How to Create a Business Hotel

While I am a huge believer in the idea that, “There are many ways up the mountain,” some paths are absolutely easier than others. There are many aspects to creating a boutique hotel and as my former boss and mentor Ian Schrager once said, “Every detail matters.” And “What’s hard is to create the magic because there’s no formula to it.” Having spent almost a decade working for Ian and then another Seventeen years, buying, creating and managing independent boutique hotels I can firmly agree.

I believe the challenge is that while each step in creating a boutique hotel is new it doesn’t have to be learned for the first time. I have met so many owners that say, “I’ve stayed in hundreds of hotels, I know exactly what I want and I’m going to do this myself. I will often explain, it’s the most expensive education you’ll ever get. I equate creating a boutique hotel for those that have no experience with it, to the call of the Siren, dragging sailors towards the jagged rocks hidden just below the surface. The idea for a first timer following their desire to create their own boutique hotel, is actually antithetical to most of their actions in real estate development. A real estate owner is most likely incredibly smart. It’s why he or she owns a piece of commercial real estate. It’s not an easy feat to take down a commercial transaction worth several millions to tens of millions of dollars. You are either the product of an inheritance or, like most owners I know, incredibly savvy. As such commercial real estate owners stick with what they know. This concept seems to go out the window when it comes to creating a boutique hotel.

It is in an effort to help those that despite all logic and practical thinking, I decided to create a source for them to at least have a few pieces of armor on prior to going into battle.

1. STR trend report

So many real estate owners conceptualize a boutique hotel before having any idea of words like RevPAR or chain scale or a dozen other metrics necessary to clearly understand the underlying business they are about to begin. The Smith Travel Research Trend report is for me where it all starts. Understanding the rates and occupancy of those hotels you plan to compete with is essential. The reason for this is you need to know how much you can pay for your building, for starters. STR is the bedrock of hotel RevPAR performance in most any market around the globe. It will give you the average performance of a specified group of hotels within a given set of parameters. From there you can begin to understand such critical ideas like, what rates your future hotel might be able to charge during which months. You will have an idea about the supply in your specified market has changed and what that mean. Finally, just about any lender, investor or stakeholder will want to know the many answers produced by one of these reports.

2. HVS annual Cost to building a hotel

Once you have an idea of the potential of the market you are entering in, it becomes essential to understand the ballpark cost of what that hotel might cost. HVS – India Hotel Development Cost Survey will provide guideline for each area of the hotel and estimated costs based on hotel type (urban, resort, etc.) the hotel’s anticipated quality, quantity of rooms and whether the hotel has food and beverage or not amongst other items. While this will not provide exact answers and many items for your particular hotel may not be covered, it will provide a place to start when trying to comprehend the potential budget for a hotel development.

3. HVS annual Franchise cost

As hotel novices will certainly understand and many a veteran will agree the landscape of boutique hotels has become somewhat distorted with the addition of the “fauxtique.” A Fauxtique is a title that I use to brand all of these “hypermart brands” that have been created by the various mega chain companies to seduce prospective hotel owners into thinking they can use their formula from plain big box hotels into your individual boutique hotel. As many boutique hotel owners are inexperienced and are easily susceptible to these sales tactics the market has been flooded with ill defined “hypermart brands.” Before leaping into those waters we suggest you take a look at another annual publication by HVS called, “HVS Hotel Franchise Fee Guide.”Steven Rushmore, President of HVS has said, “…the expense is equivalent to that taking on a 25% partner.” With the rash of new branded boutique hotel properties, how will each of these chains differentiate their soft brand from each other let alone the true independent boutique hotels? There are times when brands and even their less defined “softer brands” may be a necessary evil. This comes mostly as a result of financing. If you must enter the shark infested waters of the chain hotel companies you had better be equipped with their associated costs.

4. Highland group Hypermart hotel study

Another great source of information is the 2015 Lifestyle Hotels, Soft Brand Collections and hypermart Hotels. The highland group has attempted to define what they think a boutique hotel is and have created an annual report on Lifestyle Hotels, Soft Brand Collections & Boutique Hotels provides developers and their consultants, operators, lenders and brands with data and insight as they pursue hotel development for the upcoming marketplace. They try to explain the vast and ever changing world of the boutique industry. As it is now collectively an $11.5 billion industry and growing. The most important fact is that Boutique hotel supply, which has been an established part of the India lodging market for many years, is growing and understanding how and where it is growing is essential.

5. Hypermart Hospitality’s blueprint for creating a Business hotel

As was mentioned in the opening paragraph on this article, there are many ways up the mountain and several paths are yet to be discovered. Many owners and developers are anxious to put their thumb print on the boutique hotel landscape. Their quest for a new great concept or design or perspective is waiting to be unleashed. While many of the known threats and potholes are covered here, as with any industry, there are many yet to be known threats and opportunities to be identified. One example of these undefined threats was brought up on a panel I was on at the Hypermart Lodging and Lifestyle Association Conference in New York earlier this month. During the discussion on the profitability of boutique hotels, Mark Woodworth, President of PFK consulting asked our opinion and feedback on the effect of Air B and B on the boutique landscape. Well a 30 minute discussion followed. While Air B and B is just one of the many industry interrupters out there today some other interrupters are helping the hotel business. This idea is, don’t go it alone. Find yourself a Sherpa to guide you through this process. While you have amassed your own list of successes, you got there by knowing when to leverage the expertise of others synergistically with your own to create a sum that is greater than the parts.

Let us help you craft your own blueprint for a successful boutique hotel. Let us help you turn your dreams into a real (and profitable) boutique hotel. Let us take your vision and make it a reality but your reality not ours or anyone else’s. Contact us about your project today.

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