Boutique hotels generate more revenue per available room annually than most comparable traditional concepts and are absent in several U.S. MSAs.
ATLANTA—While hotel supply is growing, new supply is still on the rise, and boutique hotels are leading the pack.
This segment—which is made up of independent, lifestyle and soft-brand collections—performs very well and reports revenue per available room greater than most traditional segments.
Although overall boutique hotel supply increased 7% in 2017, an evaluation of the segment’s distribution across top metropolitan statistical areas in the U.S. indicates opportunity to develop.
Independent boutique hotels have been around for decades, largely represented in major markets including New York, San Francisco and Miami. This hotel type is typically positioned in the upscale-to-luxury price range with a focus on unique design and a food-and-beverage component. Independent boutique hotels increased room revenue by 7% in 2017.
MSAs with more than 40,000 hotel rooms and with less than 1% independent boutique properties might surprise you. The 15 larger MSAs without less than 1% independent boutique hotels include Houston, Minneapolis and Atlanta. Medium-sized MSAs—with between 20,000 and 39,999 hotel rooms—that have a larger distribution of independent boutique hotels understandably include New Orleans and Portland, Oregon. However, 14 medium-sized MSAs have under 2% independent boutique hotel rooms. Charleston, South Carolina, and Santa Rosa, California, are smaller MSAs, with fewer than 20,000 hotel rooms, and have a generous distribution of independent boutique hotels. However, 28 smaller MSAs—including Tulsa, Oklahoma, and Baton Rouge, Louisiana—have less than 2% of this boutique type including seven MSAs that have none.
Lifestyle boutique hotels increased openings by 12% in 2017. This hotel type is largely prescriptive and franchised; however, it is trendy and designed for the boutique-minded traveler. Room revenue for lifestyle boutique hotels increased 9% in 2017.
Some larger MSAs, such as New York and Miami, have a healthy percentage of lifestyle boutique hotels. However, 11 larger MSAs have 2% or less. Thirteen medium-sized MSAs have under-representation of lifestyle boutique hotels. Cities such as Cincinnati, Ohio, and Memphis, Tennessee, are in this group. There are 25 smaller MSAs with few or no lifestyle boutiques including Rochester, New York, and Albuquerque, New Mexico.
Soft-brand collections—a more selective franchise play—often involve conversions at a higher price point. Room revenue for this hotel type increased 10% in 2017; however they are the least represented in the U.S.
Heavy distribution of soft brands is currently found in areas such as Chicago, San Diego and Miami, but they are underrepresented in 13 out of 22 larger MSAs. All MSAs with 20,000 to 39,999 hotel rooms have below 2% distribution of lifestyle boutiques with the exception of New Orleans and Nashville, Tennessee. There are 23 out of 30 smaller MSAs with none of this hotel type including Albuquerque and Colorado Springs.
Expect to see an uptick in supply distribution for this segment over the coming years as soft-brand collections are introduced at a lower price point to reach a new target audience joining the unique overnight-stay trend.
Although the increase of boutique hotel supply is outpacing most hotel types, current distribution in the U.S. is highly skewed throughout top MSAs. Consumers are seeking out this lodging option, resulting in strong performance of the segment. Scarcity of this product in markets of all sizes indicates a significant opportunity for development.
Kim Bardoul is partner with The Highland Group and author of the annual Boutique Hotel Report. Her experience includes feasibility studies and market analysis for all types of proposed and existing hotels, due diligence for acquisitions, impact studies for several major franchise companies and financial analysis. She specializes in the boutique hotel product.
The assertions expressed in this article do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please feel free to comment or contact an editor with any questions or concerns.