The 5-Star Opportunity You Need to Know About
I hope everyone is gearing up for a fabulous Fourth… certainly a unique one but also more meaningful than ever before.
As you know, AAR Partners is constantly and consciously keeping an ear out for smAARt leads to help you to help brands. Before we all split for the holiday weekend, here’s another opportunity to check into a bit more!
While the recent spread of coronavirus hit the hotel and travel industry quite hard, the long-term macro trends remains:
-hundreds of millions of new people a year with resources to travel are entering the market.
-by 2030, the number of international trips is expected to reach 1.8 billion, [a 50% increase from 2017].
The two main groups driving this travel trend?
-wealthier citizens from emerging markets (especially China)
-growing affluence of the experience-seeking millennial demographic
Of course, the major players have a strong-hold on the industry including: Marriott, Hilton and IHG. However, there are competitive threats in the form of OTAs and a fast-growing $18B boutique hotel niche including:
· High-potential tourist regions outside of popular cities
· Corporate branded hotels
· DTC-branded hotels
· Farm hotels
· College-town opportunities
· Cities with low boutique hotel density (and high development potential)
· Distressed motel / hotel assets
What exactly is a boutique hotel?
US News Travel conducted a useful round-up of “boutique” definitions from industry professionals:
· Smaller Size & More Personalized Service:
· Unique Aesthetic
· Local Know-How & Tastes
According to The Highland Group, a consultancy, boutique hotels can be grouped into 3 segments:
Independent Boutiques: These hotels are the archetype of the boutique aesthetic mentioned above (unique in style, small and independent). Oftentimes, these hotels will affiliate with other independent properties in smaller systems to pool marketing and rewards resources (e.g., Historic Hotels of the World, Leading Hotels of the World, Small Luxury Hotels of the World).
Examples: Delano By SBE, CitizenM, Joie De Vivre, Sixty Hotels
Lifestyle Boutique Hotels: Lifestyle boutique hotels are franchises developed by branded hotel chains that are created in the mold of the “smaller, unique” boutique hotel aesthetic.
Examples: Aloft by Marriott, Kimpton by IHG, Tru by Hilton
Soft-Brand Collections: A soft-brand boutique hotel is part of a brand name chain but — due to its historic nature or name — is less restricted in how it operates and largely retains its own identity (rather than the larger umbrella brand). Soft-branded boutiques pay franchise and royalty fees to brand chains in exchange for reservation management, marketing, etc.
Examples: The Autograph Collection by Marriott, The Curio by Hilton
Based on research from CBRE (a real estate firm) and BLLA (a boutique association), boutique hotels perform favorably across the hotel KPIs including: occupancy rate; average daily rate; revenue per available room.
Occupancy rate: 70.5% for boutiques vs. 65.9% for all US hotels
ADR: $208.50 vs. $147.00
RevPAR: $126.56 vs. $83.42
While boutiques make up less than 5% of total US lodging supply, these “premium” occupancy and ADR are sought after by developers with boutiques making up more than 15% of the development pipeline.
What’s Trending in the Boutique / Independent Hotel Space?
According to Samantha Shankman — a founding employee of travel news site Skift and current freelance reporter — there are some noteworthy trends within the industry:
-the development of tourists areas 40-60 minutes outside of major cities.
Main City | # of Boutique Hotels | Surrounding Destinations
Nashville, TN | 48 | Chattanooga, Gatlinburg, Great Smoky Mountains, Memphis, Gallatin, Knoxville
Portland, OR | 42 | Mt. Hood, Willamette Valley, Cannon Beach, Eugene, Yachats
Palm Springs, CA | 36 | Idyllwild, Joshua Tree, Big Bear Lake
Philadelphia, PA | 34 | Lancaster County, Gettysburg, Brandywine, Lambertville, Cape May, Long Beach Island
Austin, TX | 32 | Fredericksburg, Gruene, Lake Travis, Luckenbach,San Marcos, Wimberley
Dallas, TX | 24 | Jefferson, Terrell, Fort Worth, Canton, Greenville
Boston, MA | 23 | Lexington & Concord, Salem, Portsmouth
Miami, FL | 23 | West Palm Beach, Naples, Key West, Ft. Lauderdale
San Francisco, CA | 20 | Sonoma, Sebastopol, Gold Country, Santa Cruz, Los Gatos, Gilroy
Denver, CO | 20 | Boulder, Blackhawk/Central City, Colorado Springs, Georgetown
Source: Boutique hotel data adapted from Stay Boutique. 10 cities with the highest concentration of boutique hotels from Stay Boutique’s curated list (with a high concentration of hotels signaling existing tourism demand for the region).
branding partnerships can generate quite a bit of excitement; Example: Equinox Hotel (Hudson Yard, NY), Muji Hotel (Ginza, Japan), Shinola Hotel (Detroit)
pop-up hotels for DTC brands; Example: DTC firms already experiment with IRL services such as Casper Mattress creating sleep pods you can rent for naps (The Dreamery).
farm hotels are capitalizing on the rising popularity of foot tourism; Example: Blackberry Farm (Tennessee); The Home Ranch (Colorado)
College towns and campus lodging is growing its boutique hotel options; Example: Two hotel brands catering specifically to the campus lodging space are Graduate Hotels (near Berkeley, Ohio State, Penn State, U-Mich, UNC, U-Oregon, US Naval Academy, Yale, and more) and Study Hotels (near Yale, Drexel, UPenn).
What are the Opportunities in the Boutique Hotel Segment?
Within the US hotel industry, a high-potential niche is the boutique hotels space. With total revenue of $18B in 2019, US boutique hotels represent less than 10% of the broader hotel industry.
When the Ace Seattle opened in 1999, it didn’t just reinvent the hotel — it reinvented the entire process of hotel-making and it never stopped.
However, the boutique niche has grown faster in recent years, showing an annual growth rate of +8.3% from 2014-2019 vs. +3.4% for the entire hotel industry.
What can you do?
Don’t underrate this five-star opportunity and do a bit more research. There are lots of boutique brands that can use your help in the “boutique hotels” arena.
Remember, don’t stalk! Don’t hound. Don’t sent a myriad of messages about yourself. What do you do?
Build trust fast by offering ideas to help with their operations, manufacturing and distribution dilemmas. Share your expertise and show how it’s relevant. Just… don’t… sell!
Prospect smAARt, pitch with passion and most importantly, with purpose.
Finally, have a peaceful and Blessed star-spangled Fourth of July!
