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MEMPHIS-Homewood Suites has been pursing the concept of joint builds of late. In this model, a Homewood–Hilton Hotels Corp.’s upscale extended-stay brand–is built within the same building as another Hilton flag, most commonly a Hilton Garden Inn, a midscale full-service chain.

Just this year, three Homewoods have opened side by side with another Hilton brand. In Silver Spring, MD, 90 Homewood studio suites are paired with 149 Hampton Inn guestrooms in a property that debuted in January. In March, a combination of 99 Homewood Suites and 151 Hilton Garden Inn rooms welcomed guests in March. And in July, a hotel with a total of 221 rooms, split between 98 Homewood Suites and 123 Hilton Garden Inn keys, opened in Downtown Jacksonville, FL.

Bill Duncan, global head of Homewood Suites and its mid-tier offshoot, Home2 Suites, says putting two brands in different demand categories enables cost savings in both the construction and operations of the property. “Each brand in a combo deal has a strong identity and a strong niche market and you are able to build a terrific performance story using both,” he says. “You can maximize the resources available from construction materials to project management, as well as architectural services and the back-of-house areas that can be common, such as the kitchen and laundry. Obviously, there are a lot of costs in operating a hotel and you can streamline that by having a central source that can serve both hotels.”

Duncan, who is based here, explains that exact figures on the cost savings possible with a joint build are hard come by since all projects are different. Nevertheless, he notes that the ramp-up period for a Homewood is shortened from 10 months to six to eight months in a combination build. A successful ramp-up is reached when the hotel hits 100% of what the brand considers its fair portion of the market share in a given market versus its competitive set as measured by Smith Travel Research.

These dual properties also allow the owners to hone their revenue management skills, thus ensuring that guests are in the right product. “These joint-build developments really use their team to manage what product the guests get into based on their length of stay and their needs,” Duncan finds. Plus, a guest in a Homewood Suites in a bundled hotel can provide an amenity not offered in a standalone Homewood, such as room service from the Hilton Garden Inn kitchen.Urban areas are particularly fertile ground for joint builds due to the vertical nature of these developments and the ability to construct them on a smaller plot of land or even adaptive reuses. The Silver Spring project, for instance, was a conversion of an office building. On the drawing board are unions of a Homewood Suites/Hilton Garden Inn in Brooklyn, NY and a Homewood teamed with a full-service Hilton in Herald Square in Manhattan.

The Jacksonville property also falls into that urban category. Landcom Hospitality Management Inc., also in Jacksonville, developed that property. Henry B. Fonde Jr., senior vice president and director of hotel development, says Landcom built another Hilton-branded hotel, a Hampton Inn, in the city. “Due to the success we had with a Hampton Inn in the Downtown Jacksonville market approximately 12 years ago,” he says, “we knew that there was additional transient demand. But we were also aware of extended-stay demand in the market and the absence of any other extended-stay product Downtown. We had a hard time making the decision of which way to go, but at the end of the day, we decided to do the dual-brand property.”

By doing a joint build, Fonde concedes the company gave up the opportunity to sell two hotels separately at a later date in favor of the efficiency gained by merging two reservation systems to lure in guests as well as the ability to share housekeeping and engineering services. “It’s always less expensive to build one building than two buildings, one roof rather than two and one fire system rather than two fire systems,” Fonde says.

The total cost of the Jacksonville project was $30 million. Fonde estimates that the company realized about a 30% discount by constructing two products under one roof.

Since the hotels are still in the ramp-up stage, Fonde could not give a projection on operational cost savings. Yet he points out that sharing staff between the two hotels is a major plus. “If we had two separate buildings, we might have to double the headcount on employment,” Fonde explains. “We are able to save on that. In many cases, we have one employee instead of two.”

Fonde also declines to release any figures on occupancy, RevPAR or ADR. He does admit that the recession has prolonged the hotel’s ramp-up period. “By the same token, we think we will buck the trend as we start coming into the recovery,” Fonde says. “Having the newest two products in this particular market with Hilton flags will allow us to perform a lot better than the competitive set.”

Doing a joint build does come with some unique hurdles. First, Landcom had to convince regulatory authorities it was building one structure, not two. Dividing up the utility costs between the two products and generating two separate P&L statements also requires more work on the part of ownership. Then there is the problem of melding the sometimes divergent property management and tech systems of each individual brand. “Nothing that can’t be overcome,” Fonde says, “but little issues come up in the process.”

The Jacksonville Homewood/Hilton Garden Inn was Landcom’s first joint build, and Fonde says the company desires to do more such projects. “I’m pleased with the way this one has turned out and I would love to go in that direction,” he says. “But I don’t know when the economy is going to allow for more development. I do think it will eventually happen and this will be one way to do new development in the future.”

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