Most feasibility studies for new hotels start with a somewhat clearly defined set of competitors. This may not be the case when working on the first hotel in a new submarket. As we recently found, this might also not be the case with a destination boutique hotel in a drive-in market. Because of its unique orientation, a boutique hotel may have no competition in its local area. Furthermore, the majority of its demand is likely to come from outside the community, as does, for instance, a property like the Inn at Little Washington. Located in a rural area, however accessible within a two-hour drive of DC, the Inn at Little Washington is a boutique hotel providing a destination for those seeking a getaway. Although the remoteness of a destination boutique hotel can be the whole point, it can present challenges for the analyst.

A thorough understanding of the local community surrounding the hotel can be the first challenge. But if approached with an open mind, there is potential for a fun experience. Explore first hand what intrigues visitors to come to the area. If it’s a historical museum, visit it. If it’s a well-known theater, attend a local play. As part of a recent study, not only did we experience the Shakespearian play of Hamlet, we also enjoyed dinner at a popular restaurant known for its support of a local farm.

By actually being a tourist of the community, we could understand its appeal and knowledgeably recommend ways in which the boutique could harmoniously blend in. Serving food from local farms for a culinary spa experience, incorporating tickets to a local theater performance into a minimum stay package or offering tours to nearby wine trails or museums link the boutique hotel to its community. This not only generates room sales by providing interesting options for guests, but also promotes awareness of the community. While learning about the community, keep weather patterns in mind. If the local area is heavy in outdoor attractions such as hiking trails or golf courses, you need to question what there is to do when the weather is prohibitive. Many destination boutique hotels rely heavily on spa revenue during off-season months; therefore, advising the necessity of a spa is imperative.

After gaining a clear understanding of the boutique’s environment, an even greater challenge begins in finding a realistic sample of hotels from which to estimate rate and occupancy ranges. Since comparable hotels might not be in the same town or even the same state, an analyst must broaden the traditional way of thinking. Selecting hotels from markets comparable to that of the boutique is the place to start. Begin by choosing comparable markets based on criteria such as geographic region, population and distance from major feeder markets.

When considering rate similarity evaluate the cost of an overnight stay in the major feeder market. Guests driving in from such a market should expect to pay a similar level of rate. For instance, Highlands, North Carolina is within a two-hour drive of Atlanta, and Cape May, New Jersey is within a two-hour drive of Manhattan. Although both comparables qualify on distance from a major feeder market, rate expectancy is likely to be very different. A traveler arriving from Atlanta would typically not expect to pay the same level of rate as the traveler arriving from Manhattan. According to Smith Travel Research, Manhattan ADR in 2010 was three times more that that of Atlanta.

When considering occupancy be aware of seasonality differences of chosen comparables. For example, low season in New England is much longer than in the Southeast and hotel occupancy can be lower as a result.

Finally, from the list of qualifying comparable markets it’s time to choose hotels that fit the profile of the boutique. Use variables such as size, AAA star rating/Forbes diamond rating and rack rate to develop a set of hotels. Accurately chosen hotels will cohesively provide realistic data of which to compare the boutique hotel.

When considering financial performance comparables, pull together another list that focuses more on revenues from areas other than rooms. Be careful to select hotels with a similar ratio of meeting space to rooms. Find out the number of spa treatment tables at comparable hotels and think through what may vary results: for instance, whether a hotel’s restaurant and spa are also open to the public, as well as the density and wealth of the local population. Boutique hotels aspire to be unique but many have similar amenities.

Lastly, to round out the market study, is the reward. Book a couple of overnight stays at comparable hotels. By actually staying in the hotels, it should be easy to see what is necessary for the boutique to compete. A destination boutique hotel may have a niche amenity such as a unique setting for weddings, a rooftop bar overlooking a beautiful view, a historical building or a luxurious spa experience, but what about the comfort level of the bed and linens, quality of food and service of the restaurant and professionalism of the staff.

Go beyond evaluating cleanliness of bathrooms and size of the fitness center. Pick up on the level of sophistication at the property. An upscale, well-run boutique hotel will intently focus on personal attention paid to the customer. Staff is often trained to remember you by name throughout your stay, walk you to your room upon arrival while pointing out amenities, and even mention events of interest in the local area. At one comparable hotel stay during a recent boutique study, a hotel associate pointed out the room’s heated floors and towel racks and finished with a tutorial on how to use the television remote. How many times have you stayed in a hotel and gotten frustrated with the remote? Extra touches such as these, not only give the analyst first-hand knowledge of how the hotel presents itself, but the experience is an invaluable tool of recommendation to the client.

Although the process can be research intensive, analyzing feasibility for a destination boutique hotel has proven interesting and enlightening. Evaluating a local community provides invaluable knowledge about an area you may have never explored. Researching potential markets and their hotels can expand knowledge of particular areas of which you may not have been familiar. And being greeted by name at the door of a beautiful hotel room with a glass of champagne certainly can’t be all that bad.

Kim Bardoul is a consultant for The Highland Group Investment Advisors, a leading consulting firm providing targeted hotel research and consul to hotel owners, operators, franchisors, developers and investors. She can be reached at kbardoul@highland-group.net.

Kim will moderate a panel at next month’s Lifestyle/Boutique Hotel Development Conference at the Fontainebleau in Miami Beach. The session, titled “Boutique Hotels: From A to Z,” explores many of the challenges and opportunities in developing, owning and operator boutique properties. The conference will be held Oct. 19-21. See the event website for more details.