REPORT FROM THE U.K.—Though the broader market still remains challenging in the United Kingdom, boutique operators in the region are not deterred by the growing presence of several branded players in their sector.
The entry of brands such as InterContinental Hotel Group’s Indigo, with its seven properties in the U.K., and Starwood Hotels & Resorts Worldwide’s Aloft, with its lone hotel in London, will only raise the game of existing independents—if they compete at all, sources said.
“When the big brands enter a sector, it does generally mean that the independents have to raise their game to still compete with the big brands, and thus standards are inevitably improved or ensured to remain consistently good,” said Nina Basset, proprietor of the 11-room Hotel TerraVina in New Forest near Southampton, Hampshire.
Basset, along with the rest of the sources interviewed for this report, will discuss this among other topics during the Boutique Hotel Summit, held 21-22 May at the Altitude London.
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Russell Kett, chairman of HVS’s London Office
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Russell Kett, chairman of HVS’s London Office, said the brand players will not water down the existing boutique stock in the region, although they will certainly increase the competition.
“However, I think by being associated to a particular brand, they will always be sort of categorized under a chain and may not be considered as a ‘true’ boutique like an operator like Firmdale would be,” he added. “I often use the epithet ‘lifestyle’ to describe those boutique hotels, which are operated by or as part of chains such as Indigo and Aloft.”
Suzie Wotton, VP of marketing for Red Carnation Hotels, does not think such “lifestyle” brands will pose a threat at all.
“The very fact that a hotel is part of a big international brand will naturally limit the hotel’s ability to operate as a true boutique hotel,” she said. “I imagine the chain boutiques offer a refreshing alternative to their own sister brands though.”
Boutique hotel performance
Performance of boutique hotels in the U.K., as with all other segments, has struggled to gain hold in recent years.
The Hotel TerraVina opened nearly five years ago just before the recession hit and has never known a prosperous period, Basset said.
“That said, last year was our best to date—until October, and then the bookings stalled and the rates people were prepared to pay were much lower, and generally this has remained the trend since then,” she said. “January, February and March were very patchy but ended better than first predicted, but as soon as the double-dip recession was announced, the phone has stopped ringing and people’s confidence has plummeted again.”
Red Carnation Hotels, which comprises 13 luxury properties in the U.K., South Africa, Geneva and Palm Beach, Florida, is reporting more favorable results as of late, Wotton said.
“Performance has been very strong this year, especially in London and despite the significant increase in available rooms/new hotels opening in the city,” she said.
George Sell of the Boutique Hotel Summit and editor of the forthcoming Boutique Hotels website said the double-dip makes it that much more important 
for boutique operators to work hard to satisfy guests.
“If they pay close attention to every detail of their operations, boutique hotels can excel, offering the personal touches that really make guests feel valued,” he said.
The future is promising for the sector, Kett said.
“The outlook for boutique hotels seems to be positive,” he said. “The recent demise of Von Essen hotels (which collapsed into administration April 2011) was more due to weaknesses in their corporate financing than performance, although it is vital in this sector that physical weaknesses are not allowed to mount up. Maintenance and replacement (capital expenditures) are hugely important if a boutique hotel is to maintain or improve market share.”
Changing behavior
As the hotel and wider economic landscape has evolved, so too have guests in the boutique sector.
“There has been an increasing interest from corporate guests for boutique hotels over the past few years, and those hotels associated with the chains will benefit particularly from this corporate market,” Kett said. “In general, once guests become more familiar with a destination, they will seek out ‘non-standard’ experiences; boutique hotels typically fall into this definition.”
At Red Carnation, guests are increasingly turning to social media to maintain their relationships with the brand between stays.
“Rather than a platform to promote special offers, both Facebook and Twitter have become valuable customer service tools for our hotels, and guests enjoy keeping up to date with what’s happening in the local area, the hotel and with their favorite members of staff,” Wotton said.
Not all of the changes are good, however. The TerraVina’s Basset said guests have become increasingly price-sensitive and rely almost exclusively on third-party booking engines that drive rate decreases and promotional discounts.
Still, the boutique concept is one that is showing no signs of slowing down, as guest demand grows throughout the world, Sell said.
“There is still plenty of enthusiasm for the boutique concept, from established markets such as here in London where we have several notable new openings this year, to exciting emerging markets such as China and India,” he said. “The combination of individuality, excellent service, great design and quality food and drink that a good boutique hotel offers is attractive to guests across the world, so we think the sector will continue to grow.”
