Third party management trends in boutique and luxury hotel management

Through the pandemic, we are seeing several interesting industry trends gain momentum, as well as new trends emerging as it relates to the management and positioning of boutique and luxury hotels. Remington is a third-party operator with 85 hotels currently under management or development. Of our 85 hotels, 13 are pure independent with five additional hotels being soft branded lifestyle hotels. We, as well as other hotel operators, are seeing increased interest for our third-party management services in the boutique and luxury space, and three trends in particular are driving this increased demand.

More independent hotels are moving to soft brand affiliations

We are seeing greater interest from independent hotel owners considering soft brands from Marriott, Hilton, Hyatt, IHG, and other brands as the pandemic continues to stress all assets across the industry. Converting an independent boutique hotel to a soft brand still requires critical evaluation on the return on investment for the additional costs of conversion and ongoing brand fees. However, we are seeing growing interest to align with brands to drive greater demand through their global distribution systems, minimize operating costs through accessing master purchasing and service agreements, as well as gaining the ability to implement global brands’ programs, systems, and processes to promote and support the health, safety, and wellbeing of their guests and associates during the pandemic.

Within the major brands’ soft brand options, we are witnessing growing interest in the utilization of the major brands’ newer upscale to upper-upscale soft brands, as like Marriott’s Tribute collection, Hilton’s Tapestry collection, and Hyatt’s collection brands acquired through Two Roads. Independent boutique hotel owners who previously shunned brand affiliations are now being drawn more to these brands, as they provide greater flexibility in design and operating standards, which make conversion costs more palatable, offer greater operational flexibility that their higher tiered brethren, and allow the ongoing look and feel of an independent hotel.

Smaller owner-operators need greater resources

Whether it be in the boutique or luxury segments, the pandemic has certainly shed a larger light on the need for a greater level of resources from hotel operators to support their hotels to either survive (in challenging destinations) or thrive (in high-demand leisure destinations). Whether the need is supporting hotels in challenging labor situations, creating, implementing, and maintain cleanliness standards, and at times, completely changing the segmentation of a hotel’s business, third party operators with scale have the ability to provide heavily resourced solutions.

No one-off owner, or an owner of just a handful of assets, can resource their companies with the enormous amounts of talent, HR, legal, governmental, and other support the industry has needed over the past 20 months to navigate the pandemic to ensure health, safety, and compliance protocols are in place. Further, as labor costs have sky rocketed, larger operators have been able to deliver operational strategies, streamline operations, complex support services, and provide the support and guidance necessary to lead owners through this challenging crisis.

Unique, deep value add opportunities are illuminating

One of the most interesting and newer trends (in my opinion) we are seeing is the growing interest in taking on deep value add renovations of dated midscale hotels to convert to lifestyle, boutique hotels, whether they are converted to independent or soft branded hotels. We are working on several projects with owners who acquiring and renovating tired midscale hotels into into vibrant, exciting lifestyle hotels. We are seeing this trend in numerous markets across the country in primary, secondary, and tertiary markets. These investments make a lot of sense in markets where the cost of a deep value add renovation may be significant, but it is still much more affordable than developing a new, ground up hotel with a similar positioning.

The third-party management landscape is always changing. We are experiencing impacts as the result of COVID 19 in ways we have never dealt with as an industry before. While these have been a difficult 20 months for all, I am always inspired by the creativity and innovation that results in times of crisis and I am excited about how that creativity and innovation will evolve our amazing industry in the future.