S P E C I A L
R E P O R T
S U M M A R Y
The Highland Group
Reports 2015:
Lifestyle Hotels
Soft Brand Collections
Boutique Hotels
Rumeli Han, Curio Collection by Hilton
March 25, 2015 The Hunter Hotel Investment Conference and The Highland Group are pleased to
provide this complimentary Summary Report on Lifestyle Hotels, Soft Brand
Collections & Boutique Hotels. This Summary will introduce you to this new
publication and is designed to be useful as you “Seize the Day”.
The complete detailed first annual report on Lifestyle Hotels, Soft Brand Collections
& Boutique Hotels is available for $495 at www.highland-group.net. The report
provides developers and their consultants, operators, lenders and brands with data
and insight as they pursue hotel development for the upcoming marketplace.
Included are trends on supply and demand; occupancy and average rate, and
financial performance for the three segments - with detail by market class for the
boutique segment. Also included is a special section on boutique hotels with spas.
We see increased interest in boutique and lifestyle hotels and soft brands as
developers create and respond to market opportunities. Boutique hotels are unique
in style, small and either independent or affiliated with small systems. They are
gaining popularity. The chains have noted changing traveler tastes and the adapting
interests of their development communities. Expanding on the boutique concept, the
chains are responding in two ways presented in this report. Lifestyle brands are
prescribed franchise products that are adapted to current trends. Soft brands give
hotel owners and operators the opportunity to affiliate with a major chain distribution
system while retaining the unique name and properties of an otherwise independent
hotel.
We expect all three segments to expand rapidly.
Sponsors
We thank the sponsors of this report, including Hilton Worldwide, our Platinum
sponsor.
We deeply appreciate Smith Travel Research and their willingness to make this
report possible.
Our consulting firm has had the pleasure of providing feasibility studies and other
services to the developers, franchisors, and operators of boutique, lifestyle, and soft
branded hotels for many years. We dedicate this report to their continuing innovation.
Mark Skinner
Kim Bardoul
Peggy Berg
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
1 Executive Summary Lifestyle hotels, soft brand collections and boutique
hotels are collectively an $11.5 billion industry and
growing.
Supply Growth Componded Annually 2009-2014
Boutique hotel supply, which has been an
established part of the US lodging market for many
years, is growing at a 3.1 percent annual pace, over
three times the rate for the hotel industry overall.
Lifestyle hotels and soft brand collections, which are
newer products being developed through franchise
systems, are growing at 11.5 and 17.8 percent
respectively. These segments are poised to become
a significantly larger component of the lodging
industry.
%
G
r
o
w
t
h
21%
18%
15%
12%
9%
6%
3%
0%
17.8%
11.5%
0.8%
US Hotels
3.1%
Boutique Hotels Lifestyle Hotels
Sources: STR and THG
Soft Brand
Collections
(2011-2014)
These concepts perform very favorably in terms of revenue per available room
(RevPar). On an annual basis, boutique and soft brand collection hotels average 33
and 10 percent in room revenue, respectively, above all US full-service branded
hotels. Lifestyle hotels, which include more mid-rate and select-service products,
average just 4 percent below full-service hotels.
These segments also perform very well in net income delivered. Soft branded hotels
averaged above the total US full-service segment as did larger boutique hotels.
Small boutique hotels netted less per available room than the larger properties or the
US average, reflecting their higher share of fixed costs. Smaller lifestyle hotels
generated about 8 percent less net operating income than the overall US full-service
average, but are simpler operations and should have lower development costs.
Hotels: Net Operating Income per Available Room
$35,000
$30,037
$30,000
$25,000
$20,000
$15,000
$17,201
$18,562
$20,553
$22,317
$31,045
$24,563
$13,034
$10,000
$5,000
$-
Boutique 50- Lifestyle 100- Total US Boutique
100 Rooms 199 Rooms Full-Service 145-240
Rooms
Sources: STR and THG
Soft Brand Lifestyle 200- Soft Brand Boutique
100-199 299 Rooms 200-299
100-215
Rooms
Rooms Rooms with
Spa
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
2 Segments We classified boutique hotels, lifestyle hotels and soft brand collections using the
following segment characteristics, with examples listed on the following page.
Segment Characteristics
Boutique Hotels
Independent or part of small brands
Lifestyle Hotels
Nationally franchised
40 to 300 guest rooms
Prescriptive
Design centric
Design centric
Less than 10,000 square feet of
meeting space
Planned for travelers who are
interested in boutique lodging
Restaurant and lounge on site or a
selection of proximate interesting
local dining and entertainment
alternatives
With a lounge and, at least, light
food on site
Soft Brand Collections
Affiliated with a major national
franchise distribution system
Signature hotels, individually named
and branded
Unique in design
Generally with restaurant and lounge
Generally upper midscale to luxury
Generally upper midscale to luxury
Generally upscale to luxury
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
3 Brands classified in each group are listed below. Most of the hotels in the boutique
group are independent. The boutique group includes only hotels with 40 to 300
rooms. The lifestyle brands and soft brand collections include all hotels within the
specified brands.
Several of the lifestyle brands are newly launched. We expect the segment to
expand significantly as these product lines ramp up. We also expect soft brand
collections and boutique hotels to see significant inventory gains over the next
several years.
Segment Brands, Networks and Properties
Boutique Hotels
Some Relais et Chateaux
Lifestyle Brands
AC by Marriott
Soft Brand Collections
Ascend by Choice
Some Historic Hotels of America
Aloft by Starwood
Autograph by Marriott
Some Small Luxury Hotels
Andaz by Hyatt
Curio by Hilton
Some Preferred Hotel Group
Cambria by Choice
Kimpton by IHG
Commune by Thompson
Canopy by Hilton
Luxury Collection by Starwood
Delano by Morgans
Centric by Hyatt
Joie de Vivre by Thompson
Dream by Wyndham
Mondrian by Morgans
Edition by Marriott
Any many other unique and
independent hotels
Even by IHG
Indigo by IHG
Le Meridien by Starwood
Moxy by Marriott
Night by Wyndham
Red by Radisson
Tryp by Wyndham
W by Starwood
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
4 Methodology Not all independent hotels are boutique.
Not all lifestyle brands and soft brand collections have operating hotels yet.
Identifying and categorizing hotels for this study was challenging.
We began by setting segment definitions. To identify the individual hotels comprising
each segment we applied these segment definitions to a select census from Smith
Travel Research.
We qualified and classified each hotel by its restaurants and lounges, spas and design
style, using hotel websites.
We did not include resort properties with multiple buildings, many acres, ski facilities or
golf facilities in the boutique segment. Some hotels with these facilities have
characteristics of boutique hotels and they may be included in future reports. However,
this report focuses on traditional hotel structures.
These hotels were classified to define the current inventory of boutique, lifestyle and
soft brand collection hotels in the United States. From this inventory, we drew samples
for characteristic groups and we report on these groups using Smith Travel Research
(STR) TREND and HOST reports. All individual property financial data is kept
confidential within STR.
Limitations
The Highland Group Reports: Lifestyle Hotels, Soft Brand Collections & Boutique
Hotels is a publication of The Highland Group, Hotel Investment Advisors, Inc. All
information contained in this report is assembled and compiled by The Highland Group
or purchased from Smith Travel Research. Although information in this publication has
been obtained from sources that The Highland Group believes to be reliable and
accurate, we do not guarantee its accuracy in whole or part.
All opinions and estimates included in this report constitute the best judgment of The
Highland Group and are subject to change without notice. This publication is not
intended to represent the rendering of legal, accounting or professional services.
Reproduction is prohibited without prior written authorization. Items may be quoted
when full credit is given to The Highland Group Reports: Lifestyle Hotels, Soft Brand
Collections & Boutique Hotels.
For publication information or to purchase the full report:
(404) 872-4631 kbardoul@highland-group.net www.highland-group.net
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
Excluded from the
Inventory
 Hotels with less than
40 or more than 300
rooms, except within
the lifestyle brands
and soft brand
collections
 Economy and
budget hotels
 National brands
except the lifestyle
brands and soft
brand collections
 Motels, family
vacation hotels
 Extended-stay hotels
 Condominiums,
vacation rentals,
timeshare
 Ski and golf resorts
 Casinos except in
the soft brand
collections
 Conference Centers
 All-inclusive
properties
 Standard limited and
full-service hotels
 Hotels with over
10,000 square feet
of meeting space
under roof
 Hotels not meeting
our restaurant and
lounge descriptors
 Properties with
multiple buildings or
many acres
5 Lifestyle Hotels The lifestyle brands in this report are defined as “lifestyle” by their franchise
companies. We included only brands that are part of national franchise systems with
multiple brands, national reservation and marketing programs, and over 100 hotels
under the parent brand. New lifestyle brands are emerging and we expect the
lifestyle segment to diversify.
Cambria Hotel & Suites White Plains, NY
Distribution
We identified 178 hotels in 12 lifestyle brands.
Lifestyle hotels are already in 34 states. Florida and New York have the most
representation with 20 lifestyle hotels each while California has 18 and Texas has 17.
New York City has the largest number of properties with 14, followed by Miami/Miami
Beach with 7. We expect these products to reach all states and to see multiple
properties in many cities within the next few years.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
6 Market Performance – Lifestyle Hotels
Supply and Demand – Lifestyle Hotels
Our census includes 30,982 rooms in lifestyle hotels as of 2014. Lifestyle hotels
increased from 0.4 percent of all US hotels to 0.6 percent in the past 6 years. They
hold a small share of total inventory, but are seeing much stronger growth than the
industry overall. Lifestyle inventory has been increasing at an average of 11.5
percent annually and is likely to gain momentum.
We analyzed a TREND sample of lifestyle properties of 300 rooms and less. This
segment has been gaining demand at an annual average pace of nearly 20 percent
since 2009, far above the US rate of 4.2 percent. This is partly due to the growing
availability of inventory in new desirable properties. But demand continues to grow at
well above the rate of supply increase.
Occupancy and Average Rate – Lifestyle Hotels
The lifestyle segment delivered 74 percent occupancy in 2014. Average rate for this
group of hotels was $171.65 for the year, based on the sample of properties with 300
rooms or less.
Financial Performance – Lifestyle Hotels
To provide insight into the financial performance of lifestyle hotels, we present two
statements of income and expense in Lifestyle Hotels, Soft Brand Collections &
Boutique Hotels, summarized on the following page.
Each is an average of the performance of a group of lifestyle hotels; one group of
100 to 199 rooms and the other of larger hotels in the range of 200 to 299 rooms.
These are averages of assorted hotels from 2013 and are not predictive of the
potential future performance of any individual hotel.
Net operating income is 28 to 29 percent of revenues for these samples, two to three
points above national averages for full-service hotels. However, these lifestyle hotel
samples yield $17,201 and $24,563 net income per available room, respectively. In
comparison, the average net income ratio for US full-service hotels was 26.2 percent
equating to $18,562 in 2013.
Like select service hotels, lifestyle products are designed to be room revenuefocused and efficient. However, they typically have a café or coffee bar where guests
can buy breakfast. They seek to have lounges that become gathering places for
locals as well as guests. This is reflected in more food and beverage revenue than
typical for a select service hotel, and a higher proportion of beverage revenue than
typical for traditional hotels.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
7 The statements summarized in the following table are organized according to the
Uniform System of Accounts for Hotels published by the American Hotel and Lodging
Association.
Lifestyle Hotels
100-199 Rooms
200-299 Rooms
Revenues
$60,062
$85,375
Expenses
$42,861
$60,812
Net Operating Income
$17,201
$24,563
Net Operating Income %
28.6%
28.8%
Data Year
2013
2013
Properties
23
10
3,386
2,361
Lifestyle Brands
Lifestyle Brands
Per Available Room
Rooms
Affiliation
Ratio to sales based on Total Revenue except Departmental Expenses; may not add due to rounding
The information contained in this report is based upon independent surveys and sources considered
reliable but no representation is made as to its completeness or accuracy. This information is in no way
to be constructed as a recommendation by STR Analytics of any industry standard and is intended
solely for the internal purposes of your company and should not be published in any manner unless
authorized by STR Analytics. Copyright 2013 STR Analytics, a division of STR, Inc. All rights reserved.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
8 Soft Brand Collections In the boutique marketplace, soft brand collections enable unique independent
boutique hotels to access national sales and marketing platforms, reservation
systems and loyalty programs. However, hotels retain their name, as well as unique
designs, orientation toward their local community, and boutique operations. The soft
brand collections in this report are all within large multi-brand franchise companies.
Grand Bohemian Hotel Asheville, Autograph Collection Hotels
Distribution
There are 208 hotels in the soft brand collections included in this report. Five soft
brands are represented. We expect both the number of brands and the number of
hotels represented to increase over the next few years.
Soft brand hotels are now in 43 states as well as the District of Columbia. California
has 34 including 10 in San Francisco. The other states typically have a few each.
Among cities, New York City has 12, and Washington DC has 9.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
9 Market Performance – Soft Brand Collections
Supply and Demand
Many soft brand hotels are conversions. As the new brands gain traction and attract
new development as well as properties that were previously independent or affiliated
with traditional franchises, soft brand supply should grow rapidly. There are 208 soft
brand hotels with 35,000 rooms as of year-end 2014. Average annual inventory
increase over the past four years has been 17.8 percent. Share is 0.7 percent of total
US inventory and should exceed 1 percent within the next few years.
Demand grew slightly faster than supply, at 19.7 percent on an average annual
basis, from 2011 through 2014.
Occupancy and Average Rate – Soft Brand Hotels
Average rate for soft brand collection hotels under 300 rooms has been gaining at an
annual average of at 5 percent, faster than inflation and the overall industry. For
2014, the segment averaged $202. Occupancy has been relatively stable, inching up
to 72.4 percent for 2014, as hotels fill shoulder periods.
Financial Performance – Soft Brand Hotels
We analyzed two sample average income statements for soft brand hotels: 100 to
199 rooms and 200 to 299 rooms. Summaries of the two samples follow. Each
includes as many participating hotels as possible within the confidentiality constraints
maintained by Smith Travel Research. There are fewer hotels in these samples than
in the foregoing market performance statistics and they perform better in occupancy
and average rate, on average.
The larger hotels generate more revenue per room, driven by higher occupancy and
rate. The share of revenue from the rooms department is similar in the two samples.
However, with more distributed fixed charges and higher revenues per room, the
larger hotels carry more to the bottom line.
Soft brand hotels have a higher contribution to revenue from food and beverage
operations than the lifestyle hotels, on average. They include more hotels with formal
restaurants and substantial banquet operations. These hotels are also more likely to
include related businesses, like spas, in their other operated departments.
The statements summarized in the following table are organized according to the
Uniform System of Accounts for Hotels published by the American Hotel and Lodging
Association.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
10 Soft Brand Collections
100-199 Rooms
200-299 Rooms
Revenues
$85,813
$106,546
Expenses
$63,496
$76,509
Net Operating Income
$22,317
$30,037
Net Operating Income %
26.0%
28.2%
Data Year
2013
2013
Properties
24
13
3,127
3,385
Per Available Room
Rooms
Affiliation
Soft Brand Collection
Soft Brand Collection
Ratio to sales based on Total Revenue except Departmental Expenses; may not add due to rounding
The information contained in this report is based upon independent surveys and sources considered
reliable but no representation is made as to its completeness or accuracy. This information is in no way
to be constructed as a recommendation by STR Analytics of any industry standard and is intended
solely for the internal purposes of your company and should not be published in any manner unless
authorized by STR Analytics. Copyright 2013 STR Analytics, a division of STR, Inc. All rights reserved.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
11 Boutique Hotels HarbourView Inn, Charlestowne Hotels
Distribution
We identified 659 boutique hotels by the criteria defined in this report. The boutique
concept is performing well and is increasingly fashionable, so hotels that may not
meet our boutique criteria use the term. Conversely, some hotels that are included in
our census may not be marketed primarily as boutique properties.
Boutique hotels are located in 46 states and the District of Columbia. California has
the strongest representation with 165 hotels, followed by New York with 87 and
Florida with 73. Boutique hotels in New York and Florida are concentrated in New
York City and Miami/Miami Beach respectively while those in California are more
widely distributed.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
12 Market Performance - Boutique Hotels
Boutique hotels have captured the interest of affluent and trend-setting travelers. As
a result, their rate and occupancy performance has been strong. Traditionally found
in premium markets, they are attracting the interest of developers in secondary
markets as well.
Supply and Demand – Boutique Hotels
Boutique hotels have been gaining inventory at an average pace of 3.1 percent
annually since 2009. Demand has been growing 6.7 percent on an annual average
basis so occupancies have been increasing.
Occupancy and Average Rate – Boutique Hotels
Boutique hotels averaged 75.3 percent occupancy in 2014 at an average rate of
$244.72. Roundly 70 percent of the boutique hotels in our census are included in the
averages.
Financial Performance – Boutique Hotels
Boutique hotels are differentiated by market class, location, and facilities, among
other characteristics. To provide meaningful information on financial performance, we
identified groups of roundly a dozen boutique hotels that shared characteristics within
a range.
Larger Boutique Hotels with Spa
Larger Boutique Hotels without Spa
Small Boutique Hotels without Spa
Spa in-house
No spa
No spa
Restaurant and lounge operation
Restaurant and lounge operation
Restaurant and lounge operation
120 to 220 guest rooms
140 to 240 guest rooms
50 to 100 guest rooms
Upper upscale and luxury class
Meeting space greater than 2,500
square feet
Upscale, upper upscale and
luxury class
Independent or affiliated with a
small chain or referral system
Independent or affiliated with a
small chain or referral system
Independent or affiliated with a
small chain or referral system
We analyzed statements compiled by Smith Travel Research from the HOST
database. All individual property financial data is kept confidential within STR.
Highlights of the statements are shown in the following table.
The statements summarized on the following page are organized according to the
Uniform System of Accounts for Hotels published by the American Hotel and Lodging
Association.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
13 Boutique Hotels
140-240 Rooms
50-100 Rooms
100-220 Rooms
Per Available Room
No Spa
No Spa
With Spa
Revenues
$73,776
$57,900
$131,173
Expenses
$53,223
$21,272
$100,129
Net Operating Income
$20,553
$13,034
$31,045
Net Operating Income %
27.9%
22.5%
23.7%
Data Year
2013
2013
2013
Properties
13
13
13
2,457
1,047
2,189
Independent
Independent
Independent
Rooms
Affiliation
Ratio to sales based on Total Revenue except Departmental Expenses; may not add due to rounding
The information contained in this report is based upon independent surveys and sources considered reliable but no representation
is made as to its completeness or accuracy. This information is in no way to be constructed as a recommendation by STR Analytics
of any industry standard and is intended solely for the internal purposes of your company and should not be published in any
manner unless authorized by STR Analytics. Copyright 2013 STR Analytics, a division of STR, Inc. All rights reserved.
Lifestyle Hotels, Soft Brand Collections & Boutique Hotels 2015 ‐ www.highland-group.net
14