Boutique Hotels: Starting and Running

Introduction

In the 21st century, the hospitality industry has thrived. Traditionally, there has been saturation of big monopolies of hotel brands, with their primary objective being provision of lodging accommodation for travelers.

A boutique hotel is a luxurious, personalized version of the traditional hotels whose focus is on the provision of a comfortable, intimate, and welcoming setting. According to Dubois (2010), the personalized service and design reflects the characteristics of the target market and is the distinguishing feature that categorizes a hotel as a boutique hotel.

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Boutique hotels were started in the early eighties, with two of the world’s first boutique hotels opening in 1981 – these two hotels are The Blakes Hotel in South Keningston, London designed by Anouska Hempel, and The Bedford in Union Square San Fransisco, now a series of 35 such hotels of the Kimpton Group (Dubois, 2010).

Starting Up

Location and Destination

The most significant factor to consider when starting a hotel is the destination and location, although product quality, market demand, a well-defined marketing approach, and effective reservation coverage play a major role that contributes to the success of the business (Yanos, 2008). For a city destination, the location should be in a trendy neighborhood, central to other things that are going to complement the business. Indeed, good locations lead to guests’ loyalty and interest (Nickisch, 2011).

A city destination attracts a diverse market from leisure, business, events, and conventions all week long. Ideal city locations are fashion centers, media capitals, cities with vibrant economies, and trendy residential areas. For a resort destination, the more the indigenous a location, the better, as this gives guests a chance to explore the local feel without sacrificing luxury.

The hotel should be tucked well behind mountains, in valleys, deep in the jungle, near a lake or watering points in wildlife reserves or in deserted corners of islands. Indeed, the more difficult it is to reach the destination by conventional means, the more fashionable the location is considered (Yanos, 2008).

The location is dictated by the destination; this defines the style, decor, and architectural design of the hotel and hotel rooms. It is generally a good idea to avoid areas that are too saturated with boutique hotels.

Financing

Boutique hotels are a big investment, as their start up costs are quite high and the marketing is costly, as it needs to be continuous (Enz, 2009). The cost varies depending on the location, number of rooms, and the additional amenities in the premises.

Buying an already existing property and renovating it to fit the desired design and needs is generally more cost effective than developing a new project from scratch. With limited finances, one should consider remote, scenic locations, suburban locations, or renovating an old city hotel in a transitional neighborhood, where property values are rising; this is not only cheaper, but it also has favorable future prospects (Yanos, 2008).

It is not easy to find funding for boutique hotels, as non-branded lifestyle hotels are seen as a risky investment (Dubois, 2010). One can also consider partnership with an investment group that will help with the financing of the project be it building, or acquiring reposition, to the desired standard under agreed terms.

This is particularly important because with the financial pressure reduced, one can concentrate on the quality of the project. Commercial loans, which are tailor-made to suit boutique hotel financing, are also a viable option although at a higher cost. Partnerships also play an important role in the financing of the business and the partners can vary from affluent hoteliers interested in new ventures to other businessmen.

Architecture and Design

The focus should be in style, distinction, warmth, and intimacy. There are no standards, but each design should fulfill individual needs. The right design, destination, and location determine the success of the hotel (Yanos, 2008). The location determines style and materials used, be it stone, timber or even logs.

The hotel should be designed to reflect or blend with the area, taking advantage of what the area has to offer. For instance, beach resorts may take advantage of the oceanfronts and water for swimming or creating swimming pools using salty water, or log cabin rooms in the wild to blend in with nature. Successful resort boutique hotels unite traditional architecture with the comfort of luxury and modernization without losing the personality of the local community.

The design should have a theme, and the selected theme should attract all senses (Dubois, 2010). Different themes can be incorporated in different rooms to create a personal touch that appeals to individuals.

The target market, which is usually between early 20’s to mid 50’s mid- to upper-income groups, should be represented and the style and design should describe their characteristics. Skilled operators in the boutique segment increasingly use psychographics to understand and define their customers.

Psychographic is a marketing classification used to define customers by attributes such as lifestyle, aspirations, interests, attitudes, and beliefs. For example, Joie de Vivre hotels- create each of its hotels around a reader-base of a popular but specialist magazine such as Rolling Stone. This is the theme behind their first hotel, The Phoenix, which opened in San Fransisco in 1987 (Dubois, 2010).

Themes could be romance, music, wildlife, historic details, or fashion. The lighting, colors, music, or art can be used selectively to appeal to all senses and create a feeling of intimacy (Yanos, 2008). The idea of a boutique hotel is entertainment in its own nature; hence, the exceptional themes and visually spectacular decorations are a necessity.

Amenities

In the hospitality industry, the primary goal should be getting people to become regulars, hence the emphasis should be more on service than on the amenities; however, luxury is necessary (Stellin, 2007). Plan the amenities to meet the needs of the target clientele while at the same time defining the hotels’ niche. In addition, it is important to invest in fine furnishings, comfortable beds, quality artworks, fine linens, good quality toiletries, extra pillows, and comfortable chairs (Atkinson, 2007).

Small things matter to clients and hence there is need to pay attention to the fine details that make the whole difference in a room. Regardless of the comfort, luxury, and style, one should compete at a practical level, hence the need to have current trend amenities such as

Wi-Fi internet
Flat screen plasma televisions
Cable television networks
Air conditioning, traditional spa services
Rose petal baths
Fitness facilities
Bar and grill
Excellent food

These should be available to provide a competitive edge (Stellin, 2007). Moreover, the investor should always aim and be willing to go an extra mile in order to attract and retain clients with complementary packages such as honeymoon packages, wine and champagne art and painting sessions, guests’ favorite CD collection, and buffet breakfast.

Service

The common feature that all boutique hotels have is the emphasis on quality service that is personalized in a professional manner. The approach and attitude, but not the size, defines a boutique hotel (Dubois, 2010). The stay-to-guest ratio should be high in order to cater for every possible need that a client may be having.

This may means a high payroll, but it pays off in customer loyalty and the clients do not mind paying extra for the comfort. Lastly, it is important to allow the staff to memorize guest names and encourage friendly interaction to make the guests’ stay memorable. The staff of a boutique hotel should predict or know in advance, the needs and requirements of the guests and deliver to their guests’ expectation (Griffin and Moorhead, 2009).

Marketing

Develop a high-quality product to appeal to an understanding clientele (Tisch, 2007). Simply, it is the experience and image that are sold, rather than the product itself. Marketing an independent boutique hotel has financial and other resources restrictions because marketing needs to be continuous (Dunne, Lusch, & Carver, 2010).

A clear, interesting message should be conveyed to the target group. Story development is very important, which relates back to the special nature of experience, or location, or the history behind the creation of the hotel. Nevertheless, the story must be delivered through effective and affordable channels such as direct mail or direct sales groups, allied marketing, affinity group travel planners, and public relations through press (Yanos, 2008).

Legal issues affecting boutique hotels

When starting and running a boutique hotel, a number of regulations define its operations. According to Sherry (2001), these include but are not limited to legal status, legal liabilities, providing services to disabled people, employee rights, intellectual property (for example business names, inventions and copyrights), and trading standards, terms and conditions.

Others include record keeping, national/local laws, regulations and bylaws, health and safety, fire regulations, planning/ building permission, contracts, duties and responsibilities, regulatory bodies, sources of advice, resolving problems, and the environment.

Health and safety: The investor is responsible for the effect his business may have on the health and safety of his employees and members of the public. One needs to register with the local authority to comply with the law.

Liquor and gaming licensing: Liquor and gaming licensing are both subject to considerable regulation under national laws. Different types of liquor licenses exist to regulate different types of alcohol services. It is therefore important to ensure that the correct license is obtained, and that the license is varied or replaced as necessary where the activities and nature of alcohol service change. Moreover, venue operators must ensure that the appropriate license is held with respect to gaming machines (O’Fallon & Rutherford, 2006).

Franchising: Boutique hotel businesses are mostly operated as franchises. This provides the hotel operators an opportunity to establish a business, which is part of a recognized brand, and to enjoy the support of the franchisor in assisting with day-to-day issues, which can arise in the running of any hospitality business.

In operating as a franchise, it is important to have a clear understanding of obligations that exist under the franchise agreement with the franchisor. The Franchising Code of Conduct operates to regulate the terms, which may form part of the franchising agreement including how the franchise agreement may be terminated in the event of a breach.

Business structuring and succession planning: The effective structuring of any business is critical to ensuring that assets of the business and its owners are protected and that the taxation and other liabilities of the business are minimized. Where a business has multiple owners, regardless of whether the owners are related, it is important that the owners enter into a partnership agreement or shareholders’ agreement to document each person’s rights and obligations.

This helps to avoid possible disputes, which can be crippling on a business. Over time, as the business grows and the nature of the services provided by the business changes and develops, it is important to ensure that the structure of the business also remains relevant and effective (O’Fallon & Rutherford, 2006).

Fire precautions: A fire certificate is needed when running a hotel business and this requirement must be met before the hotel starts running.

The Environment: There are environmental regulations that apply to boutique hotels in order to protect the environment. The use of refrigeration or air-conditioning equipment, fire equipment, or solvents for cleaning and production of packaging waste makes the hotel liable to some tax.

Employees: Employees’ legal rights must be protected. If taking over an existing business, one must usually keep the existing terms and conditions of employment.

Buildings: One must take action if a new building or change of use is involved and when existing premises requires structural alterations. In either case, the local authority should be contacted in order to comply with the standing orders.

Intellectual property: Intellectual property describes things such as business names, patents, and inventions. One should protect the company name and logo, along with any inventions, product designs, or copyrights (Sherry, 2001). One should also respect other people’s intellectual property rights. For example, one cannot use the same name as someone else doing similar work in the location/town.

Keeping information about people: Boutique hotel business involves keeping information about people, and therefore, one has to be careful about the sort of information kept and how it is used. One needs to register to keep such information on computer because of public concern about personal privacy in the face of rapidly developing computer technology. To keep such information on a computer legally, one may have to register.

Benefits of boutique hotels

The success of boutique hotel depends on its ability to target appropriate customer groups, cater to their needs, market itself through effective channels, and consistently deliver on the expectations of the clients, created through the marketing efforts. Outsourcing of food and beverage outlets to branded restaurateurs and bartenders means that the hotel benefits from pure income arising from space letting.

The boutique hotels enjoy strong customer demand and favorable economics. The hotels can survive without restaurants, ballrooms, meeting spaces, although the presence of these amenities, in the appropriate style, is profitable (Yanos, 2008).

Boutique hotels tend to have a higher percentage of repeat business compared to the industry in general, as they have become the preferred choice of affluent young travelers who are seeking an experience, rather than a commodity. However, continued adaptation to changing needs, tastes, preferences, and fashion is needed in order to remain competitive in the flourishing boutique hotel market (Yanos, 2008).

Conclusion

Boutique hotels have restored the hotel business to its glorious past. Because they are far more flexible in style and location, they are more successful, moreover, their success lies within the creative talent of their developers, and their ability to attain the visibility needed to make it on the world map of global travelers.

References

Atkinson, C. (2007). Style Makeover at hotel Aims to Dress up the guest experience. Retrieved from http://www.nytimes.com/2007/11/09/business/media/09adco.html

Dubois, L. (2010). How to Start a Boutique Hotel. Retrieved from http://www.inc.com/guides/2010/10/how-to-start-a-boutique-hotel.html.

Dunne, P., Lusch, R. F., & Carver, J. R. (2010). Retailing. OH: Cengage Learning.

Enz, C. A. (2009). Hospitality Strategic Management: Concepts and Cases. NJ: John Wiley and Sons.

Griffin, R., & Moorhead, G. (2009). Organizational Behavior: Managing People and Organizations. OH: Cengage Learning.

Nickisch, C. (2011). Hotel Building Boom focuses on boutique. Retrieved from http://www.npr.org/templates/story/story.php?storyId=120102477.

O’Fallon, M., & Rutherford, D. G. (2006). Hotel Management and Operations. NJ: John Wiley and Sons.

Sherry, J. E.H. (2001). Legal aspects of hospitality Management. NJ: John Wiley & Sons.

Stellin, S. (2007, May 15). Hotel as a lifestyle. Retrieved from http://www.nytimes.com/2007/05/15/business/15brands.html?pagewanted=all

Tisch, J. M. (2007). Chocolates on the pillow aren’t enough: reinventing the customer experience. NJ: John Wiley and Sons.

Yanos, M. (2008). Boutique Hotels: Owning, Operating and Investing. Retrieved from http://www.nuwireinvestor.com/articles/boutique-hotels-investing-in-a-boutique-hotel-business-51485.aspx.

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