Miami and NYC Driving US Boutique Hotel Growth

George Sell George Sell Uploaded 24 October 2012

LinkedIn

Around 300 boutique hotel owners, operators, developers and service providers converged on Miami – a mecca for boutique hotels, and the Fontainebleau hotel last week.

Around 300 boutique hotel owners, operators, developers and service providers converged on Miami's Fontainebleau hotel last week for the fourth annual Boutique and LifeSTYLE Development Conference, organised by Lodging Hospitality in conjunction with HVS, and supported by Boutique Hotel News.

The opening panel featured some heavy hitters from the boutique and lifestyle segments of the hotel industry and the general consensus was that the sector was doing well as hoteliers look to manage the demographic and experiential shift, and the guest becomes more empowered to express their individuality too.

However, competition is fierce and hoteliers need to "Get good, or perish in the lifestyle world" according to Jay Coldren, VP of Lifestyle brands, Marriott International. Fresh data from STR showed the strength of the boutique hotel market in Miami with year-to-date through August occupancy at 77.7%, while RevPAR increased a sizeable 8.2%. ADR has almost fully recovered to pre-recession levels, a process that took four years, with demand and revenue growth percentage currently outpacing supply growth.

Jason Pomeranc, co-chairman of Commune Hotels and Resorts, agreed that a competitive environment meant guests benefited from a better product ultimately and revealed his company goal was to be the "largest multi-brand independent" operator since last year's Joie de Vivre and Thompson Hotels merger.

Both Patrick Goddard, president and COO, Trust Hospitality and David Duncan, president, Denihan Hospitality, echoed those comments but added that performance was based around location and geography, with every market being very different from how it was pre-recession.

Duncan went further to describe the current recovery as a "raindrop market" with hotel investment only being made in the strongest markets. He added that while nationwide about 35% of jobs lost in the downturn have returned, in New York City 135% of jobs have returned. Denihan has 16 hotels under two brands (Affinia and James) and a collection of independent properties. "That's why we focus on the top five to 10 markets and in the centre cities of those markets," said Duncan. He added that it's also possible to "hedge" your position in the current market and be in operations mode when the market's good and a buyer where it's more challenging.  

Moving onto the type of guest frequenting boutique and lifestyle hotels, Duncan said his guests were much more travel oriented, after luxury finishes, unique experiences, style and fashion and 15% less likely to choose a brand.

Pomeranc added that his guests liked authenticity and a tailored experience and his hotels are open for everybody who doesn't wish to be pandered to. Guests are ultimately becoming brands in themselves and the selection of a lodging experience is becoming a lifestyle statement as to how one defines themselves, said Pomeranc.

Here, Coldren of Marriott felt the need to explain the rationale for Marriott's soft-brand Autograph Collection, saying: "People are looking for the ability to function independently in the lifestyle segment but also to have a floor to their risk. By plugging into our (reservations system) and maintaining the independent integrity of these hotels gives lenders a lot more comfort and the financing comes a lot easier."

Panel tips to achieve financing included: approach your bank with no brand support but show a solid track record and prove what you can do, illustrating your business case; have a floor to the risk of finance giving your bank comfort and therefore an easier finance decision; banks are looking to get their money back, and one may wish to look for a more flexible contract with a partner that offers capital.

Boutique hotel brokers, buyers and sellers came together to discuss the state of the transactions market, and why boutiques can be an attractive option for investors.

Bruce Blum, president and co-founder of GB Lodging, felt the market was at a "sweet spot" with relatively low supply, improving REVPAR, fewer group bookings and a debt market that was coming back.

While many believe it's difficult for non-branded hotels to attract debt or equity financing, Jason Pomeranc said a brand can be a negative for a boutique hotel seeking financing, particularly in some primary markets like New York City. "With some products and in some markets it's warranted [to affiliate with a brand], but lenders and institutions are starting to see in certain sectors you can do without brands and be better off," said Pomeranc, adding "It's hard to do deals with a brand due to cost, infrastructure, and the rigidity of the NYC market, and can work out twice as expensive working with brands overall."

He said the company is now in the resort hotel business and is also developing a new value-orientated, design-driven chain that will compete with boutiques in the budget price segment. Neil Shah, president and chief operating officer of Hersha Hospitality summarized by saying financing is a tale of two markets: "Tertiary locations are still very challenging, but buyers and lenders are more comfortable with independents and brands than ever."

lifestyleboutiquelh.co

LinkedIn

Be in the know.

Subscribe to our newsletter »
Subscribe

Thank you sponsors