REPORT FROM THE U.S.—New York. Los Angeles. San Francisco. Those U.S. cities are almost synonymous with independent, boutique hotels because that is what many travelers to these cities have come to expect.
But what does it take for an indie hotel to succeed in markets aside of the aforementioned cities? For an independent hotel, the old saying of “location, location, location” is true, said Jan Freitag, SVP of lodging insights at STR, parent company of Hotel News Now.
Indies don’t have a strong loyalty program or strong national sales/reservation system right out of the gate, he said. They need to create and carefully curate an image online so people will decide that is the experience they want over a branded experience. After winning them over from a branded experience, the indie hotel must show that it can meet the guests’ lifestyle expectations, he said.
“It’s not easy, but it can be done,” he said.
Owners and developers need to run feasibility reports based on long-term revenue-per-available-room growth and demand growth, Freitag said. They also need to take into consideration labor costs, because the amount of people needed to run a hotel or a hotel and a restaurant could create a bottleneck situation.
Data from STR shows that when looking at openings of independent hotels midscale and above over the past few years, Chicago, Denver, Miami and New Orleans were among the most popular markets.
Hotel News Now reached out to hotel developers and owners of recently opened hotels in these markets to find out what made them pick their locations and what they think it takes for independent hotels to succeed there.
Chicago
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Oxford Capital Group opened the upper-upscale Hotel Julian in Chicago last October. (Photo: Oxford Capital Group) |
Oxford Capital Group is strongly predisposed to independent luxury hotels in major urban markets, said Founder, President and CEO John Rutledge. Chicago also happens to be home for the company, and it is a deep, broad market and sophisticated city, he said. That’s why the company chose the city as the location for one of its newest indie hotels, Hotel Julian, named after the patron saint of hospitality.
The company bought an office building that fell on hard times across from Millennium Park on North Michigan Avenue, Rutledge said. The property was vacant for several years, and Oxford redeveloped it and added five stories to the property about 24 months after acquiring it. Hotel Julian opened in October 2018.
Tourism continues to grow in Chicago, and as business continues to track the country’s gross domestic product, the city has seen strong room demand, he said. The city generally has strong citywide conventions, but even years tend to be better than odd years, so 2019 doesn’t have as robust a convention calendar. There is some new supply coming to the market, he said, but it’s not a scary amount.
Independent hoteliers have to be proactive and entrepreneurial in how they access demand as the internet has democratized access to various channels, Rutledge said.
“We’ve learned to be nimble and adroit around accessing the demand channels to fill our indie hotels and leverage them in the most appropriate ways,” he said.
Every hotel has to stand on its own two feet, Rutledge said. Hotel Julian is its 13th hotel in the Chicago market, and Oxford tries to leverage synergies when possible, but each hotel and each hotel team has to compete in the market on their own to chase business, he said.
“Each has to go out and fight for its market share in its competitive set,” he said.
Independent hotel travelers tend to be reasonably sophisticated and want a more bespoke, independent lodging experience, and not something that’s cookie-cutter, Rutledge said. They pride themselves on their individuality. When they come to Chicago, Hotel Julian’s guests want to experience great architecture and design, a warm hospitality environment and great F&B, he said.
Oxford seeks authenticity in the environments it creates, he said, adding that its hotels are their guests’ home away from home. The company recognizes the need for and thus creates a warm, collegial culture for its employees, which in turn is felt by the guests, he added.
Denver
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Zeppelin Development opened The Source Hotel in the River North Art District of Denver, a neighborhood the company has focused on for years. (Photo: Zeppelin Development) |
Denver has been widely publicized as being one of the faster-growing markets and a hot development area, said Kyle Zeppelin, co-president at Zeppelin Development. Since 2000, his company has focused on development in the city’s River North Art District, one of the last major undeveloped areas connected to downtown. It’s a former industrial area, but it has a new economy with tech companies and creative firms that attracted restaurants and more creative retail, he said.
“As the urban core has gotten more sought-after, there’s just these former used-up industrial areas prime for redevelopment and different opportunities that exist in other parts of the town,” he said.
Zeppelin Development partnered with an independent hotel group to develop The Source Hotel, which opened in August 2018, Zeppelin said. In doing so, the company tried to avoid the “typical hipster hotel trap” with throwaway service and the guest experience as almost an afterthought. Those hotels are all about cool design and F&B, he said, and while The Source Hotel has those as well, it combines it all with hospitality at the highest level.
A lot of the appeal of the neighborhood is that it’s not corporate and not cookie-cutter, Zeppelin said. Looking at the history of the area, it has a sense of urban exploration.
“I think we stayed away from the faux historic and did something that was more relevant to this place and this time,” he said.
When people come visit the area, they want to experience a concentration of the most renowned things going around the town, Zeppelin said.
Denver is still at an early stage, but the neighborhood is definitely part of the story, he said. Group bookings are coming in but they haven’t fully hit yet since it takes time to make it on the map for that, he said. There’s a lot of upside in this market and a lot of built-up demand for people to have unique experience that’s grounded in this place, he added.
Miami
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Life House chose the Little Havana neighborhood for its Life House Little Havana hotel because of the area’s rich culture and its location within Miami. (Photo: Life House) |
Little Havana is a culturally rich and well-located neighborhood in Miami, said Rami Zeidan, founder and CEO of Life House, via email. It’s an experience of the city unlike any other, but it lacked an affordable, luxury boutique hotel, he said.
“We chose the Little Havana neighborhood for its rich Cuban heritage, cool local bars and restaurants and burgeoning creative scene,” he said.
Formerly The Thomas Jefferson Hotel, Life House Little Havana opened in December 2018. Market conditions didn’t materially change in the six months it took to convert the property, he said. However, new bars and restaurants opened in the area, creating additional demand for its rooms as travelers’ interest in the neighborhood grew.
“Miami has something for every type of traveler, whether you're looking to experience local culture, art and cuisine or hit the bustling South Beach strip,” he said. “Celebrating this diversity and embracing it within our first two Life House properties while offering a boutique experience at affordable prices has made our debut successful.”
Miami is also a top destination for group travel, such as spring break or bachelorette parties, Zeidan said. To cater to those groups, the company created unique bunk rooms for both its properties in the city.
Most of the business at the Life House Little Havana is leisure-based, much like many other boutique hotels in the city, he said. However, its location is near the Brickell neighborhood, the airport and Marlins Park, which has provided business demand during the week.
New Orleans
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The Hotel Peter Paul, a converted Catholic church, opened in the Faubourg Marigny neighborhood of New Orleans in October 2018. (Photo: Ash NYC). |
Ash NYC learned of the prospect of a hotel in the Faubourg Marigny neighborhood of New Orleans through a local partner, said Anthony Pellegrino, director of hotels at Ash NYC. Over a period of six years, it converted the former St. Peter and Paul Catholic church and school into the Peter & Paul Hotel, which opened in October last year.
It’s a special neighborhood, he said, and everyone fell in love with it. It’s not hard to want to be part of a community that’s full of artists and musicians, he added.
“That’s really what struck us, this beautiful historic place, where people gathered for years and years,” he said. “We were thinking how we could recreate that and be part of that neighborhood where people gather for years and years.”
His company focuses on beautification of real estate and revitalizing communities, Pellegrino said. Every one of its hotels needs to be an independent and have its own identity. They need to be part of the community as well, whether that’s through employing locals to build it, to work there or to engage with the neighbors to be ambassadors to the city.
Any city that Ash NYC is in generates its own demand. That’s part of finding that particular neighborhood and engaging with it, Pellegrino said. There aren’t that many hotels in that neighborhood, but there are a lot of Airbnb rentals, he added.
Because it’s New Orleans, the business mix so far has been almost all leisure guests, he said, but the hotel does see some people taking staycations and extending their length of stays. There is group business, of course, because it has the church space, which also doubles as a community engagement place, he said. The restaurant and bar are popular among the locals.
“Community engagement has been a huge piece,” he said.
The worst thing a hotel can do is come in and try to be authentic but end up being a poser, Pellegrino said. His company tries to make an honest homage to the cities it’s lucky to work in, he said.
Everyone wants to be thought about, and they want to be thought about before they show up, he said, adding that he calls this thoughtful service. It goes with community engagement.
“The folks who work in the hotel and know which bar or restaurant you want to go to,” Pellegrino said. “They know who is bartending that night they are sending you. As an indie hotel, we’ve thought about the experience that we give and I think people are looking for, and it’s not just to go to the hotel and be sent on a tour.”