Full-Service Boutiques Delivering More Growth Than Brands

For the past several years, limited- and select-service hotels have been extremely popular among hotel developers. According to STR, 80 percent of the properties (70 percent of the rooms) that opened in 2015 did not offer a restaurant. Also lagging in development activity are independent hotels. Of the 775 new hotels that opened in 2015, only 79 (10.2 percent) were not affiliated with a brand. These trends are the result of consumer preferences and the realities of financially feasible hotel development.

So, what happens if you are a hotelier with a passion for food and beverage and independence? You open a boutique hotel with an emphasis on restaurant and lounge service.

Back in the 1980s, boutique hotel development was all the rage. Pioneers like Bill Kimpton, Chip Conley, and Ian Schrager founded hotel chains that were quickly and enthusiastically accepted by travelers. In general, these hotels provided unique guest experiences that embraced and promoted high quality food and beverage outlets. The popularity of these hotels spawned boutique concepts such as W and Indigo that were affiliated with major international hotel brands. Over time, the growth of the Kimpton and Joie de Vivre (Commune) portfolios has led to the perception of these chains as brands.

Per STR, there are 371 independent boutique hotels in the United States that operate a restaurant. To analyze the performance of today’s independent, full-service boutique hotels, we examined the performance of 41 independent, full-service boutique hotels for which we have annual operating statements from 2010 through 2014. In 2014 (latest annual data available), these 41 properties averaged 137 rooms in size and achieved an occupancy level of 75.1 percent. They also brought in an average daily rate of $245.20.


The performance of these independent boutique hotels was compared to the operating results of the full-service hotels sample in CBRE Hotels Americas Research’s annual Trends in the Hotel Industry report over the past five years. The following summarizes the results of our analysis.

From 2010 through 2014, independent, full-service boutique hotels delivered greater growth on both the bottom and top lines compared to the sample of all full-service properties. RevPAR for the boutique sample increased at a compound annual growth rate (CAGR) of 10.3 percent during this five-year stretch, compared to an increase of 7 percent for the all full-service sample. Boutique hotels achieved annual growth rate premiums in both occupancy and ADR.

Further, the independent, boutique hotels achieved greater growth in food and beverage revenue, which led to loftier increases in total revenue. The superior revenue growth resulted in a more rapid pace of profit recovery. From 2010 through 2014, the net operating income (NOI) of the independent, boutique hotels increased at a CAGR of 23.1 percent, compared to a 12.6 percent NOI growth rate for all full-service properties.

Also, food and beverage service takes on a greater role at independent, boutique properties compared to their traditional full-service hotel counterparts. From 2010 through 2014, food and beverage revenue at the boutique properties averaged 27.8 percent, compared to 25.3 percent for the full-service sample. Consistent with overall lodging industry trends, this ratio to total revenue has declined for both samples since 2010. This is indicative of the relatively strong growth in the demand and pricing for renting hotel rooms compared to the lag in recovery observed for other guest expenditures.

The difference in the composition of food and beverage revenue between the two samples is demonstrative of the relative market positioning of independent, boutique properties versus traditional full-service hotels. In 2014, revenue earned from restaurants and bars represented 52.5 percent of total food and beverage revenue at boutique hotels compared to just 36.9 percent at the full-service hotels. Owners and operators of independent, boutique properties are able to express their creativity by placing a greater emphasis on developing and marketing their restaurant and lounge concepts.

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Robert Mandelbaum is Director of Research Information Services for CBRE Hotels Research. CBRE forecast and financial benchmarking reports can be found at pip.cbrehotels.com.