Boutique Brand Alters Landscape

InterContinental Hotels Group may have drawn inspiration from the wedding poem “Something Old, Something New, Something Borrowed, Something Blue” when it conceptualized its Hotel Indigo brand.

For starters, the eclectic and affordable Hotel Indigo, infused with soothing tones of indigo blues, puts a novel spin on the not-so-new boutique hotel trend, which has been gaining steam recently. The brand will offer guests consistent stylish décor and amenities from city to city — unlike other boutique companies which pride themselves on unique hotels in every locale.

At the same time, Hotel Indigo will change its décor regularly — borrowing from the retail trade — so the hotels never get dull or boring, says Kirk Kinsell, IHG's senior vice president of franchising and business development for the Americas.

Hotel Indigo, for example, will feature easily changeable murals and paint instead of wallpaper, ever-changing signage, chic slipcovers instead of upholstered furniture and duvet covers in place of bedspreads. Guest rooms and public spaces also will don hardwood floors with area rugs that can be easily switched out. In addition, the seasonal menu at the hotel's upscale bistro-style Golden Bean eatery will constantly feature new selections.

“We picked a timeless principle that we can keep refreshed. We want to speak to the individual, yet we don't want to be too trendy or extreme,” says Kinsell.

U.K.-based IHG, with a brand portfolio that includes InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express and Staybridge Suites, has ambitious plans for Hotel Indigo. It hopes to have 200 of the “lifestyle” hotels open within the next decade in high-profile urban markets such as Miami, Boston and Los Angeles.

The first converted Hotel Indigo opened in mid-October in Atlanta. The second conversion property will open in Chicago in the spring. Although some of the future hotels — averaging 120 to 180 rooms — may be newly built, most of the properties will be transformed from other brands or even apartment buildings and offices. IHG also will manage some Hotel Indigos, including the Atlanta and Chicago properties, says Kinsell.

“IHG is always thinking about strategic opportunities to take advantage of conditions in the marketplace. In this case, we are acting on the trend that guests are looking to trade up to affordable luxury,” says Kinsell.

This new boutique hotel conversion opportunity is particularly appealing to developers who are seeking ways to create more value out of existing hotels. Hotel Indigo, for instance, gives owners the chance to franchise a boutique brand while tapping into IHG's reservations system, frequent guest program and national advertising to drive revenue, says Jim Anhut, senior vice president of brand development for the Americas.

“The timing couldn't be better. There's clearly a growing demand for a product that's different and not cookie-cutter,” says R. Mark Woodworth, executive vice president at PKF Consulting in Atlanta.

Retail Elements Infuse New Life

Hotel Indigo is designed to tap into what consumers are looking for in a retail experience today: innovation, intrigue and an inviting atmosphere. “If anyone has caught onto the trading-up trend, it's some of the country's biggest retailers, like Target, Nordstrom and Starbucks,” says Anhut. “Retailers reinvent themselves periodically. Customers like change and respond to it.”

IHG even enlisted the help of Atlanta-based retail design firm Back Lot Productions Inc. to infuse successful retail design elements into the hotel chain. “Good retailers are very successful at creating more than just a product; they define a lifestyle,” says Bart Mills, a principal at Back Lot Productions.

Retail design elements include open, non-traditional front desks shaped like Hotel Indigo's nautilus shell logo. Commonplace in many retail chains, the welcoming and open counter allows associates to move freely throughout the lobby to assist guests. Nordstrom clerks, for example, walk out from their cashier stations to personally hand bags to customers, says Anhut.

In addition, the lobby area will include oversized Adirondack chairs designed to accommodate single travelers. The chairs will feature ample space on both sides for eating and working. “Who wants to sit at a table alone?” says Jack Ward, a partner at Diversified Peachtree LTD, owner of the Atlanta Hotel Indigo.

The big lobby chairs immerse guests in a setting where they can converse with other solo travelers or simply eat or work in a comfortable environment. “Hotel Indigo will open the window for the [lodging] industry to allow retail influences into their hotels,” says Kinsell.

Ward agrees, adding that the brand's unique retail vision for infusing excitement and style into the hotels is a welcome relief to boring chain hotels. “You won't find the color beige anywhere in this hotel,” he says.

Filling a Void

Although IHG is not immune to risks associated with rolling out a new brand, the lodging powerhouse not only has a successful track record of launching hotel chains, but it offers owners tremendous marketing muscle and buying power. To boot, IHG has a vested interest in the success of Hotel Indigo, particularly since it has poured extensive efforts into creating what it thinks will be a winner.

IHG is now in discussions with several developers who are interested in converting hotels to the Hotel Indigo brand. Most of these prospective owners have properties in major metropolitan and strong secondary markets, says Kinsell.

“The growth opportunity for Hotel Indigo is in conversions, particularly in urban markets where there are high barriers to entry [to build new hotels],” says PKF's Woodworth.

Hotels can be rebranded and remodeled as Hotel Indigos for about $10,000 to $40,000 per hotel room, depending on the extent of the renovations. That's comparable to what it would cost to convert a hotel to another brand or undergo a major renovation. Once re-flagged, the stylish hotels can command room rates of about $100 per night, compared to $65 to $75 nightly at older properties.

Investors' Perspective

The opportunity to generate higher revenues by converting her 163-room independent Claridge Hotel in Chicago to a Hotel Indigo was certainly appealing to Bonnie Kornota, a partner at Chicago-based real estate development firm Neighborhood Development Corp.

“When I met with IHG, they were right on top of it. They are certainly not the only boutique brand out there, but nobody is developing a brand specifically for the mid-tier market,” says Kornota.

All told, it will cost Kornota about $5,000 per key to convert the Claridge to Hotel Indigo — money she would have spent refurbishing the hotel anyway. Ward, owner of the Atlanta hotel, is spending about $42,000 per room on his hotel conversion, primarily because his company is gutting the old building to replace archaic plumbing and install modern wiring. Additionally, the hotel is undergoing a head-to-toe renovation.

Ward, also a principal at the Atlanta lodging brokerage firm Hodges Ward Elliott Inc., purchased his circa 1920 Atlanta hotel with partners in 1983. He initially wanted to turn the art-deco style property into a boutique hotel but “it was not the right time.”

So, the former Cox Carlton Hotel was converted into a Days Inn. In dire need of a change and facelift, Ward contacted IHG more than a year ago to discuss rebranding the hotel as a Holiday Inn Express. Instead, IHG showed him plans for the Hotel Indigo brand and he was instantly impressed. “What really caught my attention,” he says, “was the retail approach.”

Robyn Parets is a Sharon, Mass.-based writer.

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