Industry Update
Opinion Article23 October 2019

Boutique Hotels Are Better?

By Korosh Farazad, Founder and Chairman of Farazad Group of Companies

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A boutique hotel is a small hotel typically ranging between 10 to 100 keys with one-on-one 5-star hospitality service and strong personality in unique settings with glamorous accommodation and individualized UPS's.

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Experiential luxury travel is a key trend in 2019 and hotels are definitely part of the journey. Hotel markets are seeing strong demand for high-end experiential luxury travel, demonstrated by RevPAR growth in the US luxury resort market, as well as in Paris, Rome, Florence, Bangkok, Maldives, Singapore and Tokyo. Expedia research in 2017 shown that boutique hotels had higher overall ADR and faster growth compare to branded hotels. According to prestige property 2019, boutique hotels averagely cost 10-20% less than other hotels. Guests will get more value for money with luxurious experiences at a lower cost.

The popularity of boutique hotels has been significantly rising over the past few years. Especially for millennials traveler, they account as one third of the world's hotel guests and it is predicted to reach over 50% by 2020. They are often looking for a one-of-a-kind and exclusive stay during the stay and experience. This makes them the golden market segment for the hoteliers to deliver more individualize and exceptional experiences. Some example of case studies for the hotel companies that are responding by launching new unique experiences and products are as follows:

  • InterContinental Hotels Group's acquired a 51% stake in Regent Hotels & Resorts in 2018. In addition to Regent Hotels and Resorts acquisition, IHG also acquired Six Senses Hotel & Resorts for US$ 300 million in Q1 2019 to further strengthen the company's luxury segment.
  • Accor and sbe Group completed its acquisition of a 50% stake in sbe in 2018. They launched the newest luxury lifestyle brand called The House of Originals providing a network of extraordinary luxury properties. Some properties will include (1) Sanderson, London (2) St Martins Lane, London, (3) 10 Karakoy, Istanbul, and (4) the Shore Club in Miami Beach.
  • LVMH's proposed $3.2bn acquisition of the Hospitality Group, Belmond Ltd. It's portfolio of high-end hotels, train services and river cruises stretch across 24 countries and includes the Hotel Cipriani in Venice and the Orient Express train service.

What makes boutique hotels so attractive to travelers? The three principal factors are as follows:

  1. Location - Usually located in the heart of the local community making them a hot spot which allows travelers to experience authentic and cultural proficiency. Good boutique hotels will know how to take advantage of the surrounding area including local authentic food nearby the hotel. It is not only creating a unique accommodation, but it also creates a destination within a destination (Hotel Management 2018).
  2. Architecture, Furnitures and Intricate details - Full of character, personality and distinctive architectural features. They are fun and funky. Some boutique hotels will renovate to a modern building with a funky artwork, music and other forms of high-energy vibes. In order to stay competitive, it all comes down to the quality and detail of the hotel.
  3. Intimacy, Privacy and Customize Services - Boutique hotels offer highly personalized service and amenities with more intimate environment. For instance, providing luxury amenities such as high-quality authentic cuisine, personalized name on the pillow, custom toiletries and amazing spa services that creates an individualized experience. One example of bespoke spa is Cheval Blanc of LVMH. The concept is to provide a signature treatment by Guerlain to pampering body and mind. These activities offering guests exceptional experience on this luxury hotel with de-tox and re-tox experiences.

All in all, delivering experiences through service quality, excellence and emotional engagement is what luxury boutique hospitality should be about to satisfy all individual guests based on the situation of their expectation, culture and background. Moreover, boutique hotels are more cost effective for millennials over huge hotels. They pay less and perceive more value of money with the luxurious experience, ambiance of being a personal guest in a private home, rather than a hotel guest compare to larger hotel. With the 3 key reasons stated above (Location, Intricate details and Customized service), boutique hotels will continue to grow in popularity and outgrow big hotel chains.

Korosh Farazad

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    Founder and Chairman of Farazad Group of Companies
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