Developing Hotels near Medical Centers by: Alan Suzuki
Written by: Alan Suzuki
Senior Vice President – Pinnacle Advisory Group
Over the past few years, Pinnacle Advisory Group has conducted numerous market feasibility studies for proposed hotels near major Medical Centers. Hotel developers have discovered that Medical Centers, particularly those that attract patients from beyond the immediate surrounding region, can be major generators of lodging demand. As a result of our in-depth interviews with hospital administrators, we have amassed a great deal of knowledge regarding these unique developments. Demand for patient lodging versus demand from professionals (administration, education, and research) is intrinsically different – representing two distinct subsets of demand generated by operations at Medical Centers. These two subsets of demand are explored further in the paragraphs that follow.
Patients (Inpatient and Outpatient)
Typically, the largest component of demand from a Medical Center is generated by the patients and their caretakers. In most cases, a patient will initially come to the Medical Center for an outpatient visit. If a patient is traveling from outside of the region for an evaluation, they will likely need overnight accommodations. Following an outpatient visit, a patient may take weeks/months to decide to proceed with a procedure, in which case they will return for a longer inpatient stay. For inpatient stays, generally, a caretaker would stay at a hotel while the patient remains in the hospital. In some cases, even after a hospital discharge, a patient may elect to stay at a hotel proximate to the Medical Center for a few days to ensure there are no complications prior to returning to their home. We found that on average, the length of stay for inpatient visitors was 5 to 10 days (compared to 1 to 2 days for outpatient visits).
While patient preferences may vary from hospital to hospital, we found that patients typically prefer a limited-service, low to moderately priced hotel. Patients and caretakers are looking for comfortable, safe, and affordable overnight accommodations, but most importantly they are looking for a hotel that is convenient and proximate to the hospital. In general, extensive services and amenities are unnecessary, however, a quick and convenient grab-and-go option within the hotel might be attractive to a caretaker or patient – particularly if there is a lack of outside dining options nearby.
In addition to demand from patient visits, Medical Centers also generate a significant amount of lodging demand from visiting professionals. This base of demand typically includes visiting doctors, visitors attending a conference or a seminar, consultants, vendors, and interviewees. If the Medical Center is affiliated with an educational institution, demand may be generated from families visiting medical students as well as friends and family attending special events such as graduation.
The level of demand from this subset largely hinges on the extent of the Medical Center’s continuing education program. Prestigious Medical Centers such as the Mayo Clinic and Johns Hopkins, for example, draw hundreds of doctors and administrators from around the world on a weekly basis for continuing education courses. For these types of hospitals, continuing education may generate tens of thousands of room nights for the local lodging market. Other sources of demand are largely modest in comparison.
Our research has taught us that guest preferences from this subset of demand are very different than those from the patient demand sub-segment. While some visiting doctors are attracted to the hotel accommodations most convenient and proximate to the hospital, a large portion of this subset is typically seeking a more upscale product with more elaborate amenities. On frequent occasions, doctors and administrators visiting or attending a conference may be combining the business at hand with a leisure trip. As such, proximity, affordability, and convenience may be traded in for a hotel closer to popular dining and entertainment or for a hotel that offers a more upscale experience.
On the basis of our research, patient demand for lodging near Medical Centers typically exceeds demand from professionals, even if the Medical Center offers a significant continuing education program. Therefore, for developers interested in building hotels near Medical Centers, the product that would likely be most attractive to the largest subset of demand would be a low to moderately priced hotel that is safe, convenient, and proximate to the hospital. Consideration can be given to an extended-stay hotel as a significant number of inpatients may have caretakers and their families staying for an average of 5 to 10 days.
In summary, the prestige of the Medical Center as it translates into continuing education and special events to attract high-level medical professionals combined with a large number of patients coming from outside the immediate region typically translates into a large demand base for lodging accommodations. However, since each situation is unique, the best way to evaluate the need for such lodging is through a thorough an in-depth market feasibility study.
Since 1991, Pinnacle Advisory Group has provided advice and analysis on the full spectrum of hospitality properties: hotels, resorts, conference centers, timeshare and other resort residential development, golf courses, ski areas, marinas, and public assembly facilities including theme parks, arenas, convention centers and exhibition centers. Pinnacle’s services include development counseling, appraisals, acquisition due diligence, asset management and litigation support.