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A Tale of Two Strategies:
Contrasting boutique and chain hotel revenue management approaches

By Jean Francois Mourier 
May 20, 2011

Boutique hotel properties and even boutique hotel chains have been enjoying a surge in popularity over the past few years.  Consumers are increasingly seeking unique, tailored lodging experiences, and boutique hotels are well positioned to provide those experiences to them. 
Boutiques, not saddled with the same cost structures that chain-managed properties are, also present an attractive investment option for hotel owners.
Of course, the large chains still dominate the lodging landscape in the US.  But the rise of boutiques and boutique chains affords an interesting opportunity to compare and contrast the revenue management strategies that work best for each class of hotel. 
Any examination of contrasting revenue management strategies will highlight the differences between boutique and chain properties; in fact, the differences inherent to each of these types of hotel help determine which revenue management strategy is most effective.  Two differences, though, shine through.  Let’s begin with one of the more glaring differences between a large chain property and a boutique: distribution.
Inventory distribution and sales channel management are strikingly different in boutiques as compared to large chain hotels, hinging completely on the presence (or not) of a global distribution system, or GDS.  Large chains have developed and employed these since the time before the internet, while boutique properties have typically not had the resources to develop a proprietary distribution system.  In the age of the online travel agency and rampant internet bookings (more than 40% of all leisure hotel stays are booked online), the importance of a GDS is waning, but the difference in terms of the strategies behind distribution and channel management remain.  Because boutiques rely more heavily on online distribution channels, their revenue management strategies have to be tightly focused on this area.  This may mean using an automated revenue management system that can effectively maintain strong average daily rate and occupancy levels across multiple online channels, and paying close attention to the inventory allocated to each channel.
Chain hotels can also benefit from this kind of automated revenue management system- in fact, it can be argued that a GDS is simply another sales channel that must be managed along with all of the online sales channels- but the presence of a dedicated, proprietary GDS in chain hotels serves as insurance against the variability of online sales. 
More Urgency
The lack of a GDS safety net is only one reason boutique hotels face more urgency than their chain counterparts.  A large chain has the advantages of size and scope behind it: an established management company with group purchasing power, a long history of tried operating practices, the sales advantage of a recognized brand. 
Boutiques may share one or two of these advantages, but in general they have less room for error.  Low RevPAR numbers for a week or a month at a large chain property may not be the end of the world, but for a boutique it could make the difference between profitability and insolvency.  Boutiques face more pressure to maximize every financial metric, and that starts at the top line: maximizing RevPAR.  By using sound revenue management strategy- which often includes leveraging advanced in technology and software design to optimize ADR and occupancy-boutiques can stay ahead of their chain counterparts.
Unfortunately, just because boutiques face challenges and urgencies that chain hotels do not doesn’t necessarily mean that all boutique hotels are proactive in their revenue management strategies. Many boutiques simply employ ad-hoc methods of revenue management, to their detriment.  (Many others do engage in forward-thinking strategies, including investments in automated revenue management systems, a trend which can account for the flourishing of boutiques in many markets.)  If boutiques are going to make significant market share gains on their chain counterparts, they will have to embrace comprehensive revenue management strategies on a large scale.
Then, and only then, will it be the best of times for boutiques.
And looking forward to the next article in the revenue management series from REVPAR GURU & Hotel-Online…
Protecting Your Brand from Discounts
Now that the dark days of the Great Recession are largely behind us, it’s time to be more considered about rates. During the recession, hotel chains engaged in large-scale, across-the-board price cuts. This had the positive effect of filling rooms, but at the cost of overall revenue and brand image. In order to survive and thrive, especially in today’s atmosphere of heavy competition and increasing customer sophistication, hotel operators need to be focused on pricing discipline. Crude, all-encompassing rate cuts won’t put heads on beds anymore – reactive, flexible pricing and inventory management will. We’ll explain in detail the pricing discipline you need to accomplish your very own “Great Boom” in the next article of the series which will be running on June 3, 2011 on Hotel-Online.

Jean Francois Mourier is CEO & Founder of RevPar Guru, a company that has developed an alternative type of revenue management and real-time pricing solution (combined with automated online distribution) to help hotels maximize occupancy and increase their profits. The company’s Yield Dynamic Price Engine, an integrated revenue management and pricing solution, adds unprecedented power and real-time adaptability to the pricing process, leaving managers more time to run their hotels. You may reach him through or by calling +1.786.478.3500. 

786-478- 3500


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Also See: The Great Debate: Humans vs. Automated RMS: Their strengths, weaknesses and what responsibilities are best suited for each / Jean Francois Mourier / April 2011

When Every Second Counts: Secrets for making the most out of the new last-minute booking trend / Jean Francois Mourier / April 2011

Rev Up your RevPAR In 4 Different Ways / Jean Francois Mourier / March 2011

Pricing Beyond the Comp Set And other new pricing strategies that really work / Jean Francois Mourier / March 2011

Schooled By Wall Street; Using stock market principles for optimum hotel revenue management / Jean Francois Mourier / February 2011

System Underload; Inefficiencies in RMS Systems are Costing the Industry Dearly / Jean Francois Mourier / February 2011

Revenue Management: Back to Basics: The Importance of Revenue Management Principles / Jean Francois Mourier / January 2011

Revenue Management: Profiting from the Industry’s Growth in 2011 / Jean Francois Mourier / January 2011

Home For the Holidays: Tending to Hotel Operations When Your Revenue Manager is on Vacation / Jean Francois Mourier / December 2010

The World of Revenue Management: Past, Present & Future; Looking back on hotel revenue management in 2010 and what the industry is expecting for 2011 / Jean Francois Mourier / December 2010

All Science, No Guesswork: The Benefits of Algorithms in Hotel Revenue Management / Jean Francois Mourier / November 2010

The Great Debate: Humans vs. Automated RMS: Their strengths, weaknesses and what responsibilities are best suited for each / Jean Francois Mourier / October 2010

Rate Parity vs. Rate Integrity—What is Rate Integrity? / Jean Francois Mourier / October 2010

A New Day For Timeshares; Using automated RM systems for running your timeshare company / Jean Francois Mourier / October 2010

Best Practices in Revenue Management, Part 3; Automation, Channel Management and Decision Making / Jean Francois Mourier / September 2010

Best Practices in Revenue Management, Part 2; Rate discipline, the leveraging of real-time information, and price prediction / Jean Francois Mourier / August 2010

Best Practices in Revenue Management, Part 1; General revenue management and strategic pricing / Jean Francois Mourier / July 2010

The Irresistibility of the Obvious; How a new trend in revenue management and metrics is missing the point / Jean Francois Mourier / July 2010

Pricing Beyond the Compset - And other new pricing strategies that really work / Jean Francois Mourier / June 2010

A Tale of Two Strategies; Contrasting boutique and chain hotel revenue management approaches / Jean Francois Mourier / June 2010

Historical Pricing Is History, Well, Not Exactly; Examining the Role Historical Pricing Should Be Playing in Hotels’ Pricing Strategies / Jean Francois Mourier / May 2010

Tipping Your Cap (Rate) - Why hotel owners need to pay attention to RevPAR / Jean Francois Mourier / April 2010

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