Custom term paper on Boutique Hotels: The Rising Trend in Hospitality

Investors and Boutique Hotels

Researches carried out by audit firms show that the niche of boutique hotels is very promising from a commercial point of view. Thus, for 6 years, from January 1995 to November 2000, the demand for the rooms in boutiques has increased by 14%, whereas in the traditional branded hotel deluxe it grew by only 4%. The average load in boutiques in 2000 was 74%, which though slightly, only by 1-2% but exceeded the load of luxe hotels. The average room prices (ADR) in the boutiques by the end of 2000 was $ 210 compared with $ 150 in luxe hotels. And RevPAR (Revenue per average room) in the boutique in this case was $ 160 versus $ 118 in luxe hotels (Craig, 2010).
Hotels, owned by Ian Schrager and Bill Kimpton, a chain of hotels “Joie de Vivre” (“Joy of Life” – a meaningful name), and finally the hotels W, created by Starwood Hotels & Resorts, are rapidly filling America, going beyond its borders – recently, the first “W” boutique appeared in Sydney. Interestingly, the hotel was rebuilt from the former wool storing warehouse. Today, the “W” chain includes 16 hotels, 5 of which are in New York. Hotels of the chain are characterized by rather small size for America, unique architectural and design solutions, and exquisite service, which allows them to attract a variety of important clients including the stars of show business (Boutique Hotels On The Rise). custom term paper
The services proposed to the guest deserve a special mention. Apart from conventional high-quality hotel services like round the clock room service, guest parking, strong rooms for storing valuables, health center and meeting rooms, they offer a service which is not found anywhere else, except “W” hotels – the so-called “Whatever/Whenever” service, which implements literally any desire from a ticket to a fashion show to champagne bath (McKinney 2008).
Life has confirmed the correctness of the chosen strategy of Starwood – in 2000, 12 “W” hotels gave 15% of all incomes of the giant group, and it was not due to gaining over the clients from Westin and Sheraton, also included in the Starwood Group. The nearest plans of Starwood include bringing the number of “W Hotels” to 50-70, going beyond North America (McKinney 2008).
Boutique hotels have become a very fashionable trend in the hospitality industry. Investors want to build them, travelers want to stay there, travel news commentators praise their advantages. But how popular are they among owners? How profitable are boutique hotels compared to other hotels of the class? To answer this question, the company PKF Hospitality Research (PKF-HR) conducted an analysis of revenues, expenses and profitability of boutique hotels that provided their annual reports to the annual study of trends in the hospitality industry. The sample involved only hotels that provided data for all years from 2000 to 2006 (Lea).
For the analysis the boutique hotels of famous brands and independent hotels were selected. In 2006, selected boutique hotels had an average of 166 rooms with occupancy 77.3% and the average price $ 223.23. For comparison, independent hotels were taken by an average of 244 rooms with occupancy 71.8% and the average price $ 140.84 (Yanos, 2008).
From 2000 to 2006, boutique hotels showed a steady growth of the following indicators: occupancy, average daily rate (ADR) and revenue per average room (RevPAR). For seven years, boutique hotels achieved the increase in RevPAR by 162.6%. This was the result of occupancy increasing by 106.1% and ADR by 154.4%. In 2006, income from hotels’ restaurant service was 23.5% of the total income. This is lower than the average number for the industry – 26,7%. Nevertheless, the total revenue of boutique hotels was by the record 56.1% higher than the average for the United States. It should be noted that some of the boutique hotels rent restaurants to other companies, which reduces their share in total income. But the expenses of boutique hotels are also higher. From 2000 to 2006, the expenses of boutique hotels were about 55% higher than the average in the U.S. (Yanos 2008).
Despite the high rates in the period from 2000 to 2006, the profitability of this segment varies widely from year to year. In good times boutique hotels reach record levels, but the decline in the industry in 2001-2003 affected them more seriously (Yanos, 2008).
From 2000 to 2003 the average U.S. hotel revenues decreased by 15,1% and return by 36,2%. Boutique hotels had the same indicators decreased by 25% and 52.9% respectively. On the contrary, from 2004 to 2006, boutique hotels recover from the recession quicker than the rest of the industry. Their income increased by 36,6% and operating profit by 75,5%. Restoration of most ordinary hotels was more gradual: 26,7% and 45,8% respectively. Unstable rates of boutique hotels may be partly related to their predominantly urban location. Largest cities suffered most from the recession, but recovered quicker. Boutique hotels have to pay for their high performance by its instability (Yanos 2008).