Hyatt’s rental model for the well healed

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Consider retiring to a Hyatt Hotel with all the opulence that a 5 star hotel can offer. This is the promise of the ‘Classic Residence by Hyatt’ in America, a subsidiary of the Hyatt Hotel chain, with 18 such ‘upscale senior living communities’ now operating with another 4 in development. Each is in a prestige location with ‘campus style gardens and facilities’. The latest to open is in Palo Alto, California, across the road from Stanford University.
Like a hotel, you pay a tariff (or rent), ranging up from $3100 to $8,000 per month. This equates to a one bed/one bath 87sqm apartment costing $100 per night while the top of the range penthouse with 3 bed/3baths and 390sqm is $230 a night. Each apartment is true independent living with full kitchen and living space. At the same time each Classic Residence has all the trimmings, including a master chef who cooks your main meal each day (and a dedicated pastry chef), a linen service and all rates and utilities covered.
It is a great business model for a hotel business because they have guaranteed 100% occupancy through the year without the high staff levels required 24/7 for an international hotel.
At an average daily rent of $150, and an average occupancy of 8 years, it would cost $440,000 to ‘stay at the Hyatt’. By comparison, in Melbourne, the Becton Group have built and operate their own version of the Hyatt, also called Classic Residences (at Brighton East). Matching the 5 star Hyatt in facilities, Becton have 2 bedroom apartments around $400,000 on a shared capital gain DMF, plus $130 per week in fees. They charge about $13 for a main meal. This will work out at approximately $51 per night or $150,000 over 8 years – just one third of the US Hyatt model.
The extra fact to take into consideration of course is that in the American model you can use the $400,000 you do not pay out up front to invest. At 6% that would generate $65 a day before tax, reducing the gap for the Becton price to half that of Hyatt.
(For a video tour of a Hyatt residence go to www.hyattclassic.com)

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