Luxury dominates the branded residence space, but as the market matures and expands geographically, more midscale developments are coming on stream. As this happens, fee structures and contracts between developers and brands will change, say industry experts.
According to Savills, Marriott International is the market leader in branded residences, a position it has held since 2002, followed by Accor, Four Seasons and Hilton.
More accessible price points
Marriott has around 140 branded residences in operation and a further 140 in the pipeline, notes Julien Laloye, the company’s director of mixed-use development: “Eighty percent of our existing stock is luxury but recently we’ve been working on what we call ‘premium’ branded residences: Sheraton, Marriott, Westin. These offer lower price points for purchasers, but they are still buying an amazing secondary residence.”
A recent example is a Marriott hotel with one-to-three-bedroom residences (prices starting at €330,000) next door to a Westin hotel with two-and-three-bedroom homes (prices from €675,000) at the Salgados Resort in Portugal’s Algarve. The developer was Kronos Real Estate Group and the properties are managed by Highgate Hotels.
Mitra Ghamsari, founder & CEO, Persepolis Investments highlights the untapped potential for midscale branded residences: “There is a whole mid-segment, especially people who want to buy timeshare/rental programmes. That whole area, in urban areas at least, has not been touched yet. There are lots of cities – emblematic luxury cities - that haven’t even started with branded residences. There are tons of opportunities for us.”
Laloye agrees: “We’ve barely scratched the surface of branded residences yet. We have great lifestyle brands in the lower segments like Moxy, and that’s something that could be explored in the future.”
Wyndham Hotels & Resorts is another global hotel company focussing on mainstream branded residences. Around five years ago, it began building out its midscale and upscale branded residence pipeline, with familiar brands like Ramada.
“We are now signing more midscale branded residence deals than ever before and have a strong pipeline,” says Wyndham’s president EMEA Dimitris Manikis.
Change in the air?
But as competition ramps up, will brands need to offer key money or other incentives to secure branded residence projects, as they increasingly do with pure hotel projects?
Laloye explains that key money is usually given after a hotel opens and that’s because the developer has been spending its own money during the construction phase (3 to 5 years). There is then a further one-to-two-year ramp up period before a developer will start to see significant returns on his investment.
In contrast, branded residences give developers a cashflow return much earlier on by securing deposits from off-plan sales.
“With branded residences, as soon as we sign a deal with the developer, the sales process starts and we start getting royalty payments as the deposits come through,” Laloye says.
Marriott typically takes 5 or 6 percent in royalties from the sale of apartments, with Laloye noting said the level of royalty payments was justified because Marriott is bringing its sales and marketing machine to the table.
“We commit a lot of resources. We have a dedicated sales and marketing team that supports the developer during the sales phase. You’ve got to have a sales team who know how to sell the buyer benefits. We use our internal tools – 200 million loyalty programme members - and tools to improve the visibility of the project.”
Negotiation
He suggested that rather than paying key money, a discussion of the terms of the royalty payments would be more appropriate.
Mark Keiser, president - development at Viceroy Hotels & Resorts notes that his company takes a royalty on sales of 4 to 5 per cent, adding: “While key money is not something I foresee the brands doing for branded residences, I do think there is a way to align interests. And when you have that alignment, the tools and resources that a brand brings get super charged because there’s a financial motivation to deliver.”
He explains: “If sales come directly to Viceroy and not via a broker, the developer saves on the broker fee and shares some of that saving with us, so that motivates us to activate our loyalty and membership databases.”
Ghamsari suggested that brands would need to invest more or take less in the future: “Especially with standalone branded residences, the contractual relation between developers, owners and operators is going to evolve.”
“As competition increases, developers and owners will be requiring a slightly different contract format over time, because even though developers are getting money back early, the brand is getting the long-term benefits of brand exposure.”
Madrid-based Persepolis Investments has two luxury branded residence projects underway, and Ghamsari notes Madrid could not be considered an emerging market anymore as the appetite for luxury branded residences in the Spanish capital now on a par with other gateway cities like London and Paris.
The signs of change are already here: Wyndham has more branded residences in CIS, Georgia and Pakistan than anywhere else. Midscale branded residences are emerging in American cities like Charlotte and Charleston. Nobu has chosen Manchester as the location for its first UK branded residence, rather than London or Edinburgh.
The branded residence sector is expanding, evolving and scaling up to serve the needs of the growing middle classes throughout the world. And as this happens, the contractual terms between developers, owners and brands will change too.
Quotes taken from the ‘Branded residential market: Building value through integrated living’ panel session at IHIF EMEA 2025.