4 Ways Boutique Hotels Can Stay Competitive in the Wave of Consolidation

There’s been a lot of talk in our space about more and more boutique hotels joining forces with some of the larger chain brands. Recent coverage in HNN discusses consolidation trends in the boutique lifestyle space with InterContinental Hotels Group’s acquisition of Kimpton in early 2015 as well as Commune merging with Destination Hotels in January. The most recent headline-grabbing announcement is SBE’s planned purchase of Morgans Hotel Group, scheduled to close by the end of 2016.

Boutique hotel entrepreneur Ian Schrager told HNN he expects smaller hotel companies, particularly boutique and lifestyle properties, will be targeted by larger hotel chains like Marriott International and Hilton Worldwide Holdings. Schrager predicts this will fuel greater consolidation in the hospitality space because the smaller companies can take advantage of the larger companies’ scale and resources while still maintaining their unique experience for guests.

While these consolidated (formerly independent) properties can offer a different branding experience than the parent corporation, there is often a loss of what made these properties special in the first place. Case in point: In late 2015 I joined my husband on a business trip to Spokane, WA. I typically enjoy staying at boutique hotels when traveling and was excited to book our 2-night stay at the Davenport Grand Hotel. One of Spokane’s newest properties and the largest of the Davenport Collection, it felt grand from the moment I stepped through its doors. While the hotel definitely had a modern boutique look, something about it just seemed a bit cookie-cutter. The property was missing that je nais se quoi that’s undeniably characteristic of a boutique independent hotel. On our last day at the Hotel, I stopped in the gift shop to pick up something for our house sitter. The woman at checkout mentioned that the Davenport Hotels recently became part of the Marriott Autograph collection. It was at that moment that the Davenport Grand Hotel’s ordinary feel made sense to me.

Innovation, devotion to service, and maintaining an independent identity are core to boutique hotels and what drives the more authentic, hyper-local experience. As a result, boutiques are delivering more growth than the chains. According to a recent analysis by Lodging Magazine, boutique hotels have delivered greater growth on both the bottom and top lines from 2010 – 2014, with RevPAR increasing at a compound annual growth rate (CAGR) of 10.3 percent, compared to an increase of 7 percent for hotel chains. In addition, Lodging Magazine summarizes that boutique hotels achieved even greater growth in F&B revenue, resulting in an increase of net operating income (NOI) of 23.1 percent, compared to 12.6 percent NOI growth rate for hotel chains.

So how can boutique hotels stay competitive in this fast-changing landscape of consolidation?

Stay true to your independent brand
Travelers who normally bypass chain properties in favor of a boutique hotel know the difference. They know they want a unique experience and seek out properties that specifically deliver on that. They want to find YOUR independent property.

Devote your property to delivering an exceptional and unique guest experience Boutique hotels offer the local and personal touch that’s so desired by travelers. Design and service are key to the success of boutique properties. They may not have all the amenities of the larger chains, but they deliver a huge impact with the little details.

Showcase your strengths via digital channels
There are a number of different travel sites that serve as trusted lines of communication between you and your guests. For example, when you give your guests experiences they‘ll want to rave about on TripAdvisor, you’ll have exposure to their audience of over 340 million unique visitors per month. You can see how easy it can be for your property to be found.

Join a loyalty rewards program
There are a few to consider, but points-based programs show the strongest ROI. Some perks with points-based loyalty include:

Go head-to-head with chains in group negotiations: With points, you can reduce discounting, win multi-year contracts, protect long-term accounts from being wooed by chains, and increase ancillary spend.

Leverage a growing network of extraordinary independent hotels and loyal members: A loyalty program that aggregates independent hotels and has a large and active member base provides a network advantage — new leads for group business are supplied from within the network, along with a wide net of marketing reach.

Offer points for free nights to your most valuable guests: Offering points to road warriors for their nights away from home levels the playing field for frequent travelers. When combined with a national network of independent hotels to choose from, plus the marketing initiatives of a loyalty program, the chain advantage disappears.

Reduce OTA dependency and lower acquisition costs: Cutting OTA share by just 10% by awarding points to direct bookers can save hundreds of thousands of dollars. And a point program, combined with a great experience, will help you fill your rooms with loyal repeat guests.

Is your hotel ready to take the next steps to stay competitively independent? If so, we should talk.