While China’s hospitality industry has provided a range of opportunities for luxury hotels and budget hotel brands alike, the building boom, it could be argued, has also led to uniformity. Of course customers trust international hotel brands for precisely being able to consistently deliver the same quality product and service, but boutique hotels offer something unique. And by most accounts, these boutiques are booming alongside the big brands as well.
“There has been a surge of boutique hotels opening around China in the last few years by independent owners and entrepreneurs,” said Zoe Wu, director of hospitality consulting firm Horwath HTL in Shanghai.
Though there is no hard and fast definition of boutique hotels, they are often described as high-end stylish hotels showcasing features conceived by famous designers.
Western business travelers with backgrounds in interior design, architecture, fashion, entertainment and advertising are the main customer base for boutique hotels, according to operators, but these hotels have grabbed the attention of corporate and leisure travelers from other industries as well. Unlike global brand hotels, boutique hotels often have a smaller number of rooms, usually from 20 to 150.
Though boutique hotels are smaller and more individualized than typical global hotel chains, that does not mean big hotel brands are not involved. InterContinental Hotels Group (IHG), which owns a number of global hotel brands including InterContinental, Holiday Inn and Crowne Plaza, plans to bring its boutique hotel brand, Hotel Indigo, to Asian cities, including Shanghai and Hong Kong, in early 2010. IHG is aiming to open six hotels in China by 2013.
“There are a growing number of consumers that actively seek out stylish and unique hotel experiences,” said Allan Yip, head of Hotel Indigo for IHG Asia Pacific. “Asian consumers are evolving very fast and we see that market in Asia to be comparable to the ones in the US and Europe.”
Shaun Rein, founder and managing director of China Market Research Group, said he is “very bullish” on China’s hotel sector in the long-term, adding that Chinese consumers between 24 and 32 years old plan to travel domestically at least once every six months.
Yet whether these younger travelers will spend extra money to stay in boutique hotels, which tend to charge rates similar to five-star hotels, is another matter. For example, JIA Shanghai and Urbn Hotels & Resorts in Shanghai, whose main customer bases are both corporate clients, offer studio rooms to business travelers for US$160 and US$205 per night in early December, respectively. Luxury hotels like the Hilton in Shanghai and InterContinental charge US$257 and US$161-219 per night for a the same time period.
Given the choice between a more well-known hotel brand and boutique hotel – at comparable prices – most domestic travelers would likely choose the former.
Not quite ripe
“In China, you still don’t have that many wealthy people who are already used to living in high-end hotels and want something different. They are still interested in seeing what the Hyatt or Four Seasons looks like,” Rein said. “Probably 15 to 20 years from now, you will see more Chinese who want to stay in boutique hotels.”
Carla Atienza, sales and marketing manager of a boutique property Urbn Hotels and Resorts Shanghai, which opened earlier this year, would agree.
“In China, the major challenge would be introducing this type of hotel to the market. Boutique hotels have been around in other parts of the world since the 1980s, but they are in their very early stages here,” she said.
Boutique hotels’ heavy reliance on business from foreigners may mean that this market segment will get hit especially hard by the global financial crisis, as fewer companies are expected to send employees abroad.
The Red Capital Residence, a boutique hotel in Beijing said that about 95% of guests are foreigners, and the financial crisis and tight visa regulations have had an impact.
“It is true that guests are cutting their traveling budgets. This can be seen from the income received last year compared to this year. [The financial crisis] definitely has affected the hotel business,” said Rola Suzanne Heng, general manager of Red Capital. Heng declined to say how much occupancy rates and revenues had changed over the year.
Meanwhile, Yenn Wong, founder and owner of JIA Boutique hotels, which opened a property in Shanghai in 2007, said her boutique hotels have not seen much of an impact from the crisis at the moment, but “may feel more impact next year” due to the gloomy economic outlook ahead.
She added that occupancy rates in January to October of this year averaged around 65% for her Shanghai property. She may reduce JIA’s US$258-per-night room rate next year to pre-empt a business drop-off and help them better compete with other boutique hotels and hotel chains.
An important consideration in boutiques’ battle with big- brand hotels, also, is the idea of “offering something different” may not necessarily be the requirement of many international travelers, especially those on tightly scheduled business trips.
Boutique hotels often seek to insulate guests from their everyday work environment. Red Capital Residence, for instance, purposely does not offer business center facilities to guests, making it unsuitable for those needing to hold business meetings on short notice.
“[Americans and Europeans] are still staying at big-name international hotel brands because, if you are a businessman or tourist, you want to make sure you have the same comfort when you visit China as you do back home. You trust the brands.”