Boutique hotels: own brand, consortiums or soft brands?

  • Setting up a boutique hotel is often a project that transcends the always necessary Business Strategy. Sometimes, and especially when it is a historical building, the rehabilitation of the structures that house these charming hotels are projects for the recovery of artistic heritage that affect the entire social and economic environment in which the establishment is located. The opening of these hotel establishments is also sometimes a way of financing the heritage in the environment of the owner family. In some cases, these are also vital projects, projects in which the owner wishes to maintain control over each and every decision. All these aspects must be compatible with the economic viability and the distribution and marketing capacity, and that means choosing a path in terms of the creation, design and management of the brand in boutique hotels and independent hotels. What types of brand strategy are there?

    We can say that there are basically three options:

  • Create and manage the hotel boutique’s own brand
  • Join some kind of hotel consortium such as Preferred Hotels & Resorts, Small Luxury Hotels, Leading Hotels of the World or Design Hotels
  • Opting for a mixed solution such as soft brands

But before making a decision, it is necessary to understand the background and the reasons that have led to the rise of this type of establishment.

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The rise of boutique hotels : individuality and personality vs. standardisation

The world of luxury in the hotel and hospitality industry is in a process of constant innovation. From the use of digital to create value and deliver personalised experiences, through a unique personal commitment, to the development of sustainable products and concepts that protect the environment and are positive to the social environment. Everything is innovation and everything seeks the personalisation and differentiation necessary to capture an increasingly demanding, more informed client.

This type of customer is looking for experiences that appeal to their values, that make them feel unique and capable of transforming things, that elevate them personally and that manage to create a feeling of belonging to the brand. Independent and boutique hotels, due to their size, integration in the destination and service characteristics, are the most likely to generate this type of experience and are the most sought-after today, providing in a much clearer way than a traditional chain that “sense of place” which has been an important part of the success of platforms such as AirBnb.

The rise of boutique hotels today can also be explained by a journey that began with the homogenisation of the hotel industry through the growth of major brands, which dominated the scene for a long time. Clients largely had a relationship with the brand, not the hotel, seeking standards of facilities and service that they took for granted in each business unit; if they liked the Hilton standard, they would choose that chain to stay regardless of where in the world they were.

As the hotel industry became more and more corporate, and hotels more and more alike, the appeal of independent hotels, with their own unique style and character, became more and more evident. The large corporate structures of the large hotel companies have been unable to offer the extra personality and individuality that their smaller brothers and sisters bring, and often not the individualised service and attention to detail that this type of public requires.

Creating your own brand for your boutique hotel

In this scenario it seems that the most sensible option is to create your own brand for your boutique hotel. At the management level, it guarantees absolute independence and total control over it and the associated business decisions. In a previous post we commented on the importance of creating your own brand in the independent hotel sector. The advantages are many: it will allow you to define a core that will be the centre of the experience of your client, will help you connect with him, and will become your greatest competitive advantage. If you bet on this path, we recommend that you take a look at the branding trends that we propose for this 2019 in the hotel sector.

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Boutique hotel consortiums: I can' t do it alone, with friends I can.

But the world of luxury hospitality is also becoming increasingly competitive, and it is becoming more and more expensive to sustain the management and marketing of small independent business units, such as boutique hotels.

Sometimes the possibilities of economic viability are complicated in a market already very crowded with other similar proposals, which means that the owners and managers of these independent or boutique hotels must invest more resources in order to position their own brand and have a unique and distinctive sales proposal that will attract a specific audience.

Differentiating oneself and convincing customers that their choice will be the most satisfactory requires a clear strategic approach and some investment, and if this is not done there is a risk of having to compete for similar proposals with price as the only differential value. A dangerous dynamic and more in this service niche.

In this context, a bridge option could be to join some kind of hotel consortium such as Preferred Hotels & Resorts, Small Luxury Hotels , Leading Hotels of the World or Design Hotels

What these consortia offer hotels is a global platform to enable them to compete with the big brands, and that is achieved through public relations and social media support, marketing, sales and distribution.

Membership in Preferred, SLH and LHW generally costs less than what it takes to be part of a hotel franchise. In addition, these groups offer short term agreements and more flexibility and independence in their contracts. And then, there is freedom in branding standards: there are no guidelines, no brand initiatives as this would be artificial and would detract from the authenticity of the different options. With this option you maintain your own brand, but you have support in aspects of distribution and commercial development.

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Soft Brands: the hybrid option

There is a third way that appeared a few years ago. This is a new concept that has recently gained ground in the luxury hotel and catering sector, especially among the major brands of American origin: the Soft Brand.

Examples of this type of mixed solution are the Autograph Collection from the Marriott chain or the Curio Collection from Hilton, where hotels are managed independently, but under the umbrella of a large global brand. With this solution, independent hotels retain all the individuality and personalisation of a family boutique hotel, mixed with the financial power and marketing and distribution expertise of some of the world’s largest brands.

This is a two-way alternative: on the one hand, independent hotels and boutique hotels, which operate alone and without a strongly positioned brand, can jump on the bandwagon of an international brand, obtaining greater direct income and enjoying its benefits (reservation system, representation in the global sales network, loyalty programmes, rate negotiation with agents such as Expedia or Booking, etc.)

The use of centralised booking systems and unified loyalty programmes also means that the small independent hotel can reduce its percentage of the most expensive OTA bookings and generate more revenue directly through its own websites.

On the other hand, it provides large hoteliers with the ability to attract customers who are looking for authenticity and reject the rigour and standardisation of a large corporate brand. This model also allows brands to get great ideas from developers and owners who have found ways to operate in their local market. Whether in design, marketing, operations or personnel, there are creative ideas that brands could incorporate into their systems or into all collections. The big brand captures a kind of intellectual capital, in addition to the scale and inventory capital that is gained by incorporating each new hotel.

Encouraged by the success of exclusive luxury brands, such as Hilton’s Curio collection, and the growing demand from owners and consumers for a slightly lower version of the same concept, the soft brand is slowly infiltrating the three- to four-star segment, which offers hoteliers and travellers on a slightly lower budget than luxury, a combination of independence and tranquillity that was previously out of reach.

Perhaps the biggest challenge with this model is that more traditional brand owners may start to want some of the flexibility that the collections enjoy. If other brands at the same price level as the one they are competing with, perhaps even affiliated to the same hotel company, are able to make the decision not to comply with the brand’s standards, the owner linked to the big traditional brand could feel very much at a disadvantage.

It remains to be seen whether “Soft Brands” will stand the test of time and the coexistence of one brand subject to the standards of another, with the differences in customer experience that can be generated.

At Mandarina Brand Society we can help you with the creation and management of the brand for your hotel boutique or independent hotel. Shall we talk?

Pilar Domínguez
Pilar Domínguez
Directora creativa y especialista en branding
Mandarina Brand Society Mandarina Brand Society

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