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Industry Insights
March272019
2019 – Design, Development, and Direction of Boutique and Lifestyle Hotels

Jack Pulvirenti, CPA

03.27.19 | Berdon Industry Insights

The Bisnow New York 2019 Hotel Summit, held in January at the New York Marriott Downtown, gave attendees a peek into the future of design and development based on the insights of some of today’s hospitality leaders. As a moderator, I was able to gain an insider’s perspective on where the industry is heading.

Evolution of Boutique and Lifestyle Hotels

The panel members credited Ian Schrager, on the East Coast, and the late Bill Kimpton, on the West Coast, as the leaders in development of boutique and lifestyle hotels.

In praising Ian Shrager’s contribution, Jay Stein, CEO of Dream Hotel Group said, “The whole industry was turned upside down and it took a few years for the industry to follow and say: Hey, he’s on to something”.

According to Stein, Schrager felt it was foolish to try to please everyone with one product that was good enough for all, or with food that accommodated the palate of everybody in the building. Stein’s contribution with Dream Hotel is to blend in great hospitality with sophisticated service.

Dino Michael, Global Head at Waldorf Astoria Hotels & Resorts Hilton, added that the lifestyle concept evolved from boutique for two reasons.

According to Michael, the first reason is that the design is less restrictive. Without the grand standards and regimes of the big brands, lifestyle hotels owners, developers and designers are allowed to be more expressive. The second reason it that they have more activated social spaces. Michael added that the lifestyle concept is also a bit more glamourous and attentive—characteristics that appeal to a diverse customer base.

It has been said that it is difficult to find the exact words to describe a boutique or lifestyle hotel, but once you’re there, you know you’re there, as you experience the more intimate feel, ambiance, and atmosphere. Melissa Brown, Vice President of Business Development at East Coast Luxe Collection, added that another early innovator was Barry Sternlicht of Starwood Capital.

“He already had successful brands. Big brands that were, quite honestly, boring. So, he looked at it as an opportunity and of course, voila, we got “W.”

Brown continued that she felt this paved the road for a lot of big brands to create other lifestyle brands—piggybacking on the success of great business hotels and already having an established guest base and loyalty program in place.

Different Brands and Concepts – What’s the Attraction and Experience?

Each hotel brand has its own unique concept designed to attract a targeted audience. Kathleen Flores, Executive Vice President of Brands & Innovation at Trump Hotels, noted that the Trump brand is a luxury brand. It is more traditional and delivers what you expect – anticipation of guests’ needs.

Flores added that since there are a limited number of markets that can support the building and operation of a luxury product, It is important to look at all the other markets when expanding your portfolio.

For Allen Gross, CEO of GFI Capital, the strategy and the attraction should be unique, just as it is at the Beekman Hotel, which is designed to feel like the guests have taken a step back to the 1880’s
“Everything that we did from the furniture to the lighting was 1880’s, so that when you walked in and sat down you wouldn’t be shocked to see Sherlock Holmes drinking coffee,” Gross said.

Service, Service, Service

Michael shared that building a platform for luxury service is one thing that keeps industry executives awake at night. He added that, although the design of the hotel may be what draws guests in the first time, it is the attention they get that keeps them coming back.

To maintain that high level of service requires talent retention and well-trained staff. Flores was proud to report that for many of her properties, she maintains a below average turnover rate. Flores felt that it is important to make the guests and the talent that serves them feel special, fostering team spirit and a desire for both to stay.

Profitability Today and Where It Is Heading

Jay Stein gave his reading of the market. “I’ve been in New York for many years, and we had nine hotels here in Manhattan and, up until 2008, almost every year was great,” he said. But, he continued, “It’s been rough since 2008 … here in New York, the unions are tough, real estate taxes are tough, the cost of doing business in general … is tough.”

Stein said that New York hotels are running at 80-90% occupancy and everyone thinks the City needs more hotels, because occupancy is 20 points higher than the rest of the country. He warned that an average of 2-3% increases per year over the past 10 years must be weighed against expenses going up about 4-5%, which is not a great formula for driving the bottom line. Stein envisions real opportunities coming back three years out.

“I think you will see five, six, seven percent RevPAR increases, and I think you will see them for a bunch of years coming thereafter,” Stein said. “New York is not going to be held back.”

Berdon LLP New York Accountants

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