The offer of alternatives to have at home the experiences and amenities of a hotel is on the rise in Mexico. Through villas and residences, the so-called branded residences – housing units within hotel complexes, which the owners can access – are making their way in the country hand in hand with some of the largest brands in the luxury segment, by that aim to place real estate with entry prices of 2 to 4 million dollars (mdd).
Branded residences are not a new format. The birth of this concept dates back to 1927 in Manhattan, New York, when the Sherry-Netherland Hotel opened its doors. However, it was not until the 1980s that they began to gain ground, mainly in the United States. Here, brands such as Marriott International, Four Seasons and Hyatt have incorporated the option to sell residences within their complexes.
The United States remains the largest market for this type of residences – with 32% of the units globally, which consists of a portfolio of around 55,000 units in just over 400 complexes, according to data from the consulting firm Savills–, but Mexico is among the top three markets outside the United States, along with the United Arab Emirates and Indonesia.
For Francis Muuls, chief operating officer of RLH Properties –which has an available inventory of 133 residences in Riviera Nayarit and Riviera Maya–, the appeal of branded residences lies in the amenities that usually accompany a hotel.
“In addition to the services that one receives, such as cleaning, cooking, laundry, it also offers an advantage: the owner of these residences has access to use the hotel’s amenities. It just becomes very attractive,” he explains.
In fact, services and amenities are the main motivator for buying a residence, according to a study by the consulting firm Knight Frank, which found that 34% of those surveyed would choose to buy for this reason. In addition to this, a quarter see it as an investment alternative.
Branded residences are usually sold in two formats, mainly: the so-called full ownership , which implies total ownership of the unit; and by fractions, which, as its name indicates, implies partial ownership of a unit, which is shared with other owners, and which gives the right to a limited use of the property per year. For example, RLH has options to divide the property among 12 buyers, each of whom is entitled to use the unit for one month of the year.
Deciding between full ownership or fractional ownership is determined by several factors. Julian Smaldoni, general manager of SLS Hotels –a hotel complex in Cancun that has 120 fully owned residences inside–, believes that limiting yourself to this format goes hand in hand with the market segment you are trying to attract.
“It is something very aspirational, very service-oriented at the level that only ultra-luxury can offer,” he says. “You have your house, your villa or your condominium, with three or four bedrooms, and it is above an ultra-luxury hotel. You can say you live in a hotel.”
Hence, these residences carry higher entry prices than the standard for an apartment or condominium. In the case of Ritz-Carlton Residences in Mexico City, for example, there are options starting at $825,000, but in cases like SLS the options start at $2 million, and at Mandarina, by RLH in Riviera Nayarit, they range from range from 4 to 16 million dollars.
Muuls believes that the inventory of branded residences is set to double in the coming years, especially in Mexico, with demand supported by the US market.
“It has been extremely successful, especially for the issuing market, the American market, which when it wants to buy a beach property turns to Mexico, the closest country that guarantees complete sun and beach destinations. The coasts it has, the infrastructure at the airport access level, makes it very attractive,” says Muuls.
Specialists consider that, for the vacation segment, destinations such as Los Cabos, Puerto Vallarta, Punta Mita and Riviera Maya, among others, could increase their offer of this type of residences, which also aim to grow in urban markets.
“There is a fairly important market in Mexico for purchases, not only with us. As a development destination, Mexicans who choose to live well like diversity, exclusivity and personalized service”, concludes Smaldoni.
