BOUTIQUE HOTEL SENTIMENT SURVEY RESULTS 2015 Pa x4 BOUTIQUE + f4~ oe a wey , EQUITY a l n C . reFuel Inspiration | Encourage Development | Optimize Investment A LOOK.AT THE-FUTURE OF THE BOUTIQUE HOTEL INDUSTRY BOUTIQUE HOTEL SENTIMENT SURVEY RESULTS Introduction What thoughts are going through the minds of hotel operators in the boutique luxury sector in 2015? For the Boutique & Lifestyle Lodging Association (BLLA), it is absolutely essential to keep their finger on the pulse of the industry and be aware of the upcoming trends and attitudes of their member hotels. The world of boutique & lifestyle luxury hotels changes quickly, so these ideas and perspectives are a valuable indication of what to expect in the near future. ‘The BLLA has conducted a research project, surveying 55 different upscale Boutique and Lifestyle Hotels and probing them about their perceptions of the industry and their plans for the future. The survey asked various pressing questions, including “What external factors do you think have the most impact on your business?” “What areas of your business demand most of your attention?” and “From which source do you get most of your bookings?” Survey Demographics Most of the hotels that responded were North American (76.36%), while hotels from Europe made up 14.55% of the survey. There were also a few hotels in China and Asia Pacific. A large number of hotels in the survey (33-33%) were small boutique hotels with less than 100 rooms. 31.48% had between 50 and 100 rooms but only 20.37% had over 150 rooms. The majority of the hotels surveyed were urban, with 62.26% located in the city center. A smaller pereentage could be found at the countryside (13.21%) and at the beach or a mountain resort (15.09%). There were no airport hotels involved in the study and the rest of the hotel owners and operators simply listed their hotel location as “Other”. 182% 76:36% 545% 182% 14.55% Analyzing the Results With the data collected in this survey we are able to take a look at the “big picture” of many issues related to running a hotel in the luxury boutique & lifestyle sector. What are the most important concerns to these hoteliers? What are the major trends? How is business being conducted, and what is the plan for the future? In the results of this study, many luxury boutique & lifestyle hotels are traditionally minded and see their competitive advantages in a very classie way. They are looking toward the tried and tested ways of building their brand and are offering their guests a memorable experience. Many are looking to keep up with modern trends and take advantage of social media, online marketing and other promotional tools such as loyalty programs ~ but many are also promoting their brand in avery traditional way. These hotel owners and operators do face a lot of challenges, but they also have a lot of optimism for the future, Some of the survey outcome was to be expected and some - somewhat surprising. This report will take a closer look at the results of this survey and what do the answers given by these hotel professionals mean for the future of the luxury boutique & lifestyle hotel industry. Perception of the Biggest Threats What external factors do you think have the most impact on your business? or ere ees 1| Changing customer behavior 16.36 % 2 Increasing/changing 50.91 % ‘competition 3|Decreased demand 14.55 % 4) Other macro economic factors 18.18% (weather, political stability etc.)Fuel Inspiration | Encourage Development | Optimize Investment Competition Is Most Impactful External Factor When this question was asked of the survey participants, one answer came up nearly three times more than others. 50.91% of participants responded that the external factor with the biggest impact on their business was “Increasing/Changing Competition”. This reveals that hotel ownersand operatorsare acutely aware of the fact that they are competing against many other newcomers and evolving establishments in their destination and that they need to continue to strive to stand out from the rest. When they were asked “How do you rank these competitors as potential threats to boutique hotels?” the majority of the survey participants stated that major hotel brands were only a moderate threat. 69.8% of participants ranked Major Hotel Brands between 4-7 on a scale of 1-10, with 1 being the lowest threat and 10 being the highest threat. However, other independent and boutique hotels are perceived as more of a threat, with 22.2% ranking them at a level of 8 and 20.4% ranking them at a level of 9. Shared accommodation platforms such as AirBnB are not perceived as very much of a threat, as 57.8% ranked them at a level of 4 or lower. Other Factors The second most popular answer to this question was “Other macro-economic factors”, which includes major elements including political stability and weather. These are factors that affect volume of travel to certain areas and hotels have very little or no control over these elements. 18.18% of those who responded identified this as the major external factor influencing their business. At 16.36%, the next most popular answer was changing customer behavior. This suggests a focus on what influences the customers to make their decisions. What motivates customers to travel to luxury boutique & lifestyle hotels and what are they looking for when they reserve their stay? How do they compare their options and choosea place to stay? What are they looking for in a hotel and how has that changed over the years. Decreased demand is seen as the biggest influencing factor on business by 14.55% of survey participants. Luxury hotels are defined by excess, while today’s average consumer is looking for value. Some top end hotels are decreasing their room rates in order to compete and attract more customers in a period of decreased demand. If a hotel can drop its rates and demonstrate value, it can benefit from taking market share from the tier of hotel just below it. However, luxury hotels will only be able to lower their room rates so much while still being able to offer on par experience. Instead, many hotels are focusing on adding more value and memorable elements that make a hotel stay special. Innovative Solutions for the Future Where do yousee the most innovative solutions flourish in the boutique hotel industry? From the results of this survey it is easy to see that innovation is all about services. Nearly 50% of the respondents in the survey saw innovations coming from customer services. In a surprising result, less than 2% of the respondents saw Back of the House as an area for innovation. Service is one of the biggest factors in whether or not a customer will leave a positive review online or recommend the business via word of mouth — an aspect deserving the utmost attention. The other areas in which innovations were found were within Public Spaces (14.55%), Rooms (18.18%) and F&B (16.36%). mm Fa (Mim Puke spaces 182% Customer services 1455% Back oftne rouse 18.18% 16.36% Confidence in Tackling Future Challenges When the hoteliers were asked “how would you judge your ability to add value and drive performance at your hotel,” many of the survey participants were confident. 44.44% answered “Good” and 38.89% answered “Excellent” — which shows that hotel owners and operators are feeling very strong about their ability to handle any upcoming challenges and improve the performance of their hotels. According to the study, 69% of boutique & lifestyle hotelFuel Inspiration | Encourage Development | Optimize Investment owners and operators were planning on expanding their business — and most of those are planning to do so in the next 6 months. These expansions could include new openings, new outlets and much more. These plans for expansion are a very healthy sign of confidence in the industry. Payroll and Distribution — Two Major Cost Headaches What are the biggest cost pressure points you face to maintain profitability? According to these results, the biggest costs that hotel ‘owners and operators face are rising payroll and rate transparency due to online distribution, 41.18% said that rising payroll is their biggest cost pressure point. The majority of hotel operators (42.27%) have a payroll structure that represents between 20-30% of their costs and 25.45% of hotel owners and operators have payroll costs that equal 30-40%. Hotel operators will need to adjust their staffing and payrolls according to the changes in business volumes, controlling labor costs. The ability to do this will greatly impact their ability to translate their growth into profits. Other Cost Pressures Another major cost that hotel owners and operators identifiedisratetransparencyduetoonlinedistribution, ‘as 39.22% chose this option. These days, travelers are experienced in using a vast variety of online booking sites for securing a hotel room and they can compare prices quickly and easily with the click of a button. This makes hotel prices much clearer and makes customers more inclined to hunt for a deal — why would they pay the premium rate when they have seen it on another website for cheaper? More than ever, hotels need to consider the increased level of transparency in prices that the internet has allowed. Other cost pressures that were identified in the survey included cost of distribution (27.45%), supplier soureing (7.84%) and others (11.76%). Main Areas of Attention What areas of your business take most of your attention? ‘When study participants were given this question they were asked to choose three areas which took up the most time and energy. Sales and Marketing Activities were by far the most popular answer, with 57.41% of the vote. According to the results, 43.64% of the hotels that responded spent more than 5% on their sales and marketing. Social Media Marketing for Hotels ‘When it comes to sales and marketing, many hotels are focusing their attention on the power of social media to organically spread the word about their brand. When asked “which social media do you believe has the most potential for your business?* Facebook was chosen more than any other answer (40.74%). This reveals that many owners are using their online presence to generate interest in their hotel. Nevertheless, there ‘were some respondents who are very traditional with their marketing and believe that social media does not offer potential for luxury hotel marketing. 16.67% of survey participants answered that question with “None of Them.” 1.859% 741% 16.67% 9.26% 926% I None of nem 40.76% Other Social Media Could the hotel owners and operators who are not using social media be missing out on a potentially valuable source of bookings? Consumer marketing used to be very simple and advertising was limited to print media, radio, television, billboards, public relations and direct mail campaigns. It was easier to determine which magazines and newspapers the target demographic read, simply because there were fewer to choose from. Now the internet has changed the game completely and consumers receive information very differently. One of the major challenges for the future of hotels will be to stay on top of online marketing trends and technology, so that they can communicate their brand to the right customers.Fuel Inspiration | Encourage Development | Optimize Investment Other Areas of Focus Other important areas where hotel owners and operators invested a lot of their attention were Internal Management Issues (22.22%), Control of Costs (29.63%), Refurbishment of the Property (29.63%) and Food and Beverage (20.27%). Since Refurbishment of the Property was such a popular answer, we will likely see a number of hotels undergoing renovations in the coming years. When it comes to Food and Beverage, 53.70% of hotels, said that Food and Beverage contributed to less than, 20% of their revenue. Only 11.11% said it contributed more than 40%. ee Hotel Attributes and Competition What is your main competitive advantage? Another question on the survey asked hotel owners and operators what they thought was their major competitive advantage. The majority of participants answered “Hotel Location”, with 36.36% choosing this, option. Of course, location is a primary advantage for many hotels and it is interesting that it is listed as the main competitive advantage — as it is something that cannot be changed. Some of the other options, such as Price Point (3.64%) and offering the Best Product or Service (29.00%), are things that the hotel can adapt and change. This highlights the importance of situating a hotel in the right location in the first place, close to all necessary amenities yet still within a peaceful and quiet setting. Since Price Point only garnered 3.64% of the vote, it’s safe to say that luxury hotels are not eompeting with each other for price like accommodations in the budget category would be. The types of demographic that stay in these luxury and boutique lifestyle hotels are not the type to hunt around for the cheapest deal or to make sacrifices to save money. They are looking for the best possible experience, rather than the lowest possible price point. Hotels don’t need to lower their prices or offer rock- bottom deals when appealing to this demographic of travelers — they must instead raise customer expectations when it comes to quality, service and attention to detail. Luxury travelers are not concerned, with paying the lowest price, but they still do want to receive an experience of high value for their money. ‘Advanced technology (customer 2909% - 3.64% facing of back of the house) ae 10919 fm Price pont 182% taal Best rodictserdice Operational management (cost 38.28% 14s8% Ml Stratics ont know i Ober Sources of Bookings From which source do you get most of your bookings? When it comes to actually booking guests in rooms, how are the majority of hotels receiving their bookings? An overwhelming 71.73% of hotel ownersand operators in the study said that they got most of their bookings directly from their hotel website or via the phone. This represents a very traditional way of booking a hotel, and continues to be a valuable booking method for these luxury hotel owners and operators. Some hotels are receiving reservations through online travel agents such as Booking.com and Expedia.com, but this answer was only chosen 16.36% of the time. Why are so many boutique hotels receiving bookings directly rather than through booking websites? One of the reasons is that high quality luxury boutique & lifestyle hotels are destinations in themselves, so the guest often seeks them out after having heard about them via word of mouth. They are not searching hotel comparison website for the best deals in their chosen, city, they are looking to stay in a boutique signature hotel. mm Hote rect (webste, prone emai) 1636 Online travel Agents (Expedia 5 Booking com) mm GSOIcRO 727% gy Travel Agercies/Destnaton : F Management Companies 72.73% 3% — 182% AME Laort knowFuel Inspiration | Encourage Development | Optimize Investment Loyalty Programs The hotel owners and operators in the survey were also asked whether or not they participated in a customer loyalty program such as Stash Rewards, Preferred Hotel, Leading Hotels of the World or any others. Only 24.53% said “Yes.” Are the remaining 75.47% of hotels missing out on the potential revenue generation of a program such as this? Some hotels owners are very much purists and they are not interested in offering a loyalty program for their customers. However, other hotels are recognizing the potential advantages of using these programs. A loyalty program targeted toward luxury travelers will help to create a positive image, connect people to the brand and generate more revenue. Conclusion This study by the BLLA reveals a lot of noteworthy trends and attitudes in the luxury boutique & lifestyle hotel industry — presenting a bigger picture of what to expect for the future. From the answers provided by the 55 participants, we can observe a few important points. Competition from other hotels is the primary threat in the minds of hotel operators and payroll and distribution are the biggest financial pressures. However, despite these pressures and the competition, hotel owners and operators have a lot of confidence in their ability to tackle anything that the future brings. They plan to take action to grow their hotels and many of them intend to carry out this growth in the next 6 months. ‘The modern luxury hotel is starting to focus more and more on sales and marketing — seeing Facebook as the best potential social media website for promoting their brand. However, not all hotels are advertising on the web and there are still many that are not using social media at all. With more people than ever using the internet to research their travels and book their accommodation, could hotels be losing out on a potentially valuable source of bookings by shying away from social media and online marketing? When it comes to booking rooms, a surprising number of hotels still receive most of their bookings from old-fashioned direct bookings online and phone calls rather than from travel booking websites. As well, approximately % of boutique and luxury hotels surveyed are not using any type of loyalty program for their clients. Operating a luxury boutique or lifestyle hotel is a never-ending job and there are always new challenges to face. Changes in consumer behavior, developments. in technology, competition from other hotels and other factors will consistently require hoteliers to adapt. Taking a snapshot of the concerns, trends and main focus points within the industry in the current moment allows us to get a sense of what hoteliers are most concerned about — so that we can figure out what to expect for the future. ABOUT BLL The Boutique and Lifestyle Lodging Association (BLLA) is the first and only association dedicated to uniting the world’s boutique and lifestyle properties. Created to be the unifying voice of this distinctive subset within the hospitality industry, its goal isto unite the world’s collection of boutique & lifestyle properties and the suppliers that sustain them, offering them the opportunity to successfully compete on a level playing field with major hotel companies, as well as market themselves to meet the ever-inereasing demand from discerning boutique-secking clients. For more information, or to become a member, visit: www.blla.org. BILA Bot Lob IQUE & LIFESTYLE ING ASSOCIATION