If we talk about branded residences, Accor needs to be part of that discussion. Accor is set to open one branded residential project every six weeks throughout 2023 and 2024. The global hospitality group operates branded residences on both a managed and franchised basis across twenty-two brands, with a worldwide network and pipeline of 130 branded residential projects.

And the man leading it with his team is Daniel von Barloewen, Head of Mixed-Use for Europe, Middle East, India, Africa & Turkey at Accor, so Marina invited him to be our guest for the tenth episode of the IDEEA podcast.

For anyone interested in branded residences, this is a valuable conversation to listen to as Daniel explains how branded residences started, what elementary criteria can be used to evaluate a project and market, and what audience segments tend to work with branded residences.

Take the next 20 minutes to listen to the conversation and find out which markets Daniel would like to build a presence with Accor if not already done.

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TRANSCRIPT

Intro: Welcome to the IDEEA Podcast, a channel for the IDEEA Hospitality Investment Forum, which is an annual gathering for the Hospitality Investment Community in Eastern Europe. Tune in to insightful conversations between the IDEEA team and hospitality investment leaders and innovators across Europe. And now let's dive right into today's episode.

Marina Franolic: Hello everyone, and welcome again to IDEEA podcast. We're running these interviews, ahead of the IDEEA Hospitality Investment Forum that is taking place in Athens on September 26th-27th. Today I have with me one of our speakers, Daniel von Barloewen from ACCOR. He's head of Mixed-Use for Europe, Middle East, India and Turkey. And I'm very glad to have Daniel with me. Welcome Daniel.

Daniel van Barloewen: Thank you very much. Delighted to be here Marina.

Marina Franolic: So Daniel, we just talked a little bit on what you do. So can you tell us Mixed-Use is quite a big area? Can you tell us a little bit more what is your main duty?

Daniel van Barloewen: Sure, no problem. So within ACCOR Mixed-Use, and when I say ACCOR that covers both the ACCOR brands, but also all of the brands under our lifestyle platform and it's more as well. So that's a total of 22 other companies, 43 brands with which we do branded residences. We have within Mixed-Use, probably 75% of what we cover is branded residences, the rest includes golf. So we manage a number of golf courses across the world in different continents, private member clubs, co-working, etc. But like I said, the vast majority of my time is spent looking after three aspects of branded residences: the development, the brand advisory support services to our development partners, and then also the residential operational support to the properties themselves once they're up and running.

Marina Franolic: Now you definitely have a clear overview of everything within the Mixed-Use. So we know that developing residences, especially the branded ones, means returning the investment much faster than when investing only in a hotel property. Are there any other reasons why investors decide to build residences, alongside hotel and brand them?

Daniel van Barloewen: Sure. I mean, it varies depending on the investor profile. So for sure, you can easily say that for some, it's elements of trophy, ego, prestige. For others, it's purely financial. And for others, it's a mix between the two. Depending on which brands you're looking at or which operator, you would find that between 70%-to 80% of luxury brands or luxury hotels currently in the pipeline around the world include residential components. The percentage within the premium segments has continuously increased over the last decade. And we're also seeing a growing interest every single year in even midscale branded residences, as well. So it's not just a luxury product offering, it's across the three. Predominantly, investors are able to sell them simultaneously when developing the hotel. So it has a significant impact on the capital stack, it makes the IRR of the project a lot more attractive. And on top of it, depending on where the project is, you also have the ability of generating further ongoing income streams by offering an optional rental program on the project.

Marina Franolic: And you just said that mostly 70% is in luxury and the rest is in other segments. So how do you see and also, I guess that most of them are in leisure, at least in this part of the world, southeastern Europe. But if you look overall, let's say, in Europe, do you see that it will be coming more into cities as well, or it will just remain focused on maybe more leisure. We know that Paris, London and the key cities have them developed already, but what about other places?

Daniel van Barloewen: So in Europe, it has all the features to offer a great blend between the two. Historically branded residences started in the late 2000s in the USA. The next place they started was in Southeast Asia, where it was a mix between the resort segments and city segments, and then it picked up a lot in the Middle East, led by the UAE and in Europe as well. In Europe, like you said, predominantly resorts. That said, Istanbul and London are amongst top locations in the world for branded residences. Germany is seeing a number of projects already. You've got a couple in Austria, Italy, Spain, Portugal. So it definitely is increasing. The cities, for it to work it needs to be a tier one or tier two city with either strong, very strong domestic demand from buyers and domestic wealth, or an international city which attracts international buyers as well. So as long as you can tick those boxes, then there's a huge potential for success. And it's not just in emerging markets or not just in completely established markets.

Marina Franolic: You said before that there are two main reasons, one is ego, second is financial focus. So let's talk a little bit about the financial one. Is there a percentage on how much more the residence can be sold for instead of just being unbranded.

Daniel van Barloewen: For things like that, we always refer our development partners to go and commission third-party studies from independent advisors. They extensive experience of looking at this because you can't give a simple answer and pluck a number out of the air because there are so many different variables. You have the timing of the launch in terms of the market, the budget and the marketing strategy of the developer. Were they also more focused on the number of sales per year they could do, or the price that they were achieving on the units. So the many instances of identical brands even in the same city in the market at the same time, they were getting different premiums. What you can safely say is a number of the major firms, all consistently report an industry premium of around 31% for hotel branded residences. We've certainly seen that by doing analysis that we've commissioned off projects across different continents of our own brands, and consistently seen price premiums in those projects. But they will vary, you might get a lower price premium on some, and you're getting an extremely high price premium on others. And it will range between the brands as well. So it's not just one brand gets a higher price premium consistently than the others. It's very much sort of market-specific, timing specific and developer a specific of how it's marketed at that particular time.

Marina Franolic: It makes sense. Regarding this part of the world, do you see increased interest from the International, or from even local investors into mixed-use residences? And do you think that in time or maybe even you're seeing it already, you will have the branded residences without the hotel?

Daniel van Barloewen: Yes. So to back to the to both answers. Yes, I'll tackle the second one first. We are signing an increasing number of standalone branded residences every single year. We're also seeing in more demand from the domestic market in certain countries in the region as well. But historically, it's always been predominantly more international demand. But if you look at some of the projects within the region, you take the branded residences in Belgrade, they've sold to the diaspora, they've sold domestically, and they've sold to international buyers. The regions in Porto Montenegro likewise are sold to a wide range of nationalities. The cost in [inaudible 08:59] residences have also done the same. So certainly we are seeing progressively more and more demand also from the domestic market. But it tends to predominantly, in resort settings be majority led by the international market.

Marina Franolic: And if I would ask you, if you would have a choice where to develop a Mixed-Use here in the region, what would be your first, the one that you would most like?

Daniel van Barloewen: I think some of the markets, but then you sort of bring into the personal preferences as well of where I would have a second home. But I think anyway that you have like I said, a strong international buyer profile, so I would say countries like Greece, for sure. Croatia, absolutely, but it's very hard to develop in Croatia, with restrictions around planning and zoning have always been historically difficult. Montenegro is a country I've personally done a lot of work in over the years, and I love it a lot. So I look forward to seeing some of the projects there develop. So those predominantly. But then at the same time, you've also got markets, Poland, Serbia, those sort of offer non-resort, product possibilities. And I'm convinced that those are very exciting opportunities as well for branded residential.

Marina Franolic: Daniel, you mentioned at the beginning that it's not always luxury and there are more and more mixed-use projects that are also in other market segments. When someone tells me makes us also think quite often luxury. Can you tell us what is happening with the segment? Is it really -- you said 70% is luxury but do you see that the other markets are now growing, and there's possibilities what the owners actually get by having a midscale brand, but also branded residences?

Daniel van Barloewen: For sure; absolutely Marina. Historically it's been luxury and that's why people think they have to have a luxury brand. But the market's depth is a lot bigger in terms of the number of people who can afford a property, as you start moving down, especially in the resort segment. It becomes critically important because people are looking at it as a second home. So they know, they also want to be able to get rental income from it and it has to make economic sense. And a good example of that is we're doing some recent analysis of our opening in our pipeline, and 74% of our existing open branded residential network is in the luxury segments. But if we look at the pipeline of our signed deals opening over the course of the next five or so years, 49% of them are in the luxury segments, 41% of them are in the premium segments, and 10% of them are in the midscale segments. So that really shows strong growth in premium and midscale as well. And that doesn't mean there are fewer projects being developed in luxury, actually, every single year is another record year of signings. So we keep signing more and more deals, it's just that as a percentage of what gets signed every single year, the amount in the premium and the midscale segments keeps increasing, which is wonderful to see.

Marina Franolic: And I have to say it's completely different from where you see the market growth for just hotels, it's usually mostly in the luxury segment. For some reasons, whatever, whichever hotel is now developed, at least in this region, I can tell it's a five star or it's a high four star. So it sometimes feels that if you will want to go for vacation, you will only be able to choose from luxury segment. It's actually great news to see that the branded residences are going into different direction. But now, following the Airbnb development a couple of years ago, and now more and more, this part of the apartments being for rent in different areas across Europe and we've discussed that it's possible to have branded residences without the hotel. So do you think that maybe this is going to be kind of the future of hospitality with the apart hotels and branded residences, where you will not necessarily have and also the lack of stuff in hotels, that you will really have limited options for hotels, but there will be lots of options for this type of accommodation?

Daniel van Barloewen: Well the standard on branded residences is very much a residential product. So there is one brand that we can offer which does have the ability of offering a short-term rental solution. But aside from that, the same with the other major operators, if you do a standard owner residence, it's almost invariably in an urban location and the buyers are people who are living there year-round. Or if they're buying, then they're buying it as an investment and they will rent it out on a six-month, one-year-plus basis. So they're not intended for short-term rentals and commonly with all of our peers, we have restrictions, which are placed in the sales and purchase agreements and the governing documents that people sign up to saying that I will not rent out from my units on a short-term rental basis. Because especially in a standalone, it completely devalues the quality of the offering. If you imagine this is your home, let's say you do this in Athens, this is your primary home you live here either as a tenant or as an owner, the last thing you want to see is me arriving with my 24-hour suitcase bag, checking in for a meeting in Athens. Where's the security? This is my private home; my children know the other children around here. I need to feel safe when they pop down the corridor and not have a random stranger. So that's one of the main reasons. So in standalone residences, you don't have short-term rentals. So to answer your question, it's a diversification of the hospitality offering in terms of the hospitality provision of residential management operations in standalones, but you'll still maintain hotels and co-located residences where there's a short-term program, with the exception of one brand, which I can happily talk about at the conference in a bit more detail.

Marina Franolic: And you mentioned the percentages, but how many projects overall in Europe are you developing momentarily or you have in the pipeline?

Daniel van Barloewen: So within Europe at the moment we have 13 projects in the pipeline scheduled to open over the coming years. The most advanced one in terms of the next open is not in southeastern Europe but it's actually in London. It will be the The Raffles Old War Office opening next year in London, which has seen a huge amount of spectacular press. Absolutely wonderful project, and one I definitely encourage people to go and have a look at.

Marina Franolic: They haven't thank you so much. I would stop here just because we have three more weeks until the event. You're going to be in Greece, we're going to talk again about the mixed-use and development of resorts and residences within them. And I think it's going to be very interesting to hear where you're looking to develop, what you are actually already have under development, and where ACCOR is going with all the brands and all the possibilities. So thank you so much for today and it's going to be a pleasure to see you in Athens in three weeks.

Daniel van Barloewen: I'm much looking forward to it Marina.

Marina Franolic: Thank you.

Daniel van Barloewen: Pleasure.

Marina Franolic: Bye-bye.

Daniel van Barloewen: Bye-bye.

Outro: Thank you for listening to the IDEEA Podcast, the channel for the IDEEA Hospitality Investment Forum. You can find a full transcript of this conversation in the Content Library on ideaa-forum.com. With other reports and insights. We look forward to welcoming you and your colleagues in person at IDEEA in Athens, Greece on the 26th through 27th of September 2022. If you haven't registered yet, please go to ideaa-forum.com to purchase your pass today and save before ticket prices increase. Please feel free to email us with any questions at hello@thebench.com.

Until the next episode, stay safe and keep well. Bye-bye for now.