Before the coronavirus disrupted the hotel industry, the sector was already declining. A CBRE report showed that the industry had the lowest growth in revenue in 2019 since recovering from the 2009 industry recession. The pandemic exacerbated the situation, turning many already-failing hotels into ghost towns.
As lockdowns and travel bans raged on, many hotel owners were left with the same question: What do you do with an empty hotel?
One brand saw the light in a dark situation and devised a solution to not only help struggling hotels but assist in solving one of the greatest challenges that plague this country: the lack of affordable housing. Vivo Investment Group, a California-based real estate investment firm, found a way to repurpose abandoned hotel spaces into affordable multifamily units.
Vivo Investment Group CEO Dan Norville took notice of the problems impacting the hotel industry — and the staggering need for affordable housing — even before the pandemic, and it set the stage for his solution.
“A shortage of reasonably priced rental housing predated the pandemic,” Norville said. “But when the world shut down in early 2020, the precipitous drop in travel left many hotels vacant and on the verge of bankruptcy. Concurrently, the sudden loss of jobs meant even more people were at risk of becoming unhoused.”
This is when Norville had his “lightbulb moment” and began to change Vivo’s business model to focus entirely on the adaptive reuse of obsolete assets, leaning on his expertise in hotels, construction and property management. His plan was to add kitchen spaces to convert vacant hotels into comfortable and affordable housing communities.
In early 2020, Norville launched Vivo Living, a division that specializes in converting low-demand hotels into apartments. One of the first successful conversions was one of Vivo’s existing hotel assets in Mesa, Arizona.
“The hotel was a ripe fit for conversion to apartments given the strong resident fundamentals in the market and poor hospitality metrics,” he said. “After we completed the conversion construction, the project leased up rapidly and we knew we had something special. Our team quickly shifted its entire focus in mid-2020 to only hotel conversions to multifamily and have stayed true to this focus since.”
When hotels were empty and the outlook for the hospitality industry was bleak, Vivo was on the move acquiring more hospitality properties. Vivo has acquired 25 hotels and has successfully renovated 21 of them in 2.5 years or, as Norville put it, “as quickly as the cities would allow.” He added that the first three acquisitions were renovated, stabilized and sold in just 15 months on average and all for very strong returns.
“Cities have welcomed and embraced this solution because it brings critically needed mixed-income housing quickly to their markets, often at rates among the most affordable, and returns dignity to workforce housing,” he said.
Norville said one thing that sets Vivo apart from other affordable developers is that it was able to create affordable housing while keeping the plush amenities from the unused hotel spaces. It utilized structurally sound buildings and repurposed them in an eco-friendly manner while providing residents with a more engaging, luxurious place to live than the average affordable housing community.
“Hotel properties come with great amenities and common spaces made for socializing,” Norville said. “Our residents enjoy access to high-speed WiFi, coworking space, self-storage, fitness centers, clubhouses, pools, lounges and barbecues — amenities typically found only in the most luxurious and expensive apartment complexes. Residents not only get to save money but they have a place to hang out with friends, colleagues and family members.”
In addition to providing unique amenities, these spaces also helped bring back a social environment that was lost during the pandemic. Norville saw an opportunity for residents to connect with others by leveraging common spaces to foster vibrant social hubs within Vivo communities through happy hours, community service events, continuing education opportunities and wellness events.
“Vivo offers its residents a lifestyle where they can find connections as well as opportunities for personal growth,” he said.
Sustainability is also a top priority for Vivo Living, and it is able to take a sustainability-forward approach by focusing on adaptive reuse. Utilizing the vacant hotels instead of knocking them down and building new affordable properties reduces construction and the subsequent pollution it creates. Vivo has saved an average of 4,118 tons of landfill waste per building by renovating them instead of demolishing them, Norville said.
The team was also able to reduce electricity and water usage through the installation of low-flow plumbing and LED lighting.
Vivo picks properties that are close to walkable city centers and public transit to not only make life more convenient for residents but to hopefully further reduce emissions. Norville said that building more housing in these areas can lead to “meaningful reductions in traffic, waste and sprawl.”
Vivo doesn’t just work on its own properties but it helps other hotel owners transform their assets as well under the Vivo brand. Vivo has an in-house team with expertise in acquiring properties, urban planning and property management, which it can use to help owners complete their renovations in a timely fashion.
“Hotel owners who decide to operate under the Vivo nameplate will benefit from our expertise, advice, construction and technical assistance from the beginning of the renovation, through the property’s change of use, all the way to stabilization,” Norville said. “Furthermore, the hotel owner doesn’t have to worry about hiring great employees. Vivo will staff the hotel with Vivo-vetted and trained employees.”
Norville said that Vivo’s commitment to solving America’s housing shortage helps drive its success. Ultimately, it wants to serve residents, investors, partners, employees and vendors by continuing to advance its adaptive reuse practices in different hotels. However, creating a strong community is at the core of what Vivo does.
“Community remains at the center of everything we do as we continue to evolve and expand what it means to create healthy living communities,” he said. “As our properties have proven, when communities thrive, everybody wins.”
This article was produced in collaboration between Studio B and Vivo Investment Group. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.