Lessons From the Country’s Most Creative Concept HotelsApril 3, 2014 by Taylor Short
If you’re an entrepreneur, today could be a good time to develop a concept or boutique hotel. The hotel industry as a whole is set up for strong profit growth, due to low supply and high demand. And as the economy rebounds, a new young crowd of travelers with disposable income, hungry for authentic hotel experiences, is emerging—representing a lucrative new segment for hoteliers to target.
So, is it time to launch your own concept hotel? The answer relies on a number of factors, including concept viability, economic trends, customer behavior and local competition. While starting a business of any kind is a major undertaking, launching a unique hotel can be an especially long and arduous process.
With this challenge in mind, I interviewed hotel consultants and owners and operators of unique and popular lodging establishments across the country to learn what lessons they can offer for success in the concept/boutique hotel space.
Create a Concept that Fills a Niche
Concept hotels tend to boast specific and unique characteristics that can’t be found at any other hotels in their area. Finding the perfect concept can very well be a purely serendipitous moment, but there’s also a more methodical way to close in on a winning idea: through market research.
The first step is to determine the unrealized niches in the area you want to develop—and there are organizations that can provide you with research offering a wide view of a particular city’s hospitality landscape and its gaps in service. Hospitality Consultant Quentin Incao, CEO of Q Hospitality Management, says investors or entrepreneurs interested in building in a particular area should start with a Hotel Horizons report from PKF Hospitality Research.
“You may think you want to do a four-star, small hotel that caters to 18-year-olds, for example. Does that make sense? Or is there an Ace Hotel down the street that you’re going to compete with?” Incao says. “[The report] gives you a big picture that tells you if this is potentially a viable project.”
A sample Hotel Horizons report displays a wide variety of useful data, including:
- Written summaries of the city’s hotel market and economic status
- Forecasts for occupancy, average daily rate, revenue per available room and supply and demand of area hotels
- A list of hotels in the area market, broken down by price
- A comparison of the local market and other markets country-wide
- A list of the top hotel brands in the area, determined by market share
- A table showing upcoming hotel projects and the status of each
- Data on sub-markets for that area (suburbs or communities surrounding a city)
This document could help you determine that there are, in fact, no hotels in the city that cater to, let’s say, a young, artistic segment of travelers, despite a significant presence of artists. That might mean a concept hotel inspired by the local art scene and featuring designs by local artists could attract that segment.
While these reports can give you enough data to make educated decisions, it’s also a good idea to do market research the old-fashioned way. Here’s an example of how such methods can come in handy:
Frances Conklin owns and operates the Dog Bark Park Inn in Cottonwood, Idaho—where travelers can rent a room inside a large structure shaped like a beagle. The inspiration for this unusual lodging came from the dog-related folk art Conklin and her husband Dennis make and sell through their business, the Dog Bark Park.
Several years ago, one of Dennis Conklin’s pieces, a 12-foot-tall beagle, was on loan at the Chamber of Commerce in nearby Grangeville. That summer, Frances Conklin asked Chamber personnel to make a hash mark on a legal pad each time a person stopped in the visitor’s center to ask about the giant beagle.
The dozens of marks at the end of the summer gave Conklin an idea of the dog’s popularity, and led her and her husband to begin thinking of adding lodging opportunities in addition to selling folk art. Once they moved the structure back to the Dog Bark Park and paired it with Dennis’ newly completed, 30-foot-tall beagle, the rush of curious travelers gave the Conklins even more confidence that lodging would be a popular amenity—so they opened the larger beagle itself as a bed and breakfast.
The 30-foot and 12-foot beagles of the Dog Bark Park Inn
In this example, the Conklins found that the beagles fit into the novelty roadside-architecture niche that attracts the passersby of a long stretch of highway in western Idaho. So, in addition to formal market reports, take time to put in a little footwork and meet with the local Chamber of Commerce, local hotel associations, members of the business community or even just people out for a stroll and ask them what kind of hospitality experience they feel is missing from their area.
Convey Your Concept With an Original Design
So, maybe your market research (both official and not) showed that the city you wish to build in is indeed lacking in boutique hotels that serve the young, artistic segment. Now it’s time to start designing, and there are many factors to consider. Incao suggests hiring a creative designer or concept development company that can help you carry your vision through every aspect of the hotel, factoring in the area of town, your target segment and other pre-determined parts of the project.
The success of a concept hotel depends greatly on its “feel,” or the atmosphere and attitude it exudes. But this goes beyond mere physical design. Design can be copied, says Youri Sawerschel, a hospitality consultant with Geneva, Switzerland-based Bridge.over Group. What makes it unique is linking it to “protectable assets”: things about a property that cannot be exactly replicated, which could be the building itself, the view or the history of the area, he says.
For example, one of Sawerschel’s current remodeling projects in Montmartre, the art district of Paris, is a hotel he says will be positioned as “the address of the artists since the beginning of the [20th] century,” since the original location was frequented by some of the most important artists of the time. “We’re looking at archives to find out which artists actually stayed in the neighborhood, and how the hotel was part of the neighborhood during the great artistic years in Paris,” he adds. This history will help Sawerschel and his colleagues decide on design features, using local artwork for inspiration.
Artistic inspiration also helped Tanya Smith, president and founder of the Turpentine Creek Wildlife Refuge in Eureka Springs, Ark., when she decided that making lodging available would not only help fund the costs of caring for the Refuge’s over 100 big cats, black bears and other creatures, but would also give visitors a full experience with the animals.
The five African-styled lodges available to book at the Turpentine Creek Wildlife Refuge
“We had a group of artists [who] were friends of ours who asked me one day if they could help out more than just the yearly benefit we hold,” Smith says. “So, we trusted the artists with their idea for the [new lodging] units because we knew we needed something unique.”
The result? Five safari-style lodges based on those found in Africa and named after African deserts, mountains and regions: Congo, Kalahari, Kilimanjaro, Okavango and Serengeti. Seven years later, the refuge maintains a high occupancy rate and a second-place rating on Tripadvisor for Eureka Springs.
Part of your design also includes the experience you want guests to have, which should be tailored directly to the target segment, Conklin says. Back at the Dog Bark Park Inn, she decided not to offer Internet or television in the “big dog,” and she says most guests have thanked her for helping them briefly disconnect.
“That would not work for a business traveler, so you need to make those decisions—which means you have to know your customer, no matter what you’re selling,” Conklin says.
Identify the unique aspects of your property, location or concept, and design around them and the segment you’re targeting. Having a genuine passion for the concept (or involving an investor who does) will go a long way towards creating a sense of authenticity that travelers will respond to.
Demonstrate Your Hotel’s Potential Profitability
You’ve determined an unrealized niche, decided which segment to target and illustrated your concept through design. Finally, it’s time to consider the details that will make your hotel come to life as a successful business and demonstrate its profitability potential to investors.
Performing a feasibility study, Incao says, will give you a comprehensive overview of the variables that can affect the profitability of your hotel. These are usually produced by hotel consultants, who can offer an objective look at your proposal. Once complete, this report should contain:
- Market Demand: This can be determined by analyzing hospitality data from PKS, Smith Travel Research (a reputable worldwide organization that produces hospitality research data) and/or local tourism bureaus or Chambers of Commerce.
- Occupancy and Average Daily Rates: Using market demand data, you can forecast your proposed property’s occupancy and daily rates alongside those of its closest competitors. Consider seasonal conditions that might affect occupancy.
- Expenses and Revenue: Calculate forecasted revenue from room bookings using the estimated occupancy and rates, then tack on estimates for other revenue channels like food and beverage, meeting bookings or spa visits (if applicable). Be as thorough as possible: don’t forget non-tangible costs like insurance and maintenance. List expenses by department and compare with revenue to see projected profit margins.
- Return on Investment: This part of the study shows how much profit the hotel could return to investors, and when, compared to the expenses put into the property and costs to operate it.
Estimating pricing for a proposed hotel, or even an existing one, involves a lot of numerical analysis—but also a fair amount of educated guessing. Clint Pearce is president of Madonna Enterprises LLC and manages the Madonna Inn, a hotel in San Luis Obispo, Calif. that attracts travelers with Swiss chalet stylings and 110 unique and extravagantly designed rooms.
Alex Madonna, a wealthy entrepreneur, opened the inn in 1958, and was quoted as saying, “Anybody can build one room and a thousand like it. It’s more economical.” Instead, he sprang for one-of-a-kind themed rooms with names like Cloud Nine, Jungle Rock and American Home. Pearce knows the benefits of setting rates for a unique hotel like the Madonna Inn, and says entrepreneurs should not be afraid to push rates somewhat beyond what a study reveals to capitalize on a concept that already draws people in.
The Madonna Suite, one of the lavishly decorated rooms at The Madonna Inn
“You can’t charge to the moon, but you can have more pricing power than a chain hotel,” he says. “It’s partly understanding your spot in the world, but also not being completely anchored by that.”
Sawerschel suggests also performing a spatial analysis of the property, determining the most profitable use of every square foot (or meter) of the building. For example, a space in the building with a great view could impart a strong positive impression on incoming guests if the lobby were placed there, but the space better serves the bottom line if converted to a deluxe suite, instead.
Other questions to ask might include:
- Will outside noise affect my hotel?
- Where will the morning sunlight hit the building?
- Is the front of the building accessible to taxis?
- How visible is the hotel from nearby roadways?
- Is there emergency access into and out of the building?
This list is far from exhaustive, but shows the kinds of comprehensive considerations one must review to ensure that investors are convinced the project will be a success.
Create a Marketing Plan As Unique As Your Hotel
The investors like your concept and agree to move forward in the proposed location. Once built and launched, hoteliers need a marketing plan to keep the property on the minds of consumers. And with a winning, unique concept, you have marketable assets at your disposal.
S. Rayne Davidson is the lodge manager for the Beckham Creek Cave Lodge in Parthenon, Ark. The lodge offers guests a stay inside a spacious, natural, living cave—complete with modern furnishings and technology. With such a distinct hotel, she says, she’s never had to do much outreach, because many travelers and travel writers reach out to her consistently.
A bedroom within the Beckham Creek Cave Lodge
However, she does recommend tapping into free resources to drive more bookings. Davidson suggests attending tourism conferences (which can be found through the U.S. Travel Association) and contacting the state tourism organization to feature your hotel on its website, like she did.
As with any other aspect of a concept hotel, the marketing materials should reflect the hotel’s theme. Including pictures of your property can make social media marketing extremely effective, as using high-quality photos is a well-documented way to attract attention online. Posts should contain a call to action to encourage bookings, but keep the message simple and focused on attractive and unique features.
A Facebook post by Turpentine Creek Wildlife Refuge, featuring a tiger guests can observe during their stay
Another tip is to make connections with other businesses in your area—even those you may consider your competition. “They understand the business community and might agree to a referral system,” Conklin says. “If we’re booked, we refer them to other hotels. We’re not afraid to pass business onto others, and they will do the same.”
However, Davidson warns that concept hoteliers should be discerning about who to partner with for promotion. Choose opportunities that can give your hotel more exposure, but only go through reputable outlets in order to maintain some control of your hotel’s coverage.
Travel writers with well-known publications and travel bloggers with experience and a strong online presence can advertise your property in a professional manner and drive more business to your website. Be sure to stick with well-known travel websites, blogs and publications. When in doubt, a reputation checker such as URLVoid.com can scan websites for questionable attributes.
It’s a great time to launch a concept hotel, provided entrepreneurs perform the due diligence to ensure their idea is targeted at a specific segment, is smartly designed and can be profitable in its area. By answering these questions and staying true to the vision, you can begin capitalizing on the growing demand for authentic travel experiences, as well.