RSBA & Associates 
Hospitality Consulting Services
400 Spear Street, Suite 106
San Francisco, CA 94105
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  Success (or Survival) of Boutique Hotels and Resorts
by Rick Swig - 1998 

New development is a natural event in strong markets with high demand.  The hotel business today seems to be edging into that cycle with strong performance in both urban and resort locations.  The new cycle will include the development of both franchise branded hotels of all sizes, shapes, and products, plus there will also be a place for the new development or redevelopment of boutique independent products. 

Although recent development has been focused on branded products, there has been a high degree of success for the small and independent boutique hotel or resort.  There continues to be a consumer segment that demands a special and differentiated product to suit their individual needs.  This article provides an overview of the elements for success and/or survival of a boutique hotel or resort. 

The basic mantra of developing a successful boutique hotel or resort might be: 

“Is there a niche? .....Can it be filled?”
Boutique hotels and resort must fill a special need or provide a unique environment to successfully attract customers away from traditional and more familiar brands. 

Unique attributes and environments aside, the success of boutique hotels begin with the same fundamentals that lead to the success of other hospitality products: 

  • Location
  • Market demand
  • Quality product
  • Clearly defined marketing and effective distribution/reservations coverage.
Probably the keys to establishing whether to build or buy a boutique hotel or resort include: 
  • The ability to ask “why” the hotel or resort should exist in the first place
  • The determination of what market or customer needs are satisfied by its presence
 Asking “why” a hotel or resort should exist in the first place might consider the following: 
  • Does the hotel or resort or its location offer any unique or special attributes?
  • Is the hotel or resort able to support the delivery of the product as promised, whether those are oriented to the corporate or leisure traveler and have a service orientation towards business or recreation.
  • Is the location accessible or convenient to targeted customer markets?  (For example, for resort markets the question would relate to adequate air lift or other access into the destination, or as Peter Yesawich promotes, is it within 3 1/2 hour travel time from high density markets?).
  • Is the destination attractive during multiple or extended seasons to allow high occupancies throughout or in most of the year, if not every day of the week?
Then comes the query, what good is a hotel or resort if no one needs it, or put more diplomatically, does the hotel or resort fill a need for a specific customer or market segment? 
  • Is the hotel or resort oriented towards an underserved constituency in the competitive marketplace?  This constituency might be cultural, social, or spiritually based, as opposed to the traditionally defined groupings such as business, leisure, group, or family.
  • Does it fill a need for customers with special interests or requirements?  Once again the relationship to this question may be non-traditional and require “out of the box” thinking towards more intellectual or demographic groupings.
  • Is there an appeal to customers seeking an “alternative” to the traditional norm?  Given the alternative products as presented by Ian Schrager hotels in New York, Miami, and Los Angeles or the Hard Rock Hotel in Las Vegas, there are customers looking for something different.
If a significant market segment, constituency, or customer base is resolved, then more specific needs for those targets must be determined based on their special interests, such as: 
  • Recreational activities, i.e. adventure or not, physical or passive
  • Business products, i.e. not only computer ports in guest room telephones but dedicated ISDN lines or easy Internet access opportunities.
  • Social preferences, (what is the peer group or crony factor?)  Many customers are concerned with fashion and the “right” place to stay.
  • Environmental surroundings,  which would include the attitude of the hotel(customers and staff), or possibly spiritual considerations for personal enrichment as well as physical factors for just plain enjoyment.
  • The “special” experience.  The ability for a customer to feel a unique difference.
  • A quality product, which is directly associated with price/value and general customer expectation
An existing or potential boutique hotel or resort owner must consider their own basic “needs” as well.  This is a mixed bag of considerations including: 
  • The capacity to identify their hotel or resorts competitive advantage or true differentiating characteristics that will allow the location to be visible to a market with multiple options
  • The ability to define a market or customer base with “needs”, which match the product opportunities offered by the hotel or resort
  • The assurance that there is enough of a market or customer base with “needs” to create enough demand for the survival of the hotel or resort
  • The potential to deliver on customer expectations
  • And if all of the above can be achieved, then what about the opportunity of making money and returning adequately on the investment of time and capital investment?
 Marketing an independent boutique hotel or resort can be difficult, as there are generally severe restrictions of financial and other resources.  The lowest common denominator of marketing a boutique hotel or resort is really “sending a message” to those who are interested or should be.  The real basic issue here is story development, which relate back to the special nature of the experience, location, or  environment.  The unique, clear, and easily related story must then be delivered through effective and affordable channels, which would lean heavily on allied special interest groups or markets with a heavy peerage factor. 

Outside of direct mail or direct sales or impacts on affinity group travel planners or peer groups, the most effective and powerful medium is the press.  In effect boutique hotel or resorts and the press have something deeply in common.....they are both trying to attract consumer attention by displaying special interest products.....the greater the special interest, the great potential for attention from an intrigued body of customers. 

Once the message is sent, capturing the response becomes the priority.  Today, a boutique hotel or resort operator must anticipate customer buying habits - both traditional and non-traditional - and manage their distribution activities well, whether this means: 

  • Answering the telephone
  • Yielding E-Mail from the Internet
  • Utilizing the distribution channels of affinity groups, such as marketing associations, representation firms, or visitor bureaus.
When all is said and done, success in the boutique hotel or resort business comes down to some clear conclusions: 
  • Defining the hotel or resort’s purpose and niche
  • Developing a quality product targeted to an underserved customer base 
  • Conveying a clearly defined and interesting message to the target segment
  • And assuring that once all of the above is done that too much development money has not been spent and a product can be delivered to actually allow profitability!!!
From a developer or owner’s standpoint there is an ultimate gut check...the risk and willingness to be different and reap extra value from a marketplace with changing needs, preferences, and fashions.  A bold concept for the pioneering. 
RSBA & Associates
400 Spear Street, Suite 106
San Francisco, CA 94105
Tel:  (415) 541-7722
Fax: (415) 541-5333

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