Source : Business Times - 15 Jan 2009
It’s a trend pre-dating the global slowdown: big hotel chains are moving into the quirky boutique sector to tap into a niche of profitable growth. What’s not clear now is how many can succeed.
Hotel revenues have fallen sharply since last October, and shares in hotel groups in Europe fell by more than 30 per cent in 2008 as investors anticipated pressure on earnings this year.
Nonetheless, global giants from InterContinental - the world’s largest hotel group - to Marriott and Starwood are launching boutique brands in Europe, with others set to follow as they face the biggest industry downturn in a generation.
Consulting firm PricewaterhouseCoopers in December forecast that US demand for hotels in 2009 would fall by 2 per cent which, when coupled with an increase in supply, would reduce occupancy levels to 58.6 per cent - their lowest since 1971.
Against that backdrop, boutique hotels - individual and usually luxurious outlets - offer big chains a chance to boost one of the industry’s key measures: revenue per available room (RevPAR), which PwC saw sliding 5.8 per cent in this year, after last year’s estimated 0.8 per cent decline.
The US market looks the most exposed, according to Natixis Securities in a Jan 9 note. Britain, Spain and Italy look more vulnerable in Europe than France and Germany.
Picking a brand name that emphasises the mood of the moment - Indigo - British-based InterContinental Hotels Group last month opened its first boutique brand outside America. The outlet near Paddington rail station in London brought its chain to 22, and it said that it aims to reach 200 in four to five years.
‘We saw an opportunity for a hotel with a bit of a difference, but the benefits of a big brand,’ said John Wagner, in charge of the brand for Europe, the Middle East and Africa.
Hoteliers entering the boutique niche are betting that travellers will seek better value as spending is squeezed, rather than settle for the usual boring ‘beige box’ hotel room.
But as the big chains muscle in on ground hitherto occupied by smaller independents, the battle could be intense.
The latest data show that in November, US hotel occupancy fell 10.6 per cent while room rates dipped 2.5 per cent; the declines for boutique hotels were 12 per cent and 12.7 per cent, according to Smith Travel Research, which tracks the industry.
‘Unfortunately, from where we are sitting right now, the luxury sector is getting hit harder than the average hotel,’ said Smith Travel analyst Jan Freitag.
‘Luxury hotels are having a harder time and boutique properties are competing at the luxury end,’ Mr Freitag said, noting that many boutique properties are independently operated and lack the marketing muscle and frequent-stay programmes associated with chain-affiliated hotels.
Boutique hotels first appeared in the 1980s in the US, followed in Europe with, for example, a converted multi-storey car park in Paris and a chocolate-themed hotel on England’s south coast.
The Mama Shelter, a budget-priced designer hotel in Paris’s 20th arrondissement, was the brainchild of Serge Trigano, the son of the founder of Club Med, while the Chocolate Boutique Hotel in Bournemouth offers tastings at a liquid chocolate fountain and weekend workshops for hand-making Belgian truffles.
With rates nearer four-star than five-star, the newcomers’ hope is that novelty will replace glamour and ostentation for those who manage to defy corporate thrift and travel. The hope is that character will help carry their brands.
Signs that the boutique segment may be resilient in a downturn came in early January as British boutique hotel and property group MWB Group plc said that trading in 2008 at its Malmaison and Hotel du Vin chains had remained firm compared with 2007.
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