Tourism, Bowen Island and other stuff that comes to mind

Bowen needs one of these….drastically!
May 24, 2008, 4:37 am
Filed under: Uncategorized

From the CTC Tourism Daily, May 24th, 2008

Boutique hotels: good for the good times?
May 22, 2008
Boutique hotels have been all the rage in the lodging industry. Developers want to build them. Guests want to stay in them. Travel writers want to wax on about their virtues.

But Robert Mandelbaum asks on if boutique hotels are popular with their owners? How has boutique hotel financial performance stacked up to industry-wide benchmarks as the lodging industry has progressed through the ups and downs of the recent business cycle?

To answer these questions, PKF Hospitality Research (PKF-HR) has analyzed the revenues, expenses, and profits from a group of boutique hotels which provided their year-end financial statements to PKF-HR for the firm’s annual Trends in the Hotel Industry survey. The sample consisted solely of properties that provided data for each year from 2000 to 2006 (most current data available).

While boutique revenues have exceeded industry averages, so have operating expenses. From 2000 through 2006, total expenses have run approximately 55% greater at boutique hotels than the typical US hotel when measured on a dollar-per-available-room basis. Fortunately, the boutique sample achieved unit-level profits that averaged 57% greater than the total Trends sample.

In general, boutique hotels achieved superior gains in revenue and profits during periods of prosperity, but also suffered to a greater degree during the depths of the 2001 through 2003 industry recession.

From 2000 to 2003, US hotels averaged a decline in total revenue of 15.1%, while profits fell off 36.2%. Unfortunately for boutique hotel owners and operators, the declines in performance were much worse. During the industry recession, the typical boutique property in the Trends sample suffered declines of 25.0 % in total revenue and 52.9% in profits.

Conversely, from 2004 through 2006 boutique hotels enjoyed a quicker pace of recovery than the industry at large. During this period boutique properties saw their revenues grow 36.6%, while profits increased a very healthy 75.5%. The recovery for the typical US hotel was more gradual. Industry-wide growth averaged 26.7% for revenues and 45.8 % for profits.

The volatile performance of this lodging segment can be partially attributable to the urban location of most boutique hotels. In general, urban areas, especially the major gateway cities suffered the most during the 2001 to 2003 industry recession. Fortunately, these same cities have recovered strongly since then.

The “first generation” of boutique hotels had some common development characteristics, writes Mandelbaum. They were frequently constructed within the shell of a historic building and located just a few blocks off the prime heart of the central business district. By receiving historic structure and urban re-development tax credits, these boutique properties were able keep their overall development costs in-line, and devote a large portion of their development budgets to interior design. This moderation in development cost, along with superior market performance, combined to provide a favorable impact on the return on investment.

In recent years, most boutique hotels have been built from the ground up and don’t possess the antique charm historically associated with boutique properties. Instead, they thrive on the desire to be hip, modern, trendy, and full of the latest technological and entertainment amenities. In turn, development costs have escalated, but justified by the strong historical financial performance of this sector.

Given the historical elastic performance of the boutique hotel segment, Mandelbaum notes, it will be interesting to see how these unique properties perform when industry performance is basically flat. PKF-HR believes boutique hotels will continue to enjoy the strong performance premiums they’ve historically achieved, but without the wild cyclical oscillations seen in the past.

Author: TOURISM staff
Organization: Canadian Tourism Commission


2 Comments so far
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My god man. When Murray speaks you should maybe listen. Murray is the champion of Bowen Island but unfortunately there is nothing Boutique there. Wink Wink. Good comments though. Wonder how often Murray gets out and sees the real game in town. Wonder what that is? Well it is not boutique hotels but the move to quantifing and qualifing small Luxe Guest Houses. So many people want to be hotel people but only a few take the time to learn what the business is. Got to hand it to Murray (an old associate in the industry) he knows the people and has the time over on Bowen Island to reflect on the life of the Grey Power market as he and I are both getting on. HA HA HA

Comment by Robert Tuss

Kidding Murray my friend. A professional indeed and he captures the essence of Boutique Hotels in his comments. I wanted to raz him because as Murray is aware the industry is changing so fast one cannot imagine. The so called long range marketing plans have given way to dynamic marketing techniques not seen before in the hotel industry but I will state because it needs to be said the hotel industry marketing teams are still behind by at least one half a beat. They still fail to get out of their shells that in some way they are overly important and determine much of their future based on their peers and what moves they make. Gentlemen. Your peers do not stay in hotels and if they do personally they do not pay the bill. Only a true customer translates into valuable marketing information. Love hotel people but hey,hotel people just manage other peoples money, they are not the innovators, the leaders, all but a few. I challenge hoteliers to get back to basics, leave accounting to the accounting department and get out and meet the people, meet your community, be part of the community instead of jocking for the next move your company will transfer you too. Old fashion hoteliers with both experience and true people experience are wanted. Badly. The shining boys and girls today are but clones of the old players game but lack much. Don’t think so? Ask in your city both the community and the industry who are the top 5 hotel managers and what are their names? Good luck to all. Those days do not exist anymore.

Comment by Robert Tuss

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