Maybe Richard Russo, the director of development for Morgans Hotel Group, best answered the question posed in the title of the opening general session of the inaugural Lifestyle/Boutique Hotel Development Conference held Tuesday at the Fontainebleau Hotel in Miami Beach. It was titled “Why Invest in a Boutique/Lifestyle Hotel?” and Russo explained there are three simple reasons: strong financial returns, investment diversity and ego.

“These are fun hotels to own and to be in,” Russo said. The panel of four, and really almost 250 counting the interactive and engaged audience, discussed, and at times, debated the challenges and opportunities in the growing boutique and lifestyle segments.

Brian Scheinblum, the founder of locally based owner/operator Cambean Hospitality, said these hotels are often more expensive to design, build and operate. Yet, when done right, the reward can clearly outweigh the risk.

Scheinblum’s company owns and operates four small properties in South Beach, including Hotel Clifton, which will debut this fall. The Brilla Group was a recent all-cash buyer of the nearby luxury beachfront boutique hotel, the Raleigh. CEO David Brillembourg said although transactions have been at a standstill for quite a while, he’s now seeing a bigger appetite to get back into the game. “It’s a great time to buy cheap,” he said.

Even without private equity, deals and new construction are possible, said Bill Meyer, chairman of Meyer Jabara Hotels, although the terms have changed. “You need equity,” he said. “And it’s not 70/30 anymore or even 60/40, but you can do a 50/50 with regional banks, but, and this is a big but, personal guarantees are a must.”

The panel touched on a wide array of topics, from design and development to operations and marketing. Meyer at one point challenged Russo about Morgans’ service philosophy and questioned the direction of the industry if more hotels followed its lead of not using nametags for employees or any signage for meetings. Russo explained most of Morgans’ properties didn’t have much meeting space and the company trained its staff to engage guests at all times so nametags weren’t a necessity.

Size can matter in the boutique business, the panel agreed. Scheinblum, whose Hotel Clifton (35 rooms) is aiming for LEED Gold status, said many things can be lost in translation at bigger properties. Cambean takes advantage of shared resources and staff at its properties, all within walking distance of each other, to provide the necessary personalized service while still remaining profitable.

The sweet spot for Morgans, Russo said, was 150- to 300-room properties. Meyer said his definition of boutique was unique, generally small and usually independent, while lifestyle properties were experiential and often educational in some way. The panelists agreed the segments have evolved in recent years with the growth of brands like Starwood’s W and the debut of other branded concepts.

Lodging Hospitality produced the Lifestyle/Boutique Hotel Development Conference in affiliation with HVS. Six breakout sessions followed throughout the day and keynoter Cheryl Rowley, a leading interior designer in both the boutique and branded worlds, treated the audience to an inside look at the evolution of the segments from her perspective and start with Bill Kimpton.