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Are you looking for a share in your favourite hotel chain? Alex Frew McMillan looks into the rise of private branded real estate in SE Asia

"Almost any luxury hotel chain you care to mention has been selling residential real estate, typically villas, as part of any new Asian property it develops"

The name game is increasingly important in real estate. Forget about location. Branding is where it’s at.

Aman Resorts, Banyan Tree Hotels and Resorts, Capella Hotels and Resorts, The Four Seasons Hotels and Resorts, the Jumeirah Group, Shangri-La Hotels and Resorts, Six Senses Resorts and Spas, the St. Regis Resort and Residences, the W Hotels Worldwide… almost any luxury hotel chain you care to mention has been selling residential real estate, typically villas, as part of any new Asian property it develops.

The reason for the hotel chain’s interest is clear. They get cheap funding from customers that buy into the resort, with the owners encouraged to buy off plan, before construction starts. It’s better to get ‘free’ cash from paying customers than to borrow from banks to put up a building.

But what do the customers get? Is it just a name?

“A big factor contributing to the continued success of the Banyan Tree Residences sales is the confidence purchasers have with the brand,” Robert Collins, the Managing Director of Savills in Thailand, said after a sales exhibition at the Landmark Mandarin Oriental in Hong Kong in May.

The company had just taken reservations on 18 properties at the Banyan Tree properties that sell private real estate - Phuket, Bangkok, the Seychelles, Lijiang in the hills of Yunnan Province in China, Bintan just across from Singapore in Indonesia, and Mayakoba in Mexico.

“The multitude of new developments in the resorts sector regionally seems to have little impact on Banyan Tree sales, as purchasers are lured by Banyan Tree’s strong investment and lifestyle combination, which is almost impossible to compete with,” Collins added.

So they hope anyway. Cut through the marketing speak and it’s clear what buyers into Banyan Tree Residences are really buying – a piece of the name, and part of a hotel chain. There is a guaranteed return of 6 percent for six years on their purchase price, with an option to renew.

Buyers in the Banyan Tree Residences have an ‘annual entitlement’ of 60 days to use their property, which they can swap with owners of residences in other Banyan Tree resorts. But they can’t stay permanently in their properties, which the resort rents out in its hotel pool.

Cynics would say that such ‘ownership’ schemes are little more than a glorified time share. Sure, the owner does have equity in the property and can sell it later. If things go well, you get capital gains. But owners can’t spend unlimited time there, so you have to wonder who really owns what.

That’s not the case with Aman, the grand-daddy of branded real estate in Asia. Its Amanpuri resort opened in 1988 and has 30 private villa homes that still set something of a standard for branded private property. The company says no villas have come on the market for some time now, but the word is that they fetch around US$13 million.

Aman is now selling seven villas at its property on Pamalican Island in Palawan, in the Philippines, called Amanpulo. The owners can work with the company’s architect to shape their home to their liking, albeit within the style of the resort. Each home will have as many as nine different pavilions, all with at least 50 metres of beach.

This doesn’t come cheap. The smallest lot, at 4,900 square metres, costs US$4 million, including construction costs. But owners do get to do what they want with it – they can live there, use it as much as they want, or rent it back through the resort. The company manages and maintains the property.

The individuality of a property is an issue with branded real estate - different hotel chains allow varying amounts of individual design. Some will allow you to pick your own interior designer, or work with one they’ve picked. Others sell you what’s on the rack, without the option for you to really make the home your own.

The St. Regis recently unveiled its first private-property project in Asia, in Bali. It is structured so that there were 42 villas for sale to private owners that fall within the ‘hotel’ side, which also has another 81 rooms that are owned by the hotel. They are standardised, to comply with the St. Regis brand.

But the owners of the 22 residences have more freedom and can come up with their own design. The residences are unfurnished. The developer has brought in Louise Kou and her Central-based company, Kou Concept, to design the interiors of the residences and work with the owners - but it is optional whether to use the Hong Kong firm or not.

At the launch, the villas ranged from US$700,000 to US$1.1 million. But the residences, with those extra ownership perks, started at US$975,000 and ran up to US$2.05 million.

On the one hand, branded property offers the assurance that an experienced hotel-management company is overseeing your property. On the other, you give up the individuality of something you own outright.

It’s the burden and the blessing of buying into a brand. Tourists may be attracted to stay in the resort because they like the hotel company’s style. But that means there needs to be a degree of homogeneity across the brand’s different properties.

At Soneva Kiri, the first private real estate for the Six Senses chain is on sale. The resort sits on an island at the eastern extremes of Thai waters in the Gulf of Thailand, near Cambodia, and is due to open in April 2009.

The company is developing 20 villa compounds, each with around 1,275 square metres of indoor and outdoor space on plots of 3,380 square metres apiece. There’s a double-storey main residence and at least two guest houses, and plenty of outdoor decking for relaxing or entertaining, even a fancy tree house for the kids to stay in.

Again, owners can customise the setup, but within reason. Owners can also do what they want with the property - stay in it full-time, keep it for their own use, or lease it back through the hotel’s rental pool.

Six Senses’ English founder, CEO Sonu Shivdasani, and his Swedish wife, Eva, the Creative Director, say they want to offer owners the kind of opportunity they themselves were looking for when they started the hotel company. They originally wanted to have a home in the Maldives but, since private ownership of land by non-Maldivians isn’t allowed, started a resort instead. They now have a home at Soneva Fushi, on Kunfunadhoo Island in Baa Atoll.

Eight of the villas at Soneva Kiri have sold since they went on sale last September, though sales have slowed to a trickle this year. Prices were as low as US$2.75 million when the project launched, but the 17 hillside houses now start at US$4.5 million, and the three beachside homes cost US$7.5 million.

That’s a lot of money to pay for a piece of a brand. You can of course get real ‘brand equity’ in a much simpler way than through the expensive and drawn-out process of picking a property. With a publicly traded company such as Banyan Tree Holdings, which listed on the Singapore Stock Exchange in 2006, or St. Regis or the W, which are both part of Starwood Hotels and listed on the New York Stock Exchange, just buy the stock. Sell it anytime you like.

Hotel-company shareholders undoubtedly get some nice perks. But holding a share certificate is not nearly as sexy for the buyer (to tell his or her buddies about), and not nearly enough of a commitment to the hotel company for them to really feel the love.

“It is in the most basic form a property sale,” Ariel Vera, the Group Managing Director at Banyan Tree Holdings, said in introducing the company’s residences. “But to be an owner is to be an owner of the Banyan Tree brand.”

He says the two- to three-bedroom villas that the company has for sale in places such as Phuket offer “romance and intimacy, and an opportunity for couples of any age to re-find each other”.

Who wouldn’t want that? The pitch seems to be working in Hong Kong. When the company had a lunch last year to introduce the residences concept, 43 percent of the buyers at the Banyan Tree Residences in Phuket were from Hong Kong.

Staff members say Executive Chairman Ho Kwon Ping, who founded Banyan Tree in 1994, believes the brand is the best way of building a relationship with the customer for most companies. The only other way of commanding their attention is to discover a new formula or invent a totally new product, not something hotel companies do every day.

But what happens if a hotel company decides to sell its branded property? Many hotel companies only have management contracts to run a property, and don’t own it, so the property may really belong to a local developer, who may have sold shares to any number of private owners that have bought in.

Advocates of branded property say the hotel chain and the developer both have an interest – not to mention legally binding management or ownership contracts - in keeping the property running at a high standard. If they did sell or switch management, it would likely be to a management company of an equally high standard.

But do brands go bad? Do properties outlive them? The branded era is perhaps too young to know for sure. Only Time Will Tell.™