Chip Conley joked the opening of the Waikiki Edition in early October was the lovechild of Bill Marriott and Ian Schrager, but the strange marriage between the two lodging icons who couldn’t be any more opposite signals how far the boutique and lifestyle segment has come.

Conley, the founder, chairman and now chief creative officer of Joie de Vivre Hotels, mentioned the debut of Marriott International’s new boutique brand during his keynote address last month at the second Lifestyle/Boutique Hotel Development Conference at the Fontainebleau Hotel in Miami Beach.

The conference itself, which came a week after the highly publicized debut of the Waikiki Edition, was even more evidence of the growing success of the segment.
There was plenty of debate over the definition of what a boutique hotel is, and whether one could (and should) be branded, but the consensus by the 40 or so speakers at the three-day event was clear: The boutique business has arrived in the minds of developers, brands and most importantly, lenders.

• FOR AN INSIDE LOOK AT THE CONFERENCE, CHECK OUT THIS PHOTO GALLERY

COMING OF AGE
Boutique and lifestyle hotels have come of age in the eyes of an increasing number of lenders. Debt financing, in particular, has become more consistently available in recent months, said several panelists during a discussion of financing at the event produced by Lodging Hospitality in conjunction with HVS Hotel Management.

“A thriving debt market has emerged in the past year for acquisitions and refinancings of well-established, cash-flowing properties, including boutique and lifestyle hotels,” said Tom McConnell, senior managing director of Cushman & Wakefield’s Hotel Transactions Group. As example, McConnell said in early 2009 his firm was asked to advise on the refinancing of two hotel properties. “We sent queries to 150 lenders. Two responded, and one of them dropped out,” he said. “By contrast, in the second quarter of this year, we queried 100-plus lenders for a refinancing and received 10 to 15 term sheets.”

He added that terms have also gotten more favorable: Interest rates today range between 5.7 to 6.5 percent versus eight to nine percent last year. Funding sources include life insurance companies, U.S. and foreign commercial banks and mortgage REITs.

Angelo Stambules, who recently joined Marriott as senior vice president of mortgage banking, said for certain projects—particularly conversions of independent properties—the brand company will provide financing to bridge the gap between the first mortgage and the equity in a deal.

The panelists noted the shift in attitudes among lenders toward the boutique segment.

“We’ve accessed debt from a wide variety of sources, but we’ve never had to pay a premium because we operate independent boutique properties,” said Ellen Brown, executive vice president, acquisitions and development for New York City-based Denihan Hospitality Group. “We believe and lenders recognize every one of our hotels is its own brand.”

As McConnell added, in the 1980s nearly every hotel financed in New York City was a full-service branded property. Today, of the roughly 10,000 new rooms added to the market or under development, 3,000 to 4,000 are in the boutique segment, and the rest are select-service properties.

“In the early 1980s, it was nearly impossible for Steve Rubell and Ian Schrager to get financing for their non-branded boutique hotels,” said McConnell. “Today and going forward, boutiques are on par with branded hotels as to who will lend on them.”

IMPROVING RESULTS, LIVELY DEBATE
Industry heavyweights also agreed on the ongoing recovery being of the segment, but sparred on the definition of what makes a boutique hotel and whether one could be branded.

Richard Millard, the CEO of Tecton Hospitality and Desires Hotels, described 2009 as a “total disaster,” but said the last six months have improved. It’s the same story that’s been told for almost every segment of the lodging industry, but Fred Kleisner, CEO of Morgans Hotel Group, said the lifestyle and boutique segments “dive the deepest and fastest” because the marketing mix is 90-percent transient—corporate and leisure—but “we also come back the furthest and fastest.”

Janis Cannon, InterContinental Hotel Group’s vice president of global brand management for Hotel Indigo, said her brand has opened five properties this year versus 13 in 2009. Richard Kessler, who owns and operates 10 independent properties, has seen an eight-percent increase in occupancy this year—helped by seven of those hotels joining Marriott’s new Autograph Collection—and expects a double-digit increase in revenue per available room next year, “hopefully in the mid-teens.”

Where the panel diverged and debated was with the differences between lifestyle and boutique, and whether a boutique could be branded. On lifestyle vs. boutique, Millard said customers didn’t know the difference and it was just industry terminology. Kessler said the differences were like comparing apples and oranges.

Definitions for both segments were hard to ascertain and the concept of “branded boutiques,” as Cannon described Hotel Indigo, was met with resistance from Millard, who said the term was an oxymoron.

Kleisner explained that his boutique customers bought jeans from small boutique shops and if they ever saw those jeans at a Neiman Marcus, “they’d burn them.”

“If our customers thought we were a chain, they’d stop coming,” he added.

Cannon said Hotel Indigo could pull off the balancing act as a branded boutique by being different in every location. “All tell a local story,” she said.

PRICE OF A CELEBRITY CHEF
The Fontainebleau, a Miami hotspot with two major celebrity chef-led restaurants, was a fitting host for a panel on the viability of turning over food & beverage operations to a big-name chef and his company.

Panelist Antoni Yelamos, the f&b director for the W South Beach, hired an up-and-coming young Spanish chef named Marc Vidal, but as his celebrity began growing, so did his ambitions. He left after eight months.

For Tim Dixon, the owner of the Iron Horse Hotel in Milwaukee, the concern was over dividing the staff and losing the continuity he has with Desires Hotels running the entire property, including all five f&b outlets. Dixon said even during preliminary discussions with several celebrity chefs—including Iron Chef and James Beard Foundation Award-winner Michael Symon—the relationship became almost contentious when talked turned to the potential division between hotel and restaurant operations.

“Having someone else’s people over my entire first floor?” Dixon pondered. “I was afraid of those contentious relationships and confusing the experience for the guest. You’ve got to have a consistent story and experience. I’ve got 66 employees on the first floor who represent my hotel. I didn’t want to risk mixing two cultures.”

Albert Charbonneau, the director of f&b at Miami’s Viceroy Hotel, said the idea of bringing a big-name chef to a hotel began about 20 years ago in an effort to overcome the quiet and negative reputations of the typical hotel restaurant. Millard, head of Desires, added from the audience the idea also came about during that time as a result of New York City boutique hotels leasing out he prime retail space to help secure financing.

The Mediterranean-inspired Eos at the Viceroy is celebrity by all definitions. Its chef Michael Psilakis, was named a “Best New Chef” by Food & Wine and “Chef of the Year” by Bon Appetit in 2008. Restaurateur Donatella Arpaia is a culinary personality often featured on the Food Network. Even the restaurant’s designer, Kelly Wearstler, has been a Top Design judge on Bravo.

Yelamos, who was burnt by the departure of Vidal, said he’s in conversations to bring in another celebrity chef to the W. “But it has to be right,” he said. “There’s no doubt hiring a celebrity chef will cost more, but you have to have the same philosophy as the chef.”

Sure, he says, handling the ego of a celebrity can be a challenge, but that’s the point. “Having a celebrity chef with a big personality is why you have one.”

COMMITTED RELATIONSHIPS
Picking the right operator for your boutique or lifestyle hotel is all about relationships. Owners and operators must be on the same philosophical page if the partnership is to succeed, concluded another panel at the conference.

“You’re getting married,” is how IHG’s Tim Genovese summed up the owner-manager dynamic. “As a result, you had better have a ton of upfront communication before agreeing to work together. It pays to be selective on the front end rather than have to switch management companies later on and then wait for the new team to get up to speed.”

Ron Gilbert, president of Growth Properties Hospitality Management, thinks “dating” is a better way to explain how owners and operators deal with each other. “Both sides must be committed and feel as though they’re in the relationship together,” said Gilbert. “If you find the cultures are not aligned and you’re not on the same page, there’s nothing wrong with walking away.”

Experience is another theme the panelists—which included one owner and three operators—stressed as important in picking the right management company. “Owners should look for a management company that has experience in a type of market—urban, suburban, resort, university or whatever—rather than in the specific (geographic) market in which the property is located,” said Charlie Muller, executive vice president and COO of CNL Lifestyle Properties. “Lodging properties aren’t commodities so it’s crucial to find management that has passion for the kind of hotel you want them to operate.”

BUILDING THE BUZZ
A boutique hotel without a buzz is a hotel without many guests. Building that buzz, and then monitoring it, was the topic of a panel on social media.

“The conversations are happening with or without you,” said Doug Carrillo, the executive vice president and a partner with Tecton Hospitality and Desires Hotels, a management company focusing strictly on boutique properties.

Brigette Breitenbach, the principal of Company B, a marketing and brand management company, said there’s no exact formula that works in social media. “It comes down to aptitude and personality,” she said. Her keys to successfully building a buzz through social media were finding a voice, supporting it with visuals and always staying consistent.

Both Carrillo and fellow panelist Joe Hyman, the president and CEO of hotel Internet marketing firm Vizergy, stressed any communication via social media sites like Facebook or Twitter had to be authentic and not self serving. “It can’t just be a marketing ploy,” Hyman said.

Hyman also touched on the effect TripAdvisor, and in particular a negative review, can have on a hotel. For example, a quick Google search displayed how high up in search results TripAdvisor reviews were. Monitoring TripAdvisor can help hotels learn how to avoid mistakes that have led to criticism, but also provides an opportunity to respond and correct those errors.

Another key point came from the audience: Don’t ignore foreign social media sites, especially if your hotel caters to an international audience. Carrillo was on top of it, saying for example that social networking site Orkut is far more popular in Brazil than Facebook.

Measuring a return on investment was a trickier question for the panel. Tracking bookings and referrals that come from social media sites is possible, but putting an accurate measurement on the total impact of followers and friends on sites like Twitter and Facebook to the hotel’s bottom line is almost impossible. Despite that, the panel agreed social media would be costly to ignore.

The three-day conference also included discussions on branding, design and shared ownership, along with plenty of opportunities for networking in true Miami Beach fashion, including receptions featuring cigar rollers and breakfast bars offering bloody mary and mimosa cocktails.