P-THREE TALKS: USA

Continuing our international series, this week P-THREE talks USA with Chris Adelmann. Chris has held major roles across a range of hospitality businesses including Head of Worldwide Development at Hard Rock Café, Executive Vice President at Warner Brothers International Theatres and Executive Vice President, North American Business Development at Live Nation. Chris is currently President of CA Advisors LLC; working with private equity firms specifically in entertainment, F&B and retail as operating partner, M&A, market entry and reengineering strategic advisor.

What are the key consumer trends which you are currently seeing?

Bifurcation of spending/desires. I see either a low-cost, high-volume attitude for some products and a more bespoke sensibility for other items. The best example of the bespoke sensibility is in the incredible growth in online bespoke shirt makers; the selection of sizing, use of technology and selection of fabrics has successfully bridged the gap between off the rack and bespoke clothing.

The other current major trends (much owing to Covid -19) are:

• Shop at home
• Work from home
• Eat from home
• Be entertained from home
• Great increase in online gaming, widening demographic of players

How do you think COVID-19 will impact this?

Post Covid-19, more people will see that working from home is an option as is ordering prepared and unprepared food and having it delivered. Extrapolating on this, less people will stop in for coffee in the morning on their way to work and potentially less CBD retail and F&B. Also, there are a number of indications that places such as Manhattan, where there was a strong outbreak of the virus, will see a flight of workers to home; to smaller cities, to suburbs to what they considered to be “safer” lifestyles. For the next few years, I would expect vacations to shrink in travel distances and holidays by car to increase.

How about internet retailing?

This growth is really not that new, but I believe the growth of the likes of Warby Parker, Bonobos and others will continue. Many years ago, I was in downtown Rome and walked into a home goods stores that was incredibly small. The manager told me that, because of the rents, they took a smaller space as their “window” to reach the most customers but the back of house and inventory was offsite and would be delivered that day after a purchase. Their displays were limited to their best-selling brands and an in store computer helped customers with other items. This was the early days of the ‘guide stores’. Could you see this for a farmer’s cooperative? See it in person and buy it online is a huge opportunity for those retailers who can keep the sale Remember when internet sites were either transaction or content specific? Very few today are not integrating both.

You have so much leisure and hospitality experience, are you seeing this ‘lifestyle movement’ shift into Hospitality too?

Hotels have already evolved in a number of ways to embrace the change and also reposition themselves as places to be not such for guests but for the surrounding area residents and business people.

Hotels have teamed up with entertainment companies to offer their top guests unique experiences, be it in venue listening parties, rising artists events to reward programs with ticket and other benefits besides the traditional upgrades. And hotels are programming all sorts of other activities, including food tastings, city tours, you name it. The Ace Hotel in downtown LA has a well-liked performance hall. Austin City Limits moved their venue from being part of the University of Texas into a development within a W Hotel. Concert halls also serve as cool extensions for hotels wanting to capture special event business.

The 21C hotel chain from Louisville, established by members of the Brown Forman spirits family, has a central component in all their hotels which is their contemporary art collection, with modern amenities and also great restaurants with voluminous drink menus.

And finally, there is the Maven Hotel (https://www.themavenhotel.com) which sits in the LoDo section of downtown Denver. The Maven blends a great contemporary hotel guest experience with a seamlessly integrated food hall district, which is called the Milk Block, a “micro district”. One of the best food halls in America.

Is your home area of California doing anything innovative in the restaurant sector?

In LA, the impact of Covid has accelerated a number of restaurant trends. One of the unfortunate accelerations is with the increase of pre-prepared foods at supermarkets and a plethora of restaurant delivery services, many operators have just closed their doors. But the smart ones are doing a few things of note:
• Curbside pickup and direct delivery are seamless
• Sanitary standards are marketed as strongly as “specials”
• the 80/20 rule of menus, eg the most popular dishes are being crystalized. Remove all the fluff that no-one orders to help retain margin, lower inventory.
• High end restaurants are going “downscale” and preparing interesting comfort food offerings, often family style .
• Many restaurants are keeping their vendors and suppliers in business by offering things such as a weekly produce package e.g. a butcher package for the week
• Restaurants are refiguring their establishments for increased takeout food, both in the kitchen and in the pickup and servicing areas. Since many non-QSR restaurants live and die by the margin of beverages, especially alcohol, I suspect you will see more offerings for waiting customers to drink up and purchase more.
• The more tech savvy will do better. Those who have websites where one can order, pay and simply get curbside pickup will have an advantage over those that required waiting on a takeout line amongst others.

Finally, how do you think malls can deal with these shifts in consumer behavior? Are you seeing any particularly innovative trends?

They need to adapt, just some of the trends are listed below:
• Special event spaces that can be catered by in mall F&B operators
• In California, believe it or not, malls have figured out they need to be more open air.
• Increase in health and wellness offerings beyond the traditional health club
• A number of malls now have attached hotels if they are in downtown or on train lines, etc.
• Food Halls: As mentioned in The Maven, the growth of food Halls is very interesting. If curated correctly and seeming “organic” they can be huge hits but they can also seem forced without good tenants, flow and they then seem like out of place food courts
• Malls continue to see the need for increased entertainment but many are just sticking a VR experience on the top floor to compliment a cinema and that’s not enough to increase foot traffic. Good malls are increasing content offerings in larger central plaza spaces. The American Dream is taking the entertainment-retail mix to a new level with more interactive offerings: a Ski Slope and Ski Park, Nickelodeon theme park, Dreamworks water park, full NHL size skating ink and other entertainment and active sports components to bring families and increase dwell time and spending

At P-THREE we believe that looking across the globe will highlight the best new innovations, examples of layering lifestyle through buildings and how you can create places which put people at their heart. We love the sound of the Maven Hotel and their mix of uses- if only we could get on a plane!