It hasn’t even been a year since Yotel announced the launch of its branded residential component, YotelPad, in January. The brand’s pipeline already has properties set for Switzerland, Dubai, Park City, Utah, and Miami — none of which is yet operating.
Set to open in late 2020, YotelPad Miami is being developed by New York-based Aria Development Group and joint venture partner Kuwait Real Estate Company (AQARAT).
HOTELS spoke with David Arditi, a founding principal at Aria based in the company’s Miami office, about what drew them into the YotelPad concept.
HOTELS: This is one of your company’s first ventures into residential with a hotel component. What made you go in that direction?
David Arditi: A couple of reasons. One is that we identified an opportunity in the market for two things. We felt that a young professional/millennial-focused brand like Yotel was missing in the downtown Miami marketplace. And not only that it was missing, but also that it corresponded very much to what the demand has been locally. The market here, it's a lot of very high-end product — Four Seasons, Mandarin, Intercontinental. And then the sort of Holiday Inn, Courtyard-type products. And while those are all very good products within their respective categories, we felt there was an opportunity to play something in-between that was not too high-priced, but still design, lifestyle and experiential enough that it would work well for the downtown Miami market.
H: Why was including branded residential on this a good fit on your end?
DA: On the residential side, Miami, and South Florida in general, is a market that loves brands. And we've seen a lot of brand extension into the residential space, be it from hotels like Four Seasons and Ritz-Carlton, to Armani, Aston Martin and all these other consumer names. So, it's clearly a market that likes brands, and where the branding exercise has resonated well. Our thought was, why should that be reserved to people who can only spend US$3 million to US$5 million? Why can't we have it for people who can spend US$300,000 to US$400,000? Because everyone likes the service, everyone likes the lifestyle experience that comes with it. But historically, it's exclusively targeted to the very high-end buyer on the residential side. And so, to us, we thought there was an opportunity to do something that was targeted towards a younger audience but that still delivered the same benefits and values as the much fancier products.
We also had the thought in mind that these types of products that are flexible from a rental standpoint are very attractive to a market like South Florida, where a lot of the owners are absentee owners, investors, or second or third homeowners. It’s that ability to own something now that is of high quality, high design, in a location that people really like, because there's a lot of great stuff happening in downtown Miami. With a brand that resonates, and the ability to do a flexible short-term rental program, we thought it checked a lot of boxes, which is why we went with the decision to implement this type of concept.
H: What’s your projected ROI in terms of occupancy goals for the first year?
DA: Definitely the projections are in line to match or exceed what the market does from an occupancy standpoint. Because that's traditionally what Yotel does in the market where they're active.
H: And where do you see branded residential heading in the coming year? What is the mix? Is it going to be strictly residential, residential as part of mixed use?
DA: I think it's something that stays. I think if you can make it work, and the Yotel brand seems very open to it, I think it's neither a new trend nor a passing trend. It’s something that will continue, and I think that makes sense in a lot of projects. So, in our case, we have straight hotel rooms, shared amenities, and then the residential program on top. And I think we'll continue to see that business model continue for sure in South Florida in the future because it's logical relative to the demand both local and foreign.
H: We've had a really long up market in hospitality. How do you see that changing in a down market? Assuming a slowdown, how viable is branded residential in a market that might be decelerating?
DA: Well, I think there's two ways to look at it. I think about A, does it drive a premium to other non-branded products to the market? And B, does it help velocity? So, velocity of absorption. In our case, it's driving more velocity and absorption than it is pricing. But again, in the context of a down market, that’s one of the reasons our products start at US$275,000 and our most expensive unit is around US$450,000. I don't think there's anything that's recessionproof. We certainly wanted to do something that skewed that US$500,000 price point, and that was really accessible to a very broad audience, which is we went with (Yotel).
And then generally, as a firm, we tend to capitalize our deals very prudently. So, we do that knowing that the real estate market is cyclical, and has problems, and we want to weather out the storm in that way.
H: Your company is one of the first in the U.S. experimenting with YotelPad. Are you nervous about it, excited? Do you feel confident about the product?
DA: We feel very confident about the product. (Yotel) has a terrific management team and terrific ownership. And obviously that’s first and foremost for us. And then you've got people with the right experience in the right division behind it. Their solo hotel properties that are currently open or that are about to open are performing very well, they're quality products in very strategic locations. They're open in Boston and performing quite well, they're about to open in San Francisco, and obviously New York goes without saying. Their European properties and Middle East properties are also going well, very thoughtfully designed and developed. It was definitely a team that we were excited to partner with.
H: And you’re looking to partner with them again?
H: Can you speak to what areas you're considering?
DA: Our platform is New York, D.C., and Miami historically. So, generally what we've looked at together has been east coast of the U.S.