Mr. Marx

Boutique Hotels

Lifestyle 'Select Service' Brands: Oxymoron or Groundbreaking Concept?

By Steven Marx, Managing Principal, Lifestyle Hospitality

Full Service, Luxury, Limited Service, First Class, Select Service, Focused Service, Extended Stay, etc, etc.

The industry, as well as the hotel rating agencies and internet intermediaries, have managed to create a sufficient number of "classes" of hotels to not only confuse their guests, but the hotel companies themselves. And depending on to whom you talk, everyone has a different interpretation of what each of these classes mean. Then you add in 4-star, 4-diamond vs 3-star/diamond; we toss those ratings around when describing properties, not even referring to their "official" rating by Mobil and AAA. How many of us have fought with Priceline.com about their classification of our hotels, which directly affect a significant amount of potential revenue?

And then we come to boutique hotels; the confusion around what classifies a boutique hotel makes the issue with "conventional" hotels look like a walk in the park. Those of us in the boutique/lifestyle end of the business have been struggling with this challenge every since the term became popular in the early 1980's. What's most aggravating is that despite the growing popularity and numbers of boutique hotels around the country, and the world, hardly any of the rating agencies and intermediaries have created a separate class for them. Even worse, a boutique hotel could be beautiful, upscale small hotel, with excellent service levels and food and beverage operations; but because it may have been created from an older building, with inherent limitations on room size and configurations, not-quite-totally modernized HVAC (but comfortable enough for most guests), and other issues, the property could end up becoming rated as a "3-diamond" hotel, or its equivalent. Thus, a boutique hotel could arguably provide an experience that would be competitive with a Ritz Carlton, or certainly an "official" 4-diamond Westin, and yet be rated below those properties, just because their product and physical attributes don't fit into the boxes that the agencies/intermediaries have created for classification purposes.

Not only does this issue seriously impact potential revenue through creating in some cases arbitrary ceilings on relative ADR's against their local competitors; through unfair and even inaccurate guest pre-conceptions about the product; but even more importantly, by not offering a boutique designation, many guests who seek boutique hotels wherever they stay cannot find them, unless they know of a specific boutique hotel in which they've stated, or identify them through word of mouth, adverting, or Public Relations.

Another problem is that Smith Travel as of yet does not have an official classification for boutique hotels. This is not so much problematical in picking a competitive set in a city in which a boutique company operates; as the local management team will know the hotels in their backyard, and can select the true boutiques for their comp sets if appropriate. The challenge is not being able to run custom reports on the performance of selected boutique hotels as a group, nor to be able to index your own company's performance against boutique hotels at large, either regionally or nationally.

This situation, of course, has somewhat less impact on what are now recognized boutique/lifestyle brands. However, even the largest soft-branded boutique hotel company, Kimpton, without the name recognition with the general public that brands like W have, theoretically is at a disadvantage. W overcomes potential ratings issue with its Starwood affiliation and highly successful marketing program; W guests don't really care what the properties' ratings are.

When I was overseeing Kimpton Hotels back in the 1990's, when the company was primarily offering conversions of existing older buildings, I actually discouraged inspections from the rating agencies, as I knew that in many cases the properties would be 'under-rated', and would work as a liability rather than an asset. You can imagine the challenge that an independent boutique hotel developer has in establishing his identity and "class" for potential customers that take ratings seriously.

So: what do we do about this conundrum? Well, first of all, we can't expect the agencies referenced above to break their necks trying to create a standard for boutique hotels, if the boutique hotel companies themselves don't help out by attempting to set up some standards that can be used to classify their own properties for this purpose. Look at the home electronics industry, for example: they agree consistently on developing standards for new formats that can be coined and rolled out to the buying public so they understand what they're buying. Look at the airlines (well, maybe not the best example. . .); Business Class, First Class, etc. Granted, there are variables between the Business Class sections in American vs United Airlines; but the traveling public has a general idea what they're getting.

Maybe boutique hotels have a somewhat bigger challenge, as the product does vary significantly from hotel to hotel; but why not give it a try? Let's face it; there are only a handful of specialty developer/operators out there that only develop boutiques. Why not attempt to get them together for at minimum a brainstorming session to see if they can develop some rough standards that can be utilized to classify their hotels to the consumer through rating agencies and third party marketers? Although I know that some of these companies shy away from the term "boutique" as not being representative of their product type, the general public for the most part lumps most of the properties offered by companies such as Kimpton, KOR, Morgan's, etc as "boutique" hotels, for better or worse. So why not utilize this term as an umbrella under which to categorize these properties? The "stickier wicket" will be to set some arbitrary standards under which a hotel would be classified as "boutique". That's why my suggestion would be ideally to include representatives from the rating agencies, Smith Travel, and the key intermediaries as a "focus" group to assist in developing the standards, as well as hopefully to buy into the concept.

Yes, I've always been the eternal optimist; I feel that, even against the odds, the boutique companies have a lot of upside to be gained through carrying out this initiative. Far from a specialty niche anymore, boutique hotels are mushrooming everywhere, and are clearly now a legitimate segment that needs definition and clarity in order to maximize their visibility with the ever growing boutique hotel loyalist, many of whom will travel a few blocks, or more, off the beaten path to stay at one of them, versus a conventional branded hotel. Why not make it easier for them to find you? Am I missing something?

Steve Marx is an expert in lifestyle properties. While leading Kimpton Hotels, Loews Hotel Corp, and W Hotels, Steve guided each company through growth and stellar financial results. At Kimpton, he grew the company from 12 to 30 hotels. Steve and his team launched the Monaco brand. With Loews, he repositioned several properties, and spearheaded the largest growth period in Loews' history. Mr. Marx's most noteworthy accomplishment with Starwood was to transform W Hotels from the least to the most profitable brand in one short year. Mr. Marx can be contacted at 203-698-2772 or smarx@lifestylehg.com Extended Bio...

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