The Boutique & Lifestyle segment has emerged through a maze of big brands and frequent guest programs to become a prominent lodging category, highly sought after by consumers and investors alike. Recently, Frances Kiradjian, founder and chair of the Boutique & Lifestyle Lodging Association (BLLA) answered some basic questions and took us on an extended tour of the segment.
The Hotel Yearbook: Fran, what exactly is a boutique hotel? Is there an officially sanctioned definition?
Fran Kiradjian: Since there are many definitions for boutique hotels these days, the Association will be leading the charge to sanction a definition. It will be created out of a vote from all the membership, made up of the boutique properties themselves and the brands that they belong to. The Association will lead research in this area as new studies are needed to better understand consumer behavior, especially because of the changes in the worldwide economy. As a foundation, we are defining boutique hotels as intimate, unique, often luxurious and upscale hotel environments for a discerning clientele. They average around 100 rooms or less and can be charming, distinctive, quirky, cutting-edge, avant-garde, trendy, funky, classic and revel in an incredible attention to detail and high level of personal service. They may be independent or belong to a group or collection of properties such as the Rocco Forte Collection, NYLO Hotels, the AVIA Collection, Morgans Hotel Group, Personality Hotels, Joie de Vivre Hospitality, Kimpton Hotels, Charming Hotels, Small Leading Hotels of the World, Small Luxury Hotels, the Dorchester Collection, Firmdale Hotels, Pousadas, the Carino Collection, Elegant Hotels… just to name a few of the several hundred boutique & lifestyle brands around the world.
HYB: And how does that differ from a lifestyle hotel? What do they have in common?
FK: A lifestyle hotel may have many of the same attributes as boutique hotels, but they are also usually a bit larger, up to 250-300 rooms. Additionally, they combine innovation, authenticity and everyday living elements and activities, giving guests the opportunity to explore and find the experience they desire. They are defined as hip and stylistic with an urban feel and design. Both boutique & lifestyle properties will ebb and flow with design and services that are unique and that will blend in with their destinations.
HYB: Who owns such hotels? Is there a typical profile of an owner or investor group?
FK: Interestingly, there is no « typical » profile ; that’s what makes the sector so vibrant and exciting. Owners of these properties vary widely, although they all possess an inherent desire to create something unusual and different, independent of traditional large cookie cutter structures. They are outside-of- the-box thinkers and bring their passion – whatever it is – to their properties. Their backgrounds and industries are quite eclectic. For example, you have owners from the entertainment world (Bono & U2 own properties in Ireland), fashion (Diesel Jeans owns the Pelican Hotel in Miami Beach and Bulgari is now in the hotel business), automotive (Ferrari designer Paolo Pininfarina designed The Keating in San Diego), as well as traditional hotel owners who decide to jump ship and try the independent route. They include families who pass property ownership down generation to generation. Some examples include HK Hotels, family owned and operated boutique properties in Manhattan, New York.
HYB: When did these kinds of hotels first arrive on the scene?
FK: In the US, the boutique movement was born in 1981 around the time that the likes of Mr. Ashkenazy and Bill Kimpton launched the first small stylish hotels, followed in 1984 by Ian Schrager’s Morgan’s Hotel Group. These properties broke the mold by offering a feeling of warmth, a sense of personality, and a commitment to authenticity for the discerning client who desired an emotional connection as well as unique decor.
HYB: Is it a phenomenon that has a particular geographic focus?
FK: For 2010, the answer is no. It is now a worldwide phenomenon. Boutiques were born in Europe where the independent owner thrived without the influx of new big brands coming on the scene. Consider the centuries-old and unique buildings that have been converted into so-called boutiques but are often referred to by different names in each country, e.g. the Paradores in Spain or Pousadas in Portugal. The exciting aspect is that it is global, and that each region adds its own unique ingredients to the overall sector offering.
HYB: Is the sector doing well? What is it about such properties that is driving their growth?
FK: New properties are opening in epic proportions in this sector. Generally speaking, the sector is doing reasonably well for various reasons ; one being that they are able to increase rates while big brands have had to lower them. Boutique/ lifestyle properties continue to outperform their traditional counterparts in the areas of RevPAR and occupancy. In addition, since boutique customers are making their hotel selection not just on price, but on all the unique assets and offerings of the sector, the segment is less price sensitive. The current economic climate has created a buyer’s market, and with many rooms to choose from, customers are being selective about their hotel choices. In today’s economy, consumers are looking for a vacation from their day-to-day life, and boutique hotels offer that experience without the time and expense of a long flight or leaving the country. Hotels that make the grade into this sector will have a higher perceived value from a consumer’s viewpoint, due to the boutique/ lifestyle tag as it relates to the property type.
HYB: How has the recent recession affected these hotels? Have they been hit as hard as luxury properties?
FK: These properties have been able to move travelers from the big brand luxury hotels to their unique settings. The boutique & lifestyle sector offers better and more cost-effective options than the bigger chains. Executives who now have to steer clear of the well-known luxury brands and who do not want to be the headlines for tomorrow’s news can enjoy as luxurious an experience – at a reduced rate – by choosing from the many boutique & lifestyle brands of today. What’s more, while the recession has affected everyone, independents can soften the financial blow a lot easier and find solutions quicker in many instances by maintaining relationships with smaller banks who are more adept in communicating and dealing directly with independent owners.
HYB: Some of the big chains are launching brands in this space. Are these also boutique hotels as you understand the term?
FK: Big brands are getting into this space. These brands remember that before the recession, customers have generally paid more for a unique experience in these cooler, hip hotels. Time will tell whether the big brands can succeed in the boutique territory. They are getting into the act with all kinds of attractive offers to entice the independent owner to move over under their brand umbrella. Even Marriott recently created a new brand to attract the independent, called The Autograph Collection. Like the others, i.e. Choice with its Ascend Collection and Hilton’s try at the boutique upscale sector, the tricky part will be convincing the consumer that these properties will deliver the experience they desire while under the wings of the big brand. Some, like IHG’s Hotel Indigo, feel very much like a boutique when you visit the properties. Whether or not they are truly boutique hotels… the Association members from all over the globe will have to decide this – as will the consumer.
HYB: What are your expectations about their ability to compete in this segment in 2010 and beyond?
FK: I expect that they will make some inroads in the B2B space because of their ability to attract this audience through marketing reach, program attributes and international capability. However, it will not be an easy task to move an independent property owner over and will probably take much more effort, and cost more money, in the long run. I don’t believe independents will go without careful consideration of what lengthy and complex contracts they need to sign in order to give up a portion of their independence, as well as consideration of the array of rules and regulations coming from the big brands, thereby inhibiting creativity. Also, consider that larger hotel brands attempting to enter the boutique & lifestyle market are caught up in a bigger picture of a national or worldwide image, and can miss the local flair. Boutique brands have to understand they must come together, to ensure they put their stake in the ground to firmly claim the boutique & lifestyle sector as their own. As it relates to their ability to compete in the B2C arena, the big brands’ strength in the area of marketing reach and marketing dollars will certainly be a force to be reckoned with.
HYB: In say five years, do you expect to see more chains operating boutique or lifestyle brands ? If yes, who will probably be the big players? Will they be a threat to the established boutique hoteliers?
FK: I wish I had a crystal ball ! I see the big traditional brands like Starwood remaining successful in this space as long as they consider loosening the demands on brand integrity and allowing the independent feel of each destination property to be unique. I do see all major brands getting into this space in some way. The global traveler is demanding a more distinctive and personal offering and thus, if they don’t appeal to the majority, they’ll lose share quickly. On both ends of the generational gap, boomers and Gen-Xers want an experience that delivers on their expectation of special and unique design and services. Regarding your last question, the established boutique hoteliers will continue to thrive. They will have the means to compete on price, distribution and marketing via the support of an association like the BLLA, and can remain true to their promise of that special and unique experience.
HYB: You recently established the BLLA. What are its goals?
FK: First and foremost, our goals are to unite the world’s boutique & lifestyle brands as well as all independent properties onto one platform, like a shopping center or guidebook of sorts. What makes the BLLA different from other hospitality associations is its ability to provide a clear and distinct distribution channel and search engine to and for targeted consumers and to travel agents whose clients are requesting boutique & lifestyle properties only. The BLLA will give property owners and brands a platform to speak out and vote on issues affecting this unique hospitality sector. It will bring clarity to the industry while playing the role of advocate for the consumer, ensuring that properties deliver. The time could not be better for the segment to join forces and work together to address any confusion and uncertainties about this hospitality sector.
HYB: What specifically does the BLLA do for the hotels in the segment?
FK: The BLLA provides innovative and new leisure and corporate distribution for its members, first and foremost. By organizing the selection process while providing consumers a vetted list of properties, ones that have been carefully selected based on their ability to fit within the boutique & lifestyle criteria, the property receives business from customers that are searching for a product type vs. just a price. Additionally, the Association is producing a certification program to ensure properties live up to minimum criteria on design and service. The BLLA will also provides members guidance on industry suppliers and their offerings. As an example, we are currently working on a grid which will compare the costs and services of brands and groups. The Association itself will provide a voice and a platform for members to jointly raise worldwide awareness and in addition, members will receive education and networking opportunities.
HYB: Let’s take a look specifically at 2010 now. What are your expectations for next year in this part of the hotel business?
FK: I expect to see a divergence of this hotel sector, where the opportunity becomes clearer for boutique & lifestyle brands to come together and claim their fair share of business. Designers and architects will be exploding on the scene with creativity dripping with ingenuity and breathing new life into their properties. I expect to see additional new brands coming from within the travel industry itself, for example Virgin’s own luxury boutique hotel brand. As the economy begins to return in 2010-2011, there will be renovations and re-builds of old properties, which will all be rewired to include boutique elements. It is cheaper to buy than to build as well as to upgrade a property now and in doing so, prepare for a better economy. This strategy will provide a competitive advantage over a neighboring property, which is doing nothing. Also, as consumer confidence rises, these lodging establishments will have the opportunity to rise to the occasion, building awareness campaigns around the new customer.
HYB: Are there any particular milestones or events that you and other observers of this part of the industry are going to be watching out for in the next 12 months ?
FK: Not to be repetitive, however : As the trend continues to dominate the scene, the world will be closely watching the big brands as they stray from the masses and put their toe in the water to test their newly launched or launching boutique & lifestyle brands. What business will these new brands be replacing from the old solid brands that have been around forever? That is most certainly a question that will soon be answered. Research and consulting hospitality firms will need to add boutique/lifestyle as a new category among the regular labels such as Economy, Mid-Scale, Extended Stay, Luxury, etc. And there will be some interesting openings next year. The joint venture of Marriott and Ian Schrager in the new Edition hotel brand, with the first property set to open mid-2010, will be watched closely by the industry, as will Ritz Carlton’s new Reserve brand, a luxury boutique set to open its first property in Asia. And Virgin’s new boutique brand, which will open in destinations where Virgin flies, beginning in the Americas.