US boutique hotels expected to outperform traditional hotel product

US: The Boutique Hotel Report, commissioned by The Highland Group in partnership with STR, reveals that boutiques achieve much higher occupancy and average rates than its US counterparts.

The report classifies independent boutique, lifestyle, and soft brand collection hotels by the following definitions:

  • Independent boutique hotels are uniquely branded or part of smaller collections with a distinctive design and character.
  • Lifestyle hotels are affiliated with large franchises and, although they have some boutique characteristics, adhere to tightly defined product standards. 
  • Soft brand collections also offer operators the benefit of franchise affiliation. Hotels in the soft brand collection segment are unique in operation, design and experience while benefitting from the marquis of their own name, rather than the parent hotel brand. 

Overall, the boutique hotel segment generated $22 billion in room revenue in 2019, achieving occupancies within a range of 74 to 79 per cent.

Of the three groups, lifestyle hotels represent a 13 per cent increase in rooms from 2018 totalling 75,211, followed by soft brand collections at 67,517 rooms and topped by independent boutiques at 107,960 rooms.

From 2000, however, lifestyle hotels and soft brand collections are two of the hotel industry’s fastest growing segments, increasing rooms by 14 per cent and 21 per cent respectively. 

“Major franchise companies recognise the strong performance of this lodging type and continue to debut new lifestyle hotel and soft brand collections at differing price points,” said Kim Bardoul, partner at The Highland Group. 

The average room size for hotels within the lifestyle segment is 151, and the average rate increased above inflation at a compound annual average of 4.2 per cent from 2013. Currently, Aloft and Kimpton hotels have the largest share of lifestyle inventory in the US.

For soft brand collections, average rate increased annually at 3.8 per cent, peaking in 2019 at $231 – higher than all US hotels upper upscale class of $189. The average room count for this sample is 156. Autograph, Curio and Ascend hold the largest share of hotel inventory. 

The independent boutique hotel segment is building off a longer history and a larger bae of inventory than the other two categories, so supply growth is overall slower. Its 6.2 per cent annual average increase is well above the 1.2 per cent average for the US hotel industry. The average room count for this group is 113, and the average rate has grown annually at two per cent.

The report states that national hotel trends of declining revPAR growth and room supply increases over the near term should impact all hotel types to varying degrees. Although in some cases, revPAR for the boutique segment has begun to decline, the report concludes that boutique hotels are expected to continue to outperform the traditional US product.

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