Report defines boutique, lifestyle, soft brand
Report defines boutique, lifestyle, soft brand
26 MARCH 2015 7:03 AM
A new report answers the question that has long mystified the hotel industry: “What is the difference between a boutique hotel, a soft brand and a lifestyle brand?”
REPORT FROM THE U.S.—It’s the question most likely to stump any given hotelier around the water cooler: “What exactly is the difference between a boutique hotel, a lifestyle hotel and a soft brand?”
In a report that will be released Thursday afternoon, The Highland Group offers definitions for these three segments, along with research that shows U.S. operating and financial performance data for what have become the industry’s toughest segments to categorize. 
The definitions are: 
  • Boutique: Unique in style, design-centric, either independent or affiliated with a smaller brand system, with 40 to 300 guestrooms. 
  • Lifestyle brands: Prescribed franchised products that are adapted to reflect current trends.
  • Soft brands: Individualized hotels that give owners and operators the opportunity to affiliate with a major chain distribution while retaining their unique design, name and orientation. 

Why differentiate between these segments? As traveler sentiment and preferences change, the industry has responded over the years with new hotel product to address guest needs, said Kim Bardoul, consultant with The Highland Group and co-author of the report. Along the way, the need for better definitions arose to help owners, investors and even brand companies to clearly define their niche.
And as financing continues to open up for hotel projects that fall outside the traditional lines, clear definitions of these newer segments makes development conversations better, said Michael Tall, president and COO of Charlestowne Hotels.
“Now, conversations are about, ‘Is this a unique independent; is it a soft brand or is it a lifestyle product?’” he said. “Before, the question was simply, ‘Is there a flag or not a flag?’ We’ve drilled down further into the definitions because the hotel industry has a lot more options when it comes to branding and financing.” 
These emerging segments will only grow from here, Bardoul predicted. For the research, The Highland Group compiled sample sets for each segment (659 boutique hotels, 178 lifestyle hotels and 208 soft-branded hotels). Based on the sample sets alone, “total revenue for these segments was $11.5 billion” in 2014, she said. 

Boutique hotels
Boutique hotels were the real game changer, Bardoul said. As the segment matured from its early days in the 1970s, franchise companies began to respond with what they presented as boutique-like, trendy hotel products and brands.
In 2014, the boutique segment posted the highest revenue per available room compared to lifestyle hotels, soft-brand collections, U.S. full-service branded hotels and all U.S. hotels as a group. Along the way it has evolved into a very design-centric segment, Bardoul said, characterized by several different design styles.

Compound demand change for the segment was 6.7% over the past five years compared with the 4.2% increase for the total U.S. Compound boutique supply growth during that time was 3.1% compared to 0.8% for the industry at large. Boutique hotel occupancy, average daily rate and RevPAR tend to outpace the industry as well, according to the report. 
A key takeaway, Bardoul said, is that not all independent hotels are boutiques. For the purposes of the report, she said, the group considered boutique hotels to cut off at 300 guestrooms; her team vetted each property in the sample individually to ensure it met their criteria. Beyond that, boutique hotels can belong to soft brands and even to small chains. “It can be a tough segment to get your arms around,” she said. 
This segment has proved to be a successful one for real estate investment trust LaSalle Hotel Properties, which has more than 25 boutique hotels in its portfolio, most of which have less than 200 guestrooms, according to President and CEO Michael Barnello.
Demand and specific market conditions have played into LaSalle’s decisions to invest heavily in the boutique segment, he said. 
“We’re an economically pragmatic owner of hotels; we’re equally comfortable with a good branded hotel as we are with these new segments,” he said. “Our perspective is that if the demand is strong enough to fill a hotel without the necessity of a brand, then we don’t need it.” 
Beyond location and demand, Barnello said LaSalle has seen the benefits of boutique development, which typically allows for more flexibility. Bardoul noted such flexibility is a marketable benefit over traditional hotels. 
LaSalle last year made two notable independent boutique acquisitions: the Hotel Vitale in San Francisco and The Heathman Hotel in Portland, Oregon. 
“Because these are independents, we could make changes—bring in a new management company, operate a little more efficiently, add touches that make it more memorable and have better top and bottom lines,” Barnello said. Plus, it can be beneficial to not have the encumbrances of a long-term franchise management contract on a hotel.
Barnello and Tall said an advantage to boutique ownership is the growing options when it comes to finding management companies focused on that segment. 

Lifestyle brands
This newest player in the hotel segment game is poised to become “a significantly larger component of the lodging industry,” Bardoul said. “Right now, we see these fall more into the upscale, select-service segment, but we feel this may even out now as more come on board.” 
Several of the brands falling into this segment have established footprints, such as Starwood Hotels & Resorts Worldwide’s W Hotels and Le Meridien, while others have launched in the U.S. within the past few months, such as Canopy by Hilton and Marriott International’s Moxy Hotels
On the supply and demand side, this segment has seen demand grow at an annual average pace of nearly 20% from 2009 through 2014, compared to U.S. overall hotel demand growth of 4.2%, Bardoul said, due in large part to growing availability of inventory.
The key here, Bardoul said, is that lifestyle brands are clear franchise players. 
“Lifestyle brands are very different from your typical limited-service branded hotel, but they’re just a bit more prescriptive,” she said, because they do fall under brand guidelines. 
Some trends have emerged within this newer segment, she said, that play into their revenue-generating opportunities: 
  • most are select-service but with some café or bar option;
  • most have lounges they market to local residents; and 
  • many have small meeting spaces. 

According to the report, “this is reflected in more food-and-beverage revenue than typical for a select-service hotel, and a higher proportion of beverage revenue than typical for traditional hotels.”
Soft brands
The report classifies soft-brand collections as similar to boutique hotels—many are boutique hotels—but they belong to branded distribution, sales and marketing, and loyalty systems. 
Notable here, Bardoul said, is that The Highland Group worked with individual hotel companies to see where they positioned their brands on the spectrum of lifestyle versus soft. As an example, she cited the placement of the Kimpton Hotels brand within the soft-brands group.
“If you look at Kimpton at first, you might put them in the lifestyle segment, but then if you look at them compared to Even Hotels or Hotel Indigo, then you see the difference,” she said. 
On the supply and demand front, Bardoul said soft-brand share now is 0.7% of total U.S. inventory and should exceed 1% within the next few years, in part because as soft brands ramp up and favorable financing conditions persist, brands are doing more new-build soft brands opposed to traditional conversions.
In general, soft brands sit above overall industry in occupancy and between the upper-upscale and luxury classes in ADR, according to the report. 
Charlestowne’s Tall said his company has not yet opened a soft-branded hotel but is in conversations with several chains to do so. The company focuses primarily on the management side of the business and has more than 30 hotels in its portfolio; the vast majority are independent boutique properties in the midscale and upscale classes.
“A developer who may feel more comfortable with some sort of brand association or proven brand track record may (find soft and lifestyle brands) a good option,” Tall said. “There may be more comfort in that angle.” 
While the research goal was to create definitions and some boundaries around these segments, Bardoul said they share an important common element: “All of these segments are experiential; that’s the key word,” she said. 
The Highland Group partnered with STR (parent company of Hotel News Now) to compile data for this report. Visit for more information or to purchase the “Lifestyle hotels, soft brand collections, boutique hotels” report.

Clarification, 3 April 2015: The language referencing this being the first definition was deleted from the article. The Boutique & Lifestyle Association previously released definitions for lifestyle and boutique.

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