Mr. Tess

Architecture & Design

Historic Boutique Hotels: Their Past, Present and Future

By John Tess, President & CEO, Heritage Consulting

Hotels have evolved significantly. The early years truly were a boarding house or second floor over a retail space. This soon changed as aspiring communities all needed a first rate hotel in order to be taken seriously - particularly into the late 19th century with the maturation of train travel and into the 20th century with the rise of automobiles.

But the turn of the 20th century, these hotels were "modern" affairs with reinforced concrete construction rising 5 to 7 stories offering amenities as elevators, telephones and electricity. They featured a large and elegant lobby, often with a mezzanine sitting area. The hotel offered at least a few rooms with private baths; these were often at the corners of the building. Most rooms were semi-private, with a shared bath between rooms and a sink in each room. And not surprisingly, rooms located along the alley or light well were cheaper and simpler with access to a bath down the hall. The hotels also often featured a "sample room" where traveling salesmen could show their wares. And almost always, they featured one or more of the finer food establishments in the city. By the 1920s, changes in real estate financing made it easier to leverage development, creating a surge in hotel development. At the same time, the invention of steel frame construction allowed buildings to rise taller to 12, 15 and 20 stories.

By the end of the 1950s, our urban cores grew tired. The buildings were old and often dilapidated. The streets were dirty and congestion impossible. In contrast, populations sprawled to the clean, new, auto-oriented suburbs. This was true for hotels too. In the core, the buildings were reaching the ends of their depreciable lives. With aging technologies, aging infrastructure and aging finishes, many hotels began a downward spiral from first to second class to boarding and subsidized housing.

Just as the automobile fostered sprawl, it also fostered the rise of the garden-style motel. With roots to the 1920s motor courts, these are most often connected with the highway vacation travel. But with few exceptions, such as New York, most cities also became home to them - though often on the edge of the downtown. It was their auto-centrist orientation that defined these two-story buildings: Parking adjacent to the room, no common corridors, a small and efficient lobby, perhaps a breakfast/lunch restaurant and a large plate glass windows with view of the parking lot.

At the same time, the ease of travel in the 1950s and 1960s gave way to the convention hotel. The convention business was viewed as one mechanism for energizing a city's economy. These buildings were typically architecturally bland behemoths of 15, 20 or more stories with 300, 400, 500 or more rooms. They featured large flexible ballrooms, standardized operations and a self-contained orientation. Downtowns though continued to grow old and tired. They were fighting a losing battle to the clean, new and fresh suburbs, with tax dollars following.

The next decade however saw the beginnings of a "back to the city" movement. Young affluent suburbanites, often working couples, tired of ever increasing commuting, became urban pioneers. They moved back to blighted neighborhoods, reclaiming and repairing grand historic homes and buildings. Cities fostered this movement with urban renewal money and planning, while the downtown property owners created "clean & safe" districts to fight petty crime and ambiance. For its part, the federal government offered a plethora of policies and incentives both to cities and private investors. One such major benefit was the federal investment tax credit for the rehabilitation of historic buildings.

From an investment standpoint, the urban pioneers became self-fulfilling, acquired buildings for pennies and with sweat equity transforming them into substantial investments. It became "the smart thing" to do. Demographic trends have continued to support the back to the city movement. Middle class affluence has surged, while family sizes have remained small. Working couples are common, while also being joined by "empty nesters," with both groups aspiring real estate entrepreneurs. No longer "pioneers", these urban dwellers now occupy condominiums in former grand office or club buildings in the city's core, creating a critical mass to form a destination for restaurants and shopping.

The urban pioneers not only fostered an appreciation for their own city, but they recrafted the travel market to be urban-oriented. While previously a city may have major attractions, such a museum, travel in the 1950s was more oriented to something best characterized as a daylight raid, whereby visitors stayed on the outskirts and drove to directly to the museum. They were back at their motel by evening. In contrast, these new urban pioneers reveled not only in a city's museums and attractions, but in its architecture and ambiance. They wanted to experience the cities.

Into this milieu came the boutique hotel. Urban pioneers were not inclined to "discover" a city through behemoth and often sterile convention hotels. Nor are they inclined to stay at a garden hotel at the beltway. Visionaries such as Bill Kimpton saw an opportunity to use the federal historic preservation tax credits and create an entirely new product. It was a smaller hotel, perhaps 100 rooms. It was to be in dramatic and historic buildings with a lobby entrance often intended to create a "wow" factor. And it was to offer a fine restaurant and throughout friendly superior service. In terms of scale and substance, these historic hotels harked back to the grand dames of urban hotels at the turn of the century.

The model proved successful but in the early years, the boutique hotel was considered a bit of a novelty. It was too small to compete with the convention hotels. Centrally located, it did not compete with the suburban travel motels. But the business model focused on the formula that if you took care of the top of the line, the bottom of the line would take care of itself. Put another way, urban pioneers as a market had deep pockets. They were less concerned with room rate than with experience, and if the experience were unique, cost was not a particular concern. It was a concept that would normally have competed with the luxury hotels but the dissipation of the urban market in the 1950s and 1960s led this class toward bean counting. The result was a very profitable model when well-executed.

And thus like the turn of the century, every aspiring community needed to claim at least one "boutique" hotel. The success has grown over time and the true meaning of "boutique" has morphed. No longer are they necessarily small. As the model proved successful, hotel operators looked to bigger and bigger buildings (and hence bigger and bigger profits) reaching room totals of 300 or more. They also are not necessarily grand architectural palaces. Boutique hotels are now found in sometimes mundane structures - though retaining the emphasis on service and quality. Finally, financial models are also varying with a new emphasis on dramatic austerity - a strongly designed space that is not especially expensive.

But perhaps the greatest surprise is that the market seems to be self-reinforcing - that is to say, the more boutique hotels there are, the stronger the urban travel marketplace is. The more, the better. And perhaps not surprisingly, the benefactors of this reality are both the luxury hotels and the in-town garden motels. Luxury hotels are being returned to their grand dame status while the in-town garden motels are being freshened with new finishes to create "something totally different". Even secondary level hotels from the 1910s are being revamped as boutiques. Thus while the market runs the risk of being overly saturated, they key to continued success appears to be the continued ability to provide unique experiences.

The future of boutique hotels is bright. The traveling public continues to prosper and have growing discretionary dollars. It has demonstrated a strong appetite for experiential travel with an affinity for cities, architecture, and history that helps provide context for their present day reality. Product supply has not appreciably affected demand and increasingly should segment; as cities increasingly create differentiate their core into specific districts each with their own identity, so too will boutique hotels find new homes. As a product type, boutique hotels are becoming institutionalized with associational representation such as the National Trust's Historic Hotels of America. And finally, they are benefiting from an ever successful marriage of energized marketing and design focus on creating experiences.

Ironically, less and less will this market rely on history and heritage. While the roots certainly are found there, the boutique marketplace will follow the style trends of their patrons. Historic buildings likely will continue to play a role as developers seek to capture the 20% investment tax credit, but as often the marketers and designers will prefer to embrace a blank canvas. Then too, since the historic hotel been around now for decades, the rise of a different experience is not unexpected.

John M. Tess is President of Heritage Consulting Group, a firm that assists property owners, attorneys, accountants, financial institutions and investors maximize the value of historic real estate assets through the use of federal tax incentives and other tools. Heritage has represented projects totaling more than $1 billion. Heritage specializes in linking developers with corporate and institutional investors active in historic tax credits. Heritage Consulting Group is headquartered in Portland, with offices in San Francisco and Washington, D.C. Mr. Tess can be contacted at 503-228-0272 or jmtess@heritage-consulting.com Extended Bio...

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