Celebrity Restaurants the Popular Amenity at Luxe Hotels

Landlords just can’t quit food and beverage tenants as upscale restaurants become the new anchor of luxury hotels.

That’s according to findings from JLL’s research team, which were presented Monday morning from the exhibitor floor at the Las Vegas Convention Center for the International Council of Shopping Center’s annual ICSC Las Vegas trade show and conference.

The research comes at a time when the food and beverage, or F&B, segment continues to be the darling within retail centers’ tenant mixes. The segment’s popularity holds across its respective categories, whether it’s a fast-casual player, such as Chipotle, or prestige restaurants helmed by big name chefs such as Gordon Ramsay and José Andrés.

Much like at malls or neighborhood shopping centers, restaurants with a buzzy name are helping attract guests to upscale hotels. As a result, those hotels have occupancy levels that are nearly 7 percentage points higher than hotels in the same class without a prestige restaurant, according to JLL.

Aside from keeping rooms filled, those hotels with a buzzy restaurant name also earn more.

JLL reported hotels with a prestigious restaurant have average daily rates that are 8.8 percent more than comparable peers. Revenue per average room, a key hotel industry metric that gauges how much revenue an individual room can generate, shows those same hotels with a glitzy restaurant can also generate nearly 19 percent more per room than properties without that food option.

The real estate firm’s findings were based on a study of restaurants with a celebrity chef, James Beard award or Michelin stars and their impact on the high-end hotels they are located within.

With consumers willing to shell out $128 on restaurant dining for every $100 spent at grocery stores, according to JLL, having a top-end restaurant has become part of the leasing strategy for hotels seeking to be competitive.

James Cook, JLL senior director of retail research and one of the report’s authors, said there isn’t enough data to conclude whether the symbiotic relationship between luxury hotel and restaurant has been enough to push rental rates up. Instead, landlords and tenants are getting creative in how leases are structured.

“Anecdotally, we are seeing celebrity and prestige chefs eschewing leases in favor of some kind of non-lease agreement,” Cook told The Real Deal ahead of the report’s release.

The lease workouts to woo dining concepts in high demand run the gamut. They include the traditional 10- to 15-year lease agreement, plus a percentage of the gross revenue once a certain sales figure has been reached.

There are also non-lease agreements that shift restaurant buildout costs to the hotel, while a chef receives a fee for use of their name and potentially a portion of revenue or profit, according to JLL.

In those non-traditional lease deals, “they are less risky for the chef and give more control over the restaurant operations to the hotel,” Cook said.

He added that in the case of traditional lease deals, restaurants are typically paying market rents. The caveat would be if it’s a high-demand concept, which would have more leverage in negotiations and could come away with paying below-market rents or receiving more tenant improvement dollars. However, that’s anecdotal, Cook said, due to there being a lack of transparency around prestige restaurant and luxury hotel deals.