. For instance, in the early years of the 21st century the Accor group decided to launch in the Middle East their economy brand, Ibis, a market monopolized at the time mostly by 5* brands, and only few 4+* properties. In the mind of most, bringing a true economy brand was doomed to failure and almost no one believed it could succeed. To stack the odds in their favor, Accor Hospitality linked the Ibis hotel to Dubai’s World Trade Center, home of countless exhibitions and conventions that bring visitors from all over the world – hence guaranteeing a stable stream of revenue from an overseas clientele already familiar with Ibis and other economy brands. Despite an upgraded lobby design, the Ibis Dubai World Trade Center offers the same level of service and room standards as their counterparts around the world.
Against all expectations, the brand was relatively quickly a success – time for guests to adapt to the economy level of service! -, including within the local population. Soon after, more Ibis properties opened (this time with a regular branded lobby), shortly followed by competitors’ own economy brands such as Holiday Inn Express, Days Inn or other Hampton by Hilton!
The Dubai World Trade Center location was selected to protect as much as possible the introduction of a new product in a market where an economy brand was not expected or even desired: The location selection allowed some guaranteed revenue, an international exposure, a real-life test.
In other words, “location, location, location” is a much more complicated equation that it looks like at first!
So many parameters are involved that it takes great care to select the proper location for your next hotel. There are many more parameters to consider, and you’ll find a lot of online Web sites and blogs that will give you some good and less good hints. But none of them explains in detail the importance to understand how a city is living and developing, and how a carefully selected location can change the market perception, hence opening new opportunities.
We, at Amsa Hospitality, we learn from the successes and failures of our competitors and precursors. It helps us select the best hotel location, not only for today, but also for tomorrow and the day after tomorrow.