As more consumers search for unique experiences when they travel and stay at a hotel, owners and operators of boutique hotels are challenged to distinguish themselves from their growing competition.
ATLANTA—Hotel owners and operators in the independent boutique space say it’s their favorite segment to be in, but developing and operating a boutique property is rife with challenges.
Chief among them is differentiating your hotel from other boutiques and picking the optimal market to develop an independent boutique hotel.
During the “Owning and operating boutique hotels” panel at the Hunter Hotel Conference in March, Craig Greenberg, president and CEO of 21c Museum Hotels, said unique design is no longer a differentiator among hotels in the independent boutique segment.
“The evolution of the boutique or independent space was first led by design, and now from my perspective—regardless of what type hotel (of) you’re doing in what segment in what city, it’s just a given,” Greenberg said. “It’s like hot water coming out of your shower quickly and good Wi-Fi; if you don’t have good design, regardless of what level of hotel you’re developing, you’re going to have a challenged product.”
The best way to make your hotel stand out from the competition is by delivering an authentic experience, and that doesn’t have universal appeal, Greenberg said.
“You have to be comfortable with the fact that you’re not going to appeal to everyone,” he said. “But that’s what makes it unique. People can see through, for lack of a better word, they can see through the (B.S.). If you’re faking it, it’s not going to work.”
But once guests book, the work isn’t done, since they’ll only return if they experience great service.
“People like talking about the glitz, the glamour, the uniqueness, but people will come to your hotel one time if there’s a great story and great pictures on your website, but they’re not going to come back unless there’s great service,” Greenberg said.
Roger Hill, chairman and CEO of The Gettys Group, said it can be a challenge to deliver on your property’s story each and every day, but if you can stick with it, there are plenty of benefits.
“If you want to be a success, you’ve got to continue to be thinking about creating these experiences and delivering on these great stories day in and day out,” Hill said. “It’s not for the faint of heart, but if you do it right, it’s so much fun. And for me, having done this for a while, it’s a great space in which to play and make a lot of money if you do it right. But there’s serious risk around it like any good investment.”
Finding the right market
Mitch Patel, president and CEO of Vision Hospitality Group, said it can be more difficult to develop a unique boutique hotel in larger markets like Los Angeles or New York City.
“(21c) and our company, we saw an opportunity to take that (boutique) model and develop those types of hotels in smaller midmarket cities, like Louisville and Cincinnati,” Patel said. “In those kind of markets there are a lot of mainstream branded hotels, and there may be an independent hotel but it misses the mark.”
Vision opened The Edwin Hotel in Chattanooga, Tennessee, last September.
“If we were going to do our first boutique hotel, we were going to do it in our hometown (of Chattanooga) where that community means a lot more to me, I know a lot of people in that community,” Patel said. “Emotionally, I was more invested as well. We are now looking for a market that’s similar, we found some success there, and now we’re looking for markets where it’s missing.”
But Patel warned against trying to fit a boutique property into a market where it doesn’t belong.
“You don’t just build something to build something,” he said. “You may have capital, but it doesn’t mean you just deploy it. You’ve got to find a unique angle, a story, what’s missing; it could be a small market where a Hampton Inn is missing and you may want to put that in there. It’s important to find a unique angle and a business proposition, what is your business plan?”
Greenberg said it’s easy to assume boutique hotels will only be successful in markets with high leisure demand.
“We’re making it sound like it’s all leisure, but it’s not, at least not for us,” he said. “We have a lot of groups and a lot of business transient travelers staying with us also. Just because people are traveling for business these days, they still crave and like unique experiences, and that is a very big part of our business. That’s also where location particularly in the urban settings come in.”
Greenberg added that lenders are more attracted to boutique projects with consistent demand generators. Matthew Hick, director of finance at Access Point Financial and the lone lender on the panel, agreed.
“If it’s a destination location where people are going to go there anyway, that’s a good place we’d finance a boutique hotel or a soft brand,” Hick said. “But if there’s a lot of demand generators for business in that area and leisure travel, that makes sense as well.”