• Buying into boutiques

Urban & Country Leisure, the pub operator which is due to open its first hotel in October, has confirmed plans for a chain of small boutique hotels, with a £15m investment expected to take it to 10 sites in two years.

The group has so far invested £1.5m converting the former Globe Hotel in Warwick into a 16-room hotel, pub/restaurant called The Lazy Cow, marking increasing interest in the UK's boutique hotel market.

UCL currently runs 14 pub restaurants across the UK and a nightclub in Soho, reflecting the background of founder Ross Sanders, who was one of the former owners of Bar Room Bar, which went into administration last year.

Sanders, said to have been the youngest-ever GM of a West End nightclub at the age of 20, commented: "It's a natural progression and extension of our existing UCL blueprint and plans, which we have successfully rolled out over the last two years across our estate with our quality pub restaurants. It is an extension of the high quality hospitality offering and experience that our customers enjoy whether that is in a UCL pub restaurant or small hotel."

This "high quality" is represented in part by the hiring of David Philpot as head chef. Philpot was previously senior chef at Le Caprice, The Ivy and head chef at Soho House in New York.

UCL is joined in announcing boutique expansion plans by Sanguine Hospitality Management, which is taking InterContinental Hotel Group's Hotel Indigo brand to the northeast of the UK with the opening a 148-room Hotel Indigo in Newcastle next year.

The hotel will be built in the city's Eagle Star House building and it is thought that the group will look to attract a Michelin-starred chef to operate its Brasserie.

UCL follows a trend for sites to make the transition from what would have been pubs-with-rooms to a boutique product, where the accommodation has been given a little more focus. Sanders' "natural progression" is a model also favoured by the likes of Gordon Ramsay and the team at St John with their properties.

UCL's operations director Harwood Warrington has direct experience of this, having previously been founder and operations director of boutique pubs-with-rooms operator Merchant Inns, which called in the administrators just over a year ago.

Warrington said: "Our overall aim and core objectives with our hotels will be to over-deliver in terms of exceptional standards of accommodation, food and drink while maintaining a natural hospitality, in our words tender loving care."

Boutique hotels are taking over where, not only pubs-with-rooms left off, but are also the next stopping-off point after the high-end B&Bs. The growing foodie culture in the UK has also driven the recent opening of Lime Wood in the New Forest (by Robin Hutson, co-founder of Hotel du Vin) and the nearby Terravina (owned by Gerard Basset, co-founder of, ahem, Hotel du Vin), bright spots in a gloomy provincial market.

Boutique hotels add named chefs, locally-sourced food and a hint of individualism, which gives guests the sense of added value that they might not feel in a more generic branded site, which also helps when it comes to raising rates. Much as W is about aspirational cool, a boutique hotel allows guests to make a statement about themselves when they stay there.

One of the reasons that a fledgling brand run by a former nightclub GM can find itself in the same segment as a brand run by a global operator is the loose interpretation of boutique. At the high end it is synonymous with personalised service and unique design, at the less reputable end it's just a way with unusual chairs. Not to take anything from Lazy Cow – or Indigo – but the two may find themselves sharing a sector with some strange bedfellows indeed.

What unites them is a search for a premium on their rates, as described in HVS's report released in August: ‘Design or Lifestyle? – A Review of London's Boutique Hotel Scene'.

The report found that boutique hotels have been more resilient in the downturn than all sectors other than the budget market, with revpar in 2009 for central London's boutique hotels at £135, compared with revpar of £105 for the city's hotels overall.

The study also pointed to the expansion of the sector in London, highlighting the current pipeline of 17 hotels, which are set to be added to the 36 currently operating in the market.

The anticipated openings over the next two years include both branded (W, Aloft and three Indigos) and unbranded (the Great Northern – with the help of Nicholas Rettie, the man who bought you the Metropolitan, the Halkin and the Great Eastern hotel).

For the global operators, much as you were no-one without a budget brand to get you through the hard times, the next target is the boutique market. With Hilton out of the running as it disentangles itself from Denizen, Marriott has stepped in with Edition, produced in partnership with Ian Schrager. Barcelona is expected to be the first European site for the brand.

Bill Marriott has told the press in the past that the group is "interested in getting into the market as fast as we can and with as many as we can," and the brand will be a test of to what extent a boutique brand can be rolled out before it succumbs to the cookie-cutter approach to hotel management.

What the boutique brands may potentially lose under the care of a multinational they gain in terms of financing, with banks and other institutions looking more favourably on an established operations team, critical in the current market. And for the operator, having a full set of brands from budget to luxury makes them a one-stop-investment-shop for interested owners, helping to maintain pipelines.

 

HA Perspective: There is little doubt that the boutique or lifestyle or townhouse or…. the list goes on …. market is the sexiest segment of the hotel industry. But it also remains a tiny fraction of supply.

There is good reason for this. Despite the hype, few operators have found the right formula for success. Individualism, for obvious reasons, runs counter to chain philosophy.

Some big operators have made progress – Starwood would be the pick of the bunch with IHG gaining an honourable mention for Indigo – but others remain either cautious or unproven.

This issue can be overcome but investors might question how much of a priority it should be in the short-term.

To succeed, boutique hotels need something to kick against. While the penetration of branded hotels remains so low in most territories outside of North America, it is going to be heavy going for the individualists.

In the meantime, the mainstream brands can continue to pinch the best ideas and innovations from the emergent boutiques. As the saying goes, it is the pioneers who get the arrows, and the settlers who get the land.

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