Building a Better Boutique Hotel

Aboutique hotel is something like art, hard to define, but you know one when you see it. Building a 21st century boutique hotel is much more complex than building a branded, conventional hotel, which already has highly researched standards that appeal to a broad cross-section of guests. A boutique is a one-of-a kind lodging experience.

Perhaps the two hottest hotel concepts today, as well as the most confused, are “lifestyle” and “boutique.” While they are often combined to identify one hotel, the two concepts are distinctly different, nearly at opposite ends of the spectrum. Lifestyle hotels generally are targeted to mass markets, while boutique hotels aim for each guest individually, or a “market of one.”

Lifestyle hotels are largely a creation of the major brands. While they “feel” independent, there is a similarity in the product across the brand. Boutiques, on the other hand, have individual personalities that don't often transfer well from market to market. Creating and building a boutique hotel today requires a sophisticated skill set and dedication to a unique and clear vision.

The branded lifestyle hotel is built around the premise of creating an image: “We are hip. If you want to hang out with hip people, come stay with us.” They create an environment that has a certain snob appeal of “see and be seen.” Starwood's W brand has done an extraordinary job of creating this image and has been quite successful in building demand from developers and consumers alike.

Prior to the rise of Holiday Inn in the 1960s, virtually every hotel was a boutique, in that it was singular in appearance and product offering. As brands exploded, these independent hotels began to fade away until resurgence in the early 1980s when several adventuresome developers reinvented the concept. Since then, boutiques have flourished and today outperform high-end, full-service, branded hotels in terms of occupancy (74.5 percent vs. 72.9 percent), ADR ($198.68 vs. $153.59) and rooms RevPAR ($147.02 vs. $111.03), according to the 2006 Trends in the Hotel Industry report by PKF Consulting.

There is no precise definition of a boutique hotel, but the following characteristics are found in today's modern version.

  • Size matters

    Boutiques typically range from 20 to 150 rooms. The ability to provide the intense personal service required of a boutique becomes exponentially more difficult above 200 rooms.

  • Upscale or higher

    It is almost impossible to offer a boutique experience below the upscale level of at least four stars.

  • Good food counts

    Food and beverage define a boutique. Most branded hotels view a restaurant as a necessary evil; a box of rooms that unfortunately has a restaurant. Without the sugar daddy of the rooms, the restaurant would fail. On the other hand, most successful boutique properties are a restaurant with hotel rooms. For example, when Gemstone opened the ZaZa Hotel in Dallas, we sought out a well-known chef to “celebritize” its Dragonfly restaurant and generate immediate trial. We focused carefully on insuring the guest restaurant experience would be extraordinary. The Dragonfly quickly was received as one of the best restaurants in Dallas, which established the buzz for the hotel.

  • Not for large groups

    Boutiques should have limited meeting space. When a boutique depends on the group meeting segment for more than 10%-15% of its weekday demand, the hotel begins to lose its unique personality. Having 100 people with name badges in your lobby will quickly drive off core guests.

  • Getting older and better

    Boutiques typically are housed in older, unique structures that have been converted from another use. These structures help the property exude a unique personality and often bring tax-credits that will help the project pencil out.

  • Location isn't everything

    Location for a boutique is not as important as for a branded hotel. We have guests who drive 50 or more miles out of their way to stay at some of our boutique hotels.

  • Incredible shrinking lobbies

    Boutique lobbies generally are much smaller than conventional hotels, which make the guest experience much more intimate.

  • But, fatter profits

    Properly run boutiques will have lower operating costs and higher margins than branded hotels.

CREATING A REFERENCE

Boutique hotels create a reference point that appeals to specific compatible interests. The reference point is a combination of both design and service. When a guest enters a boutique hotel, he will immediately feel at home and find people there like him. Creating the reference point is the key differentiator for boutiques and is essential to their success.

One of the most famous boutique hotels was the Algonquin, the New York hotel that attracted the literati during the 1920s and 1930s. One stayed at the hotel because some of the country's best writers gathered there (the reference point). Stimulating conversation was waiting for guests as soon as they walked into the lobby.

Today, boutique hotels must target “markets of one.” The hotel must create a personal experience tailored to each guest that is completely service- oriented. For example, any repeat guests should be called by their preferred name on their second and subsequent visits to the hotel. Service and amenities should be tailored to each guest's individual preferences. Everything in the hotel must have a purpose for making the guest's experience more personalized.

For example, when Gemstone renamed and repositioned the Mosaic Hotel in Beverly Hills, we created a position called the “Tailor.” His job was to get to know our repeat guests and obtain sufficient personal information to create a “tailored” experience.

This played out from the simple to the exotic. We had one repeat guest who was on a waiting list to buy a new Mercedes S550. The model was not available in his home town yet, so we arranged a temporary solution. We asked our regular luxury automobile rental dealer to provide one — which he did. The guest paid the rental and is still talking about the experience.

Another guest was delayed in a client meeting and missed her flight back home, where her two young children were waiting for her. When she called for a room, we knew she would miss them desperately. So we bought two teddy bears and put the children's names on each along with a note from them, dictated over the phone, saying they missed her and didn't want her to be lonely that night.

With that kind of personal attention, is it any wonder that The Mosaic Hotel has been ranked the number-one boutique hotel in Los Angeles?

BUILDING A BETTER BOUTIQUE

Psychological and marketing research has proven that the amygdala region of the brain is the area that creates emotional connections. The region is especially wired to make connections with brands and products. In laboratory tests, the amygdala region lights up like a Christmas tree when the brain is stimulated by a favorite brand.

The key to a great boutique is creating an environment that over-stimulates the amydagala and makes an emotional connection with the guest. For hotel guests, it can be as simple and cost-effective as car rentals and teddy bears. When that connection is properly made, the guest will always love the product, and unless it is an extreme situation, s/he will always forgive a lapse.

When developing a boutique hotel that will make that emotional connection, the owner must begin with a boutique strategist. There arguably are no more than a handful of people in the industry today who are true strategists. These specialists are not architects or designers. Their strength lies in understanding the physical and design aspects of a hotel, and, more importantly, they have a sophisticated appreciation for the theater of hospitality. They identify the guests who will stay at the hotel and build the hotel script that will attract them.

These specialists focus on ferreting out the special things that will set the hotel apart for its unique guests. They do not conceptualize for the average, because that will only yield mediocrity in both product and financial results. A boutique cannot be all things to all people. Its vision must clearly identify what it is and what it is not.

Luck is not a strategy for designing a multi-million-dollar boutique. Supporting the strategist is a research firm that identifies what potential special market exists for such a highly segmented asset. This type of research must be probing. If Henry Ford had asked his customers what they wanted in the early 1900s, they probably would have responded with “a faster horse.” Today's travelers will probably ask for a better bed, unless the researcher drills down several levels to unearth what will make the emotional connection.

Based on research, the strategist creates a position and script for the property. At this point, the strategist should select the right management company (the director in theater) to collaborate on the final production. Together, they assemble a multi-faceted team to turn the script into a finished production. To set the tone, the strategist begins the first meeting by noting that the team must approach the project by listening to the research and what the guests tell them, versus what might make the cover of Architectural Digest.

Each team member brings special talents. The architect brings functionality. The interior designer creates the set in which the hotel experience will be performed. The food and beverage expert defines a unique experience in keeping with the hotel's position. Independent marketing consultants such as Internet marketers, advertising and PR agencies also add value in shaping and refining the vision and its messages.

Combined, these team members create the structure for a sustainable long-term competitive advantage; an advantage that matters — and acts as a powerful magnet to the target market.


Mark van Hartesvelt is a partner of Gemstone Resorts in Park City, Utah. The company manages or asset manages more than 20 boutique hotels and resorts. He can be reached at mark@gemstoneresorts.com.

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