Inclusion of Condominium Units in Luxury Hotels as a Diversification Strategy: Property Performance Perspective

Abstract

There is a new wave of mixed development where luxury hotels come with condominium units, though this type of diversification has gained scant attention. Prior hospitality literature on diversification strategies has mostly taken the firm-level approach and documented its impact on performance from various angles such as brand diversification, segment diversification, and geographic diversification, therefore leaving a void. In this work, we use the multilevel mixed effect model to examine 15,340 property-level data points from 2010 to 2019 for U.S. luxury hotels with and without condominium units. Our objective is to compare, at a property level, the performances of luxury hotels with condominium units with the performances of those not having condominium units and to determine whether the difference varies by hotel location. Our findings suggest that the Average Daily Rate (ADR), Revenue per Available Room (RevPAR), and Total Revenue per Available Rooms (TRevPAR) of luxury hotels with condominium units were significantly higher than those of hotels without condominium units. Significant moderating effect of location was found for Occupancy, ADR, Food and Beverage Revenue per Available Rooms (F&B RevPAR), and TRevPAR while no such effect was found for RevPAR and GOPPAR.