Small Hotels, Big Business

Boutique and small luxury hotel groups are opening the door to major profits.
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At an out-of-town business luncheon, it used to be advantageous to drop the name of your luxury chain hotel of choice. The Ritz and Four Seasons rolled off the tongue and boosted image.

But now these names might make you sound a little dull, maybe even uninspired.

As travelers become more adventurous and discerning, the small luxury and boutique industry is indeed at their service.

Serious Service

John Sears, executive vice president of

Boutique Hotels & Resorts International, an independent network of boutique hotels under one brand name, says visitors want their hotel address, like their home address, to reflect personal taste and standards.

"It is clear that the ordinary hotel trade drastically underestimated the demand for originality and character," says Sears. "The tide has radically shifted."

His group started in 2003, when the boutique hotel trend was just taking off and customers were starting to look for a more customized experience. As these boutique hotels and small hotel groups raised the luxury norm, people began to take notice. Ten years ago, "the boutique hotels were the romantics of the industry and nobody took us seriously," he says.

The biggest challenge, says Sears, has been competing with industry giants and their sales and marketing machines. So they focused on something the behemoths don't (and in many cases can't) have: exceptional service and unique style.

"We stayed with the foundation of delivering highly serviced hotels ... focusing less on the initial hype and more on results," says Sears.

Commercial luxury hotels are part of a bigger organization that is constantly watching their labor costs, while smaller boutiques look for service to the customer first and foremost -- unconventional in today's business model.

And as the adage goes, imitation is the sincerest form of flattery. "The best compliment we've had was that all the major hotels have started boutique segments and brands," says Sears.

The boutique hotel model is the pioneering concept in the hospitality industry, Sears adds, and has been growing significantly over the past decade.

To view Annika Mengisen's video take of today's segment, click here.

"The most exciting assortment of services and amenities are offered from hotels that were not too long ago considered the outcasts," says Sears, who boasts of quirks like cordless guest room phones that can be used outside the hotel and throughout the local area, in-room mini delis and some of the finest cuisine.

Look Ma, No Ads

Boutiques and small hotels generally don't use mainstream advertising, but they deliver a product that their users like to brag about.

John Scott, president and CEO of

Rosewood Hotels & Resorts calls his group fortunate; it's been around for 27 years and is recognized as the pinnacle of luxury

residential hotels.

But Rosewood's success can be attributed to more than sheer luck.

Rosewood goes by the philosophy of "a sense of place," and prides itself on designing properties that architecturally, historically and culturally fit the environs.

"We're able to do the small touches that bring a hotel to life," says Scott, whose intimate resorts can afford great attention to detail, with guests' names monogrammed on their pillows and programs like

Hot Type, which lets guests read books before they hit the shelves.

Scott also explains the importance of a strong branding initiative. His customers were seeking ways to connect the dots between different properties, and Scott gradually began integrating the Rosewood name into the names of the individual hotels for easy identification.

Further, staying small can lead to staying strong:

Kor Hotel Group, a company with a diverse portfolio of design-led hotels including the Viceroy and The Tides brands, identifies efficacy as its greatest asset.

At Kor Hotel Group, "there exists no prevailing paradigm of rules that regulate and sometimes thwart our elder luxury competitors," says Nicholas Clayton, president of the Kor Hotel Group.

Kor's efficacy also depends largely on internal tracking of guest satisfaction, reservations and online activity. Its most successful initiative has been establishing a central reservations office, which allowed the group to build an internal reservations process.

Like many smaller luxury hotel groups, Kor is constantly growing and evolving, which is attractive to customers. "People are interested and excited in something that's growing, vs. something that's been around for much longer," says Clayton.

Sunny Outlook

Adam Weissenberg, partner at Deloitte & Touche LLP and leader of its travel, hospitality and leisure sector, says today's higher-end leisure and business travelers are looking for a superior level of service and are less sensitive to high room prices.

Considering the overall trend in the luxury market, Weissenberg says, 2007 and 2008 look good for small luxury hotels.

While luxury chains are still incredibly successful, smaller and boutique hotel groups can reduce the everyday grind of traveling or enhance the memory of a trip.

"Now hotels can add to business or vacation, and be the

primary reason why you travel," says Sears.