Will Boutique Hotels Be the Future of the Hotel Industry?

We’re used to getting what we want. As long as we can pay for it, there’s no reason why our goods and services can’t be tailored exactly to our preferences. The Internet has birthed hundreds of specialty businesses addressing niche markets and customizing products for a discerning clientele.

This mindset thrives in brick and mortar businesses as well, and has come to be referred to as the “boutique” market.  There are boutique hospitals, boutique law firms, and boutique hotels. They all serve a sophisticated, specialized clientele, and generally charge premium rates.

The boutique idea originated in Europe. Boutique means “shop,” but in modern usage it’s come to mean a place that is highly specialized and often relatively elite.  It’s been expressed in retail with the development of “concept stores” like 10 Corso Como in Milan, Collette in Paris, and Berlin’s Quartier 206. As the concept has been carried over into the hotel industry, boutique establishments strive for the atmosphere of a specialty shop over a “department store” feel.

Some of the first boutique hotels appeared in the 1980’s, and Morgan’s in midtown Manhattan, often cited as the first boutique hotel in the U.S., opened in 1984. In Leeds, England, 42 the Calls is a venerable boutique hotel, in operation for 24 years and going strong. These establishments are generally small, unique, and personalized. Their success has helped the concept to spread to other cities worldwide. Although New York is still the center for boutique hotels in the U.S., they’ve been popping up everywhere, with especially active markets in Miami, Los Angeles, and San Francisco.

Although there is a subset of “budget” boutique hotels, rates at most of these chic alternatives are higher than you’d pay for the same floor space at a more “vanilla” establishment. Still, a segment of consumers don’t mind spending more for accommodations that meet a specific need. This might be a unique location, unusual dining opportunities, or specialty in-house services, like spa treatments or vegan cookies at the front desk.

As this type of hotel has become more common in the U.S., some of the apprehension of investors has eased. While it can still be more difficult for developers to obtain financing without the backing of a specific brand, more in the industry now recognizes the potential return on a successful boutique establishment.  In many cases, existing properties are being refitted to suit the boutique model.

Some developers are seeing solid success with the boutique approach. The Wall Street Journal recently featured details on the expansion of Commune Hotels and Resorts, which is based in New York, into the Asian market, acquiring a Singapore-based hotel company. According to the piece, boutique brands have “exploded in number in the past couple of years.” These properties  “target younger and more fashionable travelers, focusing on design, a lively bar and a social scene in the public spaces.”

Companies like Hilton and Marriott have their own entries in the boutique arena, and there appears to be room for both the more conventional hotel and the specialty inn. This represents new opportunities for development.

Experts caution that the boutique idea is less novel in other countries, where small establishments and personalized service have been the norm. Still, in the U.S., boutique hotels have grown by an average of 6.1% annually since 2009, and growth is expected to accelerate. It looks like the boutique hotel has checked in for an extended stay.