You are where you sleep

Guests who stay at Alan Lieberman's 50-room Chesterfield Hotel in Miami Beach are treated to a funky South Beach style including leopard- and zebra-print furnishings. Animal prints fill the hotel, the crowd is wild, and Craig, the hostelry's popular bartender, serves up a roaring margarita at the Safari Bar & Restaurant.

“Our hotels are unique, each with a different style,” said Lieberman, the apartment owner turned boutique hotelier. “We specialize in personal service and try to give customers something unusual, something different. Every bathroom is unique, every lobby is unique.”

Guests also have one exclusive benefit at Lieberman's South Beach Group hotels — the properties have a direct line to South Beach's hottest night clubs and can gain access to some of the most exclusive night spots in this trendy city. “It's one of the reasons people stay at our hotels,” said Lieberman, the chairman of South Beach Group. “We have people who live in the Miami area who check into our hotels just to get into the clubs.”

South Beach Group is one of a growing number of boutique hotel chains that is creating its own image. San Francisco's Joie de Vivre Hospitality's hotels reflect the themes of popular magazines. The New Yorker-inspired Hotel Rex offers poetry readings and a lounge lined with books, while algae shakes and vitamins greet guests at the Men's Health Magazine-themed Nob Hill Lambourne.

Chip Conley, the founder and chief executive of Joie de Vivre, which operates 20 boutique properties, said his company not only sells sleep “but we create dreams through making an emotional connection to our customers.”

Boutique hotels are making that connection. “Americans have embraced the idea of living stylish, design-oriented lives,” Conley said. “There used to be an old saying, ‘You are what you eat.’ Today, in the hotel industry, the saying is, ‘you are where you sleep.’ People look at hotels differently than they did 10 or 15 years ago. Nowadays, hotels are a reflection of people's personalities, a mirror for how people see themselves.”

And today's boutique hotels are only happy to oblige. Boutique properties, whether a 50-room distinctive property off the beaten path or a 1,000-room hostelry in Manhattan, are the latest trend in the global hospitality industry. Boutiques are a new genre in hotel accommodations — a home away from home, or as some have said, “The new millennium's answer to Holiday Inn.”

“What we find is that people are gravitating to properties that offer richer, more sensual experiences,” said Greg Bingaman, vice president of operations and development at New York-based Boutique Hotel Group (BHG). “Many people are not satisfied with the branded hotel properties and are seeking out boutique hotels,” he said.

All about style

These days, when many travelers select a hotel, style is as important as substance. Thus, boutique hotels feature individually furnished rooms, designer goods and a different feel from ordinary business- or family-oriented properties. Boutique hotels play on the aspirations and desired self-image of their guests. It's not just a bed for the night — it's an experience.

The term boutique today has less to do with size and more to do with style, ambiance and personalized service. Many boutique hotels are known for their exotic touches. San Francisco-based Kimpton Hotel & Restaurant Group's Hotel Monaco in the City by the Bay, for instance, provides guests with loaner goldfish fed by the housekeeping staff. White Plains, N.Y.-based Starwood Hotels & Resorts has entered the boutique genre with its W brand. Guestrooms at its W Tuscany in Manhattan feature gumball machines, with collected coins going to charity.

In general, boutique hotels are smaller, allowing employees to provide more personalized service. Fewer rooms also mean shorter hallways and cozier interiors. The W New York blends rooms in earth tones of green, brown and beige, supplies guestrooms with a box of wheat grass on the windowsills and offers organic treats in the minibars.

The bottom line

Bingaman of BHG pointed out that boutique hotels offer faster market revenue per available room [RevPAR] growth and stabilized returns that exceed those of the more traditional competitors. “Psychologically speaking, as leisure and corporate travelers seek more style in their personal lives, they will gravitate to hotels that provide a richer and more sensual experience,” he said. The [landscapes] of hotels are changing, and the boutique hotel segment of the lodging industry will continue to grow, serving two masters — guests' preferences and owners' rate-of-return requirements.”

This year, Bingaman said revenues at BHG-managed properties will exceed $50 million. The company manages a collection of six hotels known for signature boutique amenities, including a complimentary European breakfast, Belgian linens, plush towels and complimentary mineral water.

Most boutique hotels succeed because of simple economics, said Robert Mandelbaum, director of research information services at Atlanta-based Hospitality Research Group (HRG), the research affiliate of PKF Consulting, San Francisco.

“In general, the strategy of a Kimpton and a Conley is to find an older building two or three blocks off the best area at a low price,” he said. “That allows them to put a lot of money into focusing on design and furnishings rather than expensive public spaces, as well as costly food and beverage operations. With those economics, it means they can charge between mid-price and luxury and make the deal work.”

Mandelbaum noted that in San Francisco, where luxury hotels are charging $300 to $400 a night, a boutique hotel might charge $200. In Atlanta, where luxury hotels are charging $200 a stay, boutiques are charging $125 to $150 a night. “Boutique hotels are above the mid-market rate, but most are not in the luxury class,” he added.

Conley of Joie de Vivre added that boutique hotels don't feature a lot of meeting space or a huge food and beverage operation, further fattening the bottom line. “They might have a restaurant, but no big banquet department, and typically the lowest profit margin is the food and beverage department,” he said.

For owners and operators, boutique hotels offer a much quicker out-of-the-box start, Bingaman said. “They can ramp up to market penetration quicker because they have the new-style feel. Guests will find you, rather than sales people banging on doors and selling the property.”

In fact, as hoteliers such as Ian Schrager have demonstrated, buzz is very important in the boutique hotel industry. His company, New York-based Ian Schrager Hotels, has opened several boutique properties in Manhattan that have caught the attention of the city with their avant-garde design and hip bars. “Word of mouth is our biggest source of business,” Conley said.

Defining ‘boutique’

What exactly is a boutique hotel? “That's a great question,” said Jim Whelan, chief development officer at Kimpton, a company created by the late hotelier Bill Kimpton, who was considered one of the creators and innovators of the genre. “I think it defies real definition. Ian Schrager is calling his recently opened 1,000-room Hudson in New York a boutique,” he said.

“At Kimpton, we define boutique hotels as those offering specialized, individualized customer service,” he added. “A customer's experience defines everything we are about. Our hotel staff, design and furnishings are all geared to giving customers that experience.”

Kimpton was one of the pioneers of the boutique maxim of buying smartly and spending heavily on design. Generally, Kimpton tried to pay no more than $150,000 per room, and often much less, to buy and renovate hotels. Thus, Kimpton properties are able to offer competitive rates. For example, Kimpton purchased his second hotel, the Vintage Court, for $2.2 million in the 1980s and invested $3.6 million on refurbishing the 103-room property. That emphasis on design is one of the common threads that ties together Kimpton's hotels. So is the right price.

Today, Kimpton operates 35 hotels with 5,400 guestrooms in nine cities and is continuing to expand. The company is transforming the 75-year-old Masonic Temple building in downtown New Orleans into the 250-room Hotel Monaco. The $34 million renovation is designed to offer a mix of classicism and urban style.

Schrager also continues to spread the popularity of the boutique hotel. Schrager helped publicize the notion of “cheap chic” in the 1990s when he teamed up with designer Philippe Starck. Together, they redesigned the Paramount in New York, as well as the Delano in Miami Beach and the Mondrain in Beverly Hills, Calif. Schrager continues to open hotels in locations such as London and New York.

Kimpton and Schrager's success has spawned a number of new boutique entrepreneurs. Consider Lieberman of South Beach Group. In 1988, Lieberman began accumulating apartments in Miami's hip South Beach neighborhood, restoring the units to their original Art-Deco luster. Today, South Beach Group owns and operates six Art-Deco inspired boutique hotels in South Beach, including the Whitelaw Hotel, Chesterfield Hotel, Lily Guesthouse, The Mercury Hotel, Hotel Shelley and The Hotel Chelsea.

Lieberman's newest project is the 90-room Angler Hotel, which will occupy a building constructed in the pre-Art Deco 1920s. Scheduled to open in about two years, Lieberman hopes to produce the look and feel of the days when writer Ernest Hemingway frequented South Florida. The key to his success, Lieberman emphasized, is consistency.

“We do everything ourselves,” Lieberman said. “We buy the properties, we gut them, we design them and we give each a different theme.” For example, he said, the Chelsea has an Asian contemporary theme, and the group's Angler is going to be nautically themed. “Each has to be a one-of-a-kind,”

To open a boutique hotel, the group typically spends about $75,000 per unit, which includes acquisition costs, Lieberman said. These expenses are lower than typical luxury hotels and allow him to charge less for accommodations while still offering a unique experience.

“Our hotels are not on the beach, so we can charge half the price other hotels on the beach charge,” he noted. “We deal in the mid-market. On the beach, hotels are $300 to $500 a night, and we're half that rate, but we're a half block away.”

Hotel giants enter the picture

With the popularity of boutiques taking off, some of the industry's giants want a piece of the action. Starwood was one of the first mainstream hotel companies to jump into the boutique business, opening its first W hotel in New York in December 1998. Starwood expects to have 20 W hotels open by the end of next year in cities stretching from Honolulu to Miami.

Another huge player, Washington, D.C.-based Marriott International, recently formed a joint venture with Bulgari SpA, the Italian luxury goods manufacturer, to launch a new hotel brand designed by Bulgari. William R. Tiefel, vice chairman of Marriott International, said the new brand will appeal to guests “who seek high value from individualized, contemporary Italian style.”

But as increasing numbers of operators enter the boutique hotel arena, will the boutique market be diluted?

Big hotel chains face a major challenge in trying to develop boutique hotels, according to Conley of Joie de Vivre. “One of the things that make boutique hotels unique is that they don't feel like a chain,” Conley said. “Boutiques have a handcrafted feel, each with their own sense of personality. A hotel chain is predictable and consistent, so the chain has to figure out how to offer a unique product. It's questionable whether they can.”

Bingaman of Boutique Hotels said he doesn't believe large hotel companies will be able to develop their own boutique offerings easily. “It's a different animal,” he said. “We could be seeing one of those companies buy a boutique hotel chain at a later date. I also think we'll see some consolidation in the boutique hotel industry in the years ahead.”

At the same time, boutique hotels will continue to evolve, advancing beyond what they are now. “In the future, I think it will be more about what services a boutique hotel can provide,” said Whelan of Kimpton. “Boutique operators will seek more ways to provide more services to guests. A guest may come into town and want a special package of amenities put together, whether it's outdoor activities in Denver, theater tickets in Chicago or spa therapy in Houston. They will find that boutique hotels really care about them, that they are a person and not just a number.”

With today's travelers becoming younger and more affluent, boutique hotel owners expect no end to the segment's growing popularity. Fans of boutique hotels are likely to continue seeking great boutique hotel experiences like connoisseurs search for a piece of art — seeking something new, creative and original.

In other words, as Conley said, “You are where you sleep.”

Mike Sheridan is a Houston-based writer.

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