Boutique Hotel Brands From 'Legacy' Chains - Will They Work?

By Steven Marx Managing Principal, Lifestyle Hospitality | October 28, 2008

It is clear that the boutique/lifestyle hotel niche is longer occupied by just a handful of rogue, counter cultural hoteliers. The evolution of lifestyle hotels from a very small, extremely specialized industry segment, to its current status as one of the fastest growing product types, has been nothing short of astounding.

It is sometimes debated who actually was the pioneer who developed the first of what has become generally known as contemporary boutique hotels, in the United States. But clearly, the concept did not come from the mainstream hotel industry. Depending on to whom you talk, Ian Schrager, starting with Morgan's Hotel in New York, gets the credit; others will say that Bill Kimpton was the founder, converting broken down old small hotels in San Francisco into "gems", with "hot" restaurants next door.

However, the "winner" may very well have been a gentleman by the name of Ashkenazy, who converted several vintage apartment buildings in the West Hollywood district of Los Angeles into genuine, high style boutique hotels back in the 1970's; one of which was the original Mondrian on Sunset Boulevard, now one of the most notable and successful boutique hotels owned by the Morgans Group, and originally redeveloped by Ian Schrager.

All three of these gentlemen were visionaries, highly creative, and none came from either a hospitality or even corporate background. Also, the hotel industry at large was moving in an entirely different direction; but these entrepeneurs weren't taking notice. They were following their passions and instincts, with no track record or "feasibility studies" to support their initial projects. Many of the properties weren't instant successes, but these hoteliers pressed on nonetheless, knowing that they were onto something that would bear fruit in the years to come.

What's most noteworthy, however, is that the ultimate success of the segment that these brave men launched arguably was derived from an entrepeneural vision of one individual; as opposed to flowing from a corporate, risk-averse, large public, or even private, hotel company. The idiosyncracies that made at least a couple of these hoteliers challenging with whom to deal, were the same ones that were vital to the singular vitality and innovation of their respective products. The concepts were not formed by committees, work groups, or brand teams, as they typically are today. Despite the obvious advantages of "group think", and gleaning opinions and recommendations from a variety of people with complementary disciplines, I would contend that at the end of the day the final result may not have the leading edge 'push the envelope' attributes of those derived from one briliant, take no prisoners, pioneer, with no shareholders of Boards of Directors to whom to account.

For most of the period during which the boutique hotel concept was forming and growing, the industry at large generally regarded this product type as an oddball, replete with challenges that the legacy chains found to be too daunting to take on. The conventional wisdom maintained that boutique hotels were: too small to be truly profitable, couldn't stamp them out and thus too expensive to build, couldn't compete effectively with a chain affiliation's marketing clout, difficult to finance, didn't perform as well in an economic downturn, etc. So the chains allowed the niche operators to dominate this segment, while they watched from the sidelines.

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