Boutique evolved : 5 key trends

Maria-Pia Intini
HNN Columnist
Hotel News Now
Boutique hotels first appeared in 1981 with Anouska Hempel’s Blakes Hotel in London, Ian Schrager’s Morgans Hotel in New York and Kimpton Hotel & Restaurant Group’s first operated property, the Bedford Hotel in San Francisco.
Since the 1980s, boutique hotels have registered a continuous expansion on the wave of the rapid advancement of a new generation of design-conscious and technology-savvy customers increasingly seeking a unique experience instead of a cookie-cutter hotel room.
Using psychographics as opposed to demographics, hotels have shifted from a standardised to a personality-based offer. As an example, California-based Joie de Vivre Hotels’ personality is crafted around the reader-base of a specialist magazine, such as Rolling Stone for the Phoenix Hotel and The New Yorker for Rex Hotel, both of which are in San Francisco.

Maria-Pia Intini

The concept of boutique hotels has evolved with the entrance of chains’ brands such as Edition by Marriott International; W, Aloft and Element by Starwood Hotels & Resorts Worldwide; Indigo by InterContinental Hotels Group; and Andaz by Hyatt Hotels Corporation. Mostly associated with the term “lifestyle,” these hotels provide the same unique experience as boutique hotels but tend to be larger and more formulaic.

Initially the hotel industry was dominated by private owner-operators (with the notable exception of Starwood’s W Hotels). Flexibility in site selection and construction, higher margins than similarly priced luxury hotels, and celebrities’ and media’s halo effect on average daily rates represent the main advantages of owning boutique hotels which, on the other side, have limited economies of scale, costly property updates and high affiliation fees.
Since the 2007-2009 recession, independent hotels have been more open to joining a larger entity to gain access to a larger customer base through global reservation systems and marketing campaigns. Established hotel operators have used their “conversion” brands to grow and capture high entry-barrier sites despite restricted debt and stifled new developments.
With independent hotels and international hotel chains aside, the sector has become extremely competitive and the following five key trends have developed:
1. Outsourced F&B facilities
Partnerships and outsourced food-and-beverage facilities to acclaimed chefs and bartenders generate high revenues, free advertising and additional guests encouraged by chefs’ or bartenders’ reputation. Some good examples are Dos Palillos, run by world-famous El Bulli’s former chef Albert Raurich within the restored 19-century gothic tenement Casa Camper in Barcelona and the globally acclaimed Beijing-focused Mr. Chow within the W Hotel in Miami South Beach.
2. Private clubs
Membership programs and guests-only areas within the hotel replicate most private members clubs’ privacy and exclusivity. As an example, the guests-only recognition program clubNYLO by Texas-based NYLO Hotels offers its guests retreats at check in, special rates, exclusive mailings and advance notice of special events. In London, Soho House has seen significant success from this concept.
3. Authenticity
Boutique hotels are particularly suited to conversions of historic or interesting buildings. Malmaison Hotels Group, for example, focuses on converting existing buildings of architectural interest and character to food-and-wine focused high quality boutique hotels, like the converted prison Malmaison Oxford.  
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4. Sustainability
Boutique hotels can capitalize on the environmentally sensitive customers in a variety of ways from serving local, seasonal food to allowing guests to control their energy usage. Element by Starwood represents a great example of eco-consciousness mixed with a multisensory experience.
5. Affordable luxury
Brands like Citizen M, Yotel, Standard by André Balazs, Aloft by Starwood, Ace Hotels and the new Z Hotels brand represent the next generation of boutique hotels delivering vibrant design and an energetic guest experience at an affordable price for highly self-sufficient travellers. Some of these companies such as Citizen M, Yotel and Qbic have expanded through off-site modular methods of construction, which are faster and more controllable than traditional construction methods and guarantee a high level of comfort, technology and trendy atmosphere at a very competitive rate.
U.K. boutiques
Significant boutique hotels in the United Kingdom include Malmaison and Hotel du Vin, both owned by property group Marylebone Warwick Balfour; Firmdale Hotels, whose new Dorset Square Hotel in Marylebone is scheduled to open next January; Eton Hotels Group; ABode Hotels; Myhotels; and D&D London, which will open its second London property, South Place Hotel, in January 2013. Campbell Gray Hotels, which established the one Aldwych, is looking for a new London project.
London boutique hotels have experienced a steady growth since 2004 even throughout the recession. According to STR Global, the sister company of HotelNewsNow.com, occupancy increased from 2004 to 2007, growing from 74% in 2004 to almost 80% in 2007, when the increased supply slowed demand growth.
In 2008 the segment saw a drop back to 2005 levels, but in 2009 and 2010 occupancy level rose to 75% and 77%, respectively. Revenue per available room for London's boutique hotels in 2009 and 2010 was £150 (US$239) and £170 (US$271) respectively, compared with a RevPAR of £105 (US$168) and £112 (US$179) for the city's hotels overall. By 2013, London’s boutique hotel sector is expected to double in size with more than 2,500 additional rooms, making the category the fastest growing sector in London.
Conclusion
The competition dictated by the dual presence of both independently-run boutique hotels and chain-operated lifestyle hotels has pushed hoteliers towards finding innovative ways to appeal to guests and create the most memorable experiences.
The boutique sector will continue to grow in the future, mainly in the form of both lifestyle hotels owned and/or operated by chain hotels to penetrate markets with high entry-barriers, like London and New York, and cheap chic hotels for the experiential travellers on the go.

Mature markets a must for boutique hotels

By Patrick Mayock -Editor in Chief-Hotel News Now

DUBAI, United Arab Emirates—Boutique hotels are more popular than ever, but woe to the investor who establishes such a beachhead on uncharted terrain. For these stylized properties, market maturity matters, according to boutique hotel executives.

“You do need a certain level of maturity in the market,” said Adrian Jossa, co-founder and owner of Muse Hotels de Luxe, which counts five properties in its portfolio. That maturity extends to an established base of hotel inventory and a thriving cultural footprint from which boutique hotels can draw inspiration.

“What’s key in lifestyle- and boutique-type hotels is taking the DNA of what you have in the jurisdiction and the location and transcribing that DNA into something that is locally grown,” Jossa said during a panel titled “The next wave” at last month’s Arabian Hotel Investment Conference. 

For Meliá Hotels International, blazing the trail with the company’s more traditional chains is a prerequisite before adding any of its ME by Meliá hotels, said Martin Ostermann, Meliá’s director of development in the Middle East region.

“Introducing the group with our core brand with Meliá was important to set up infrastructure,” he said. 

Dubai is a case in point of a market marching toward maturation, the executives agreed.

“For many years, Dubai seemed totally based around large, extravagant big-brand hotels,” said Gordon Campbell Gray, founder and chairman of CampbellGray Hotels, which operates the Carlisle Bay in Antigua and the Le Gray in Beirut. “I thought it was no place for a niche market … but I feel as though Dubai has matured; it’s more sophisticated; the art scene’s improved. 

“I really now feel Dubai is ready for a smaller boutique hotel.”

Simon Coombs, president and CEO of Shaza Hotels, offered a different take, arguing a great niche hotel can complement any location, regardless of existing hotel footprint.

“I would like to think of us in all markets and not just saturated markets as a first choice,” he said.

Giving him some confidence, Coombs said, is the brand’s backing of Kempinski, which manages a portfolio of 73 5-star hotels in 31 countries. 

Mostly Middle East 

Middle Eastern destinations dominated the executives’ wish lists for expansion.

“We’re very keen on the Middle East,” Campbell Gray said. He and his team are “always keen on Oman and Jordan.” Other opportunities include projects as far afield as the Galápagos Islands, Switzerland and Palm Beach, Florida.

“With the current focus of Dubai being the tourism focus of the Middle East, it was important for us to enter that market successfully and then branch out,” said Ostermann. 

Meliá is discussing projects in Qatar, Jordan, Oman and Saudi Arabia, he added. 

JA Resorts & Hotels, whose seven properties include five in or near Dubai, has another three planned in the emirate, said COO David Thomson. The company’s development team is also looking to the Indian Ocean, he added. 

Muse is primarily a resort play, although “now we’re working on a very urban product,” Jossa said. 

The United Arab Emirates and Qatar top his wish list, he added. 

Coombs said expansion at Shaza is less predicated on locale and more so focused on traveler trends. 

“We will develop wherever our market wishes to travel,” he said. That includes a new project in Oman, which is set to open later this year. 

Key takeaways

The Middle East focus reflected in the executives’ key panel takeaways.

Jossa made a pitch to investors who’ve worked exclusively with more traditional brands. 

“Partnership in this region is essential in the (Middle East, North Africa) region where you have a lot of very large real estate owners or developers that have a big share of the market,” he said. “… We’re here. We want to participate in creating the DNA of the different locations. Give us the opportunity to partner with yourself. We’re building the essence of cities.”

Campbell Gray reiterated that message.

“If you’re an investor, be confident and go for the individual. … Be confident enough to throw away that safety of that big brand and go with your gut instinct,” he said. 

Coombs stressed the importance of a strong working relationship between owners and brand creators. 

“You have to have a very clear vision of who you are building your hotels for,” he said. 

Boutique segment a distinctive set

Chief Operating Officer, STR
brad@smithtravelresearch.com

by Brad Garner

The boutique hotel segment is outpacing national averages in supply growth, demand growth and all three key performance measures.

Whatever adjective you choose to use—hip, alternative, fresh or unique—boutique hotels are a distinctive and interesting group of hotels to analyze.

While the definition of a boutique hotel can vary widely, most agree that product offerings/assets in this space offer and promote a distinctive, urban/metro, contemporary and avant-garde feel. Disagreements about the definition of “boutique hotel” probably exist among both hoteliers and consumers, stemming from personal taste in FF&E packages (décor), atmosphere and architecture, both exterior and interior.

At STR, we objectively define hotels in the segment as having an actual or estimated room rate (ADR) of $175 or higher and a room count of 150 to 300 rooms. We also include major players in the boutique segment such as: Morgans Hotel Group (previously Ian Schrager Hotels), Kimpton Hotels, Joie de Vivre, Starwood’s W Hotels, recent product offerings from InterContinental Hotels Group’s Hotel Indigo brand, John Russell’s NYLO brand, Starwood’s Aloft and a number of independents that meet the definitional and objective criteria for the segment.

The boutique hotel segment is a collection of approximately 450 properties and 55,650 rooms accounting for less than 1.5 percent of all rooms available for rent in the United States. Growing in popularity and becoming a hip alternative place to stay for business and leisure travelers alike, the segment experienced notable supply growth in excess of 5.0 percent, starting in the late ‘90s and peaking at just over 7.0 percent before 9/11 and the resulting industry downturn. Currently, the 3.8-percent growth in room inventory outpaces the national average of 2.3 percent for the 12 months ending September 2008.

 

A tough operating environment has reduced demand for rooms 0.2 percent nationally while demand growth for boutique properties has grown by 2.5 percent in the latest 12-month period ending September 2008. Despite favorable levels of demand for the segment, the aforementioned 3.8 percent growth in supply yields a 70.6 percent absolute level of occupancy, which is a decline of 1.2 percent from a year ago.

Soft demand/occupancy in this current downturn has, in turn, affected rates. While the industry at large increased rates at just over 4.0 percent, hotels in the boutique segment were able to raise rates by 5.5 percent in the 12-month period ending September 2008.  However, this level of growth was markedly off from the 10.0 percent to 11.0 percent level enjoyed by the segment in both 2006 and most of 2007. The US$130 premium in ADR commanded by boutiques is certainly noteworthy and can be attributed to the distribution and density of product in major metro markets.

 

Revenue per available room growth of 4.2 percent came from the heavy contribution of the 5.5-percent growth in ADR and the 1.2-percent decline in occupancy. More importantly, RevPAR growth for the segment outpaced the national average of 1.7 percent. Similar to the ADR premium enjoyed over industry average, boutiques posted a US$100 premium in the absolute level of RevPAR for the 12 months ending September 2008.

 

 

If we look beyond this hopefully short downturn and into the future, the boutique segment appears poised to post favorable levels of performance and continue to be a viable option to the traditional hotel room and stay. New entrants into the competitive landscape like Aloft, Indigo, NYLO, and Edition—the Marriott/Ian Schrager partnership—will certainly shape this dynamic segment for years to come. Retiring baby boomers, Gen Xers, emerging Gen Yers and those consumers looking to escape big brands will certainly seek alternative, hip and unique surroundings, experiences and aspirations perhaps only a boutique hotel can offer.