Corporate travel buyers are reporting increased access to and use of independent and boutique hotels, spurred by better negotiating opportunities, availability in tight markets and the potential to increase traveler compliance with hotel programs.
Use of independent and small group hotels participating in corporate programs increased 89 percent from 2007 to 2008, according to Utell Hotels & Resorts, the representation service segment of Pegasus Solutions that represents more than 3,000 properties in 130 countries. As buyers initiate the request-for-proposals and negotiating process for their 2009 hotel programs, that growth trend is continuing, said Elaine Kennedy, vice president of global demand sales at Utell.
"We're looking at 25 percent to 28 percent so far in terms of additional hotels invited, and a lot may not have come out yet," Kennedy said. "We don't just work on the largest global RFPs. We have teams on the ground on a local basis to help independent hotels with regional accounts."
Other hotel representation groups have seen similar growth. Preferred Hotel Group, for example, in recent years has grown to represent more than 600 hotels and resorts in 30 countries, and such participants as India's Leela Palaces, Hotels & Resorts also have reported exponential growth in corporate RFP submissions (see story, page 18).
Independent and boutique hotels also have been able to grow their presence in and ties with global distribution systems in recent years. Sabre, for example, in 2004 acquired SynXis Corp., which has a consortia management program to help independent properties offer corporate rates to multinational companies. "It really levels the playing field, and that's why there's more interest and more availability," said Stephen Fitzgerald, Sabre's vice president of hotel and car distribution.
It's happening on a smaller scale as well. Margaret Bowler, HRG's director of global hotel relations, said Hotel du Vin—a small U.K. line of boutique properties converted from hospitals or breweries into funky, club-type atmosphere hotels of about 40 rooms each—will be available to load into the GDSs this month.
Buyers said such properties fulfill travelers' changing needs and could in turn boost hotel program compliance rates.
"We have different demographics within our company," Chevron global category manager for hotel and global travel Diana Edens said at an educational session during July's National Business Travel Association Annual Convention and Exposition. "We need to make sure we're listening to what the traveler needs, so we're trying to inject into our program places that people want to stay at, maybe getting them a little bit excited about where they're going to be staying."
Boutique properties particularly appeal to the millennial generation that is now entering the workforce, Johnson & Johnson manager of travel services Maria Chevalier said at a Corporate Travel World educational session earlier this year. "They travel more for the experience, they stay longer and they tend to switch hotels more often," she said. "We have employees that love them, and it all comes down to leveraging where we have spend."
Increased use of boutique properties also corresponds with the trend of business travelers aiming to combine trips with leisure travel, Utell's Kennedy said. Successful boutique properties have incorporated the business facilities travelers need with a style that differentiates them from typical chain properties.
"Travelers want to feel that they're soaking up a bit of the location wherever they go," she said.
Current market conditions also underline the trend. As a group, boutique hotels in recent months, unlike the hotel industry at large, are showing increases in occupancy and stronger growth in revenue per available room.
At the same time, multinational hotel companies are increasing efforts to emulate the boutique experience. Starwood Hotels & Resorts Worldwide, a longtime proponent of the strategy since the launch of the W brand in the late 1990s, recently began opening its first boutique-style properties in the midprice and extended stay categories, branded Aloft and Element.
Marriott International, meanwhile, is working with Studio 54 co-creator Ian Schrager to open a new brand of boutique hotels, dubbed Edition, in 2010
(BTNonline, Jan. 29).Still, boutiques remain a business-travel niche. Kathy Pruett, senior director of consulting at BCD Travel's consulting arm, Advito, said most of her clients still limit use of such properties to upper-level executives. Boutique hotel use also continues to skew more toward certain industries, particularly entertainment.
"We are a unique area of travel, and our needs for ourselves are quite different," Universal Music Group director of travel services Pamela Witherspoon said. "We do tend to stick to hotels that are—I don't want to use the word boutique-y—smaller types of hotels."
The comparative smaller size of boutique hotels will limit the scope of their involvement in a corporate program, HRG's Bowler said. "They also tend to limit the number of rooms to which they give discount rates," she said. "It has to fit the mix in terms of what the client wants."
"With the market softening and competition getting a little more fierce, because boutique hotels are in the major markets," according to Advito's Pruett, "there might be some opportunities to get some of those nice amenities."