Image hotel lobby
Boutique hotels outperforming big box hotels in key performance indicators. Image: Canva
  • Guest needs and wants transformed across the pandemic
  • Boutique hotels outperformed big box hotels for occupancy, ADR, and RevPar
  • Gap between hotel segments expected to shrink

The hotel experience was shaken up by Covid, with the post-Covid world ready to see a new type of hotel check in.

Boutique hotels typically comprise 100 or fewer rooms and provide a more intimate and sophisticated offering.

The sector has recently outshone large chain hotels, with data from CBRE finding boutique has outperformed ‘big box’ international hotels on all three key performance indicators.

Sector growth initially stemmed from pandemic guests seeking a hotel environment that offered a reduced possibility of exposure, particularly avoiding large crowds that heightened the chance of Covid exposure.

The drivers have now changed, with new habits now firmly gripping the driver’s wheel.

“Over two years on, many of the resulting trends such as remote working and virtual conferencing, ‘staycations’, and the continued growth of social media use for destination ‘collecting and bragging’, have become embedded in our lifestyles, shifting guests’ preferences towards a highly personalised and hybrid approach to their hotel stay experience,” said Ally McDade, CBRE’s Australian Head of Hotels Research

A unique way to stay

The boutique hotel experience can be differentiated into four categories, according to CBRE: experience, amenity, aesthetic and service.

Experience refers to a suite of offerings that can be enjoyed at a property. CBRE noted boutique hotels are particularly savvy, offering bespoke experiences that span health and well-being, are pet friendly, and more.

One example included the 5 star Little Albion in Sydney’s Surrey Hills, a boutique hotel that specialises in being a pet-friendly accommodation and offers a 5pm gin service in a sunken lounge; you can also mix your own cocktails or enjoy some wine and nibbles.

Amenities are another defining factor of boutique hotels, with each property providing guests with experiences typically not seen across chain properties. The QT Sydney was one of the first in its class and offered a quirky and modern themed restaurant, bar, spa, baber shop, and access to the renowned Virgin Active gym.

Boutique hotels invest a great deal into an aesthetic that aligns with their brand. The Royce in South Yarra, Melbourne, was a former Rolls-Royce showroom turned boutique hotel with a 1920’s theme, achieved through embracing period  style cues.

Services are also an important aspect of boutique hotels. With many being independently run, they can quickly and efficiently adapt to their client’s requests. The Inchcolm in Brisbane provides guests with the opportunity to reduce their environmental impact by eating locally sourced cuisine.

Boutique hotels seeing growth

Research by CBRE considered six boutique hotels and six international hotels across Sydney, Melbourne and Brisbane.

It was found that boutique hotels outperformed conventional hotels, sometimes referred to as ‘big box’, since 2020 in the three key areas of; occupancy, average daily rate (ADR) and revenue per available room (RevPar).

Boutique hotels compared to international big box hotels

Table of boutique hotels compared to big box hotels
Boutique hotels compared to big box hotels Source: CBRE

For the year ending December 2022, boutique hotels recorded a 68% occupancy, up 21% on big box hotels. However, the gap has begun to shrink, with last year’s gap being 34%.

Boutique hotels also recorded an ADR of $420, 27% up on $332 for larger hotels. Boutique hotels current ADR also marks a new peak and shows recovery from the price slowdown experienced between 2019 to 2021.

RevPar for Boutique hotels is currently 54% up on big box, with boutique RevPar being $286, compared to $186 for big box.

One reason behind the strength of boutique hotels is the chain hotel reliance on corporate and international guests, which dropped off during the pandemic and are still bouncing back.

However, unlike big box, boutique hotels have had a large proportion of their guests be locals or domestic travellers, which has allowed for the recent growth in the boutique hotel sector.

“The growth of this local traveller has resulted in demand for a curated hotel offering, which is being met by Australia’s new wave of boutique hotels that blend intimacy and sophistication, and authentically resonate with the feel of the city being visited.”

Ally McDade, CBRE’s Australian Head of Hotels Research

Nevertheless, as the level of meeting, incentive, conferences and exhibitions (MICE) travel starts to return to pre-pandemic levels, it is expected that the gap between the big box and boutique will shrink.

“The continued recovery of corporate travel and international arrivals, coupled with more Australian’s travelling abroad, will broaden the mix of hotel business demand and ultimately moderate the exceptional outperformance we’ve seen from the boutique sector in the past two years,” McDade said.

Boutique hotels may still experience growth in the future if they continue to innovate and provide personalised experiences for their guests.

“The continued growth of boutique hotels in Australia will rely on their ability to deliver a personalised offering, while capitalising on new and emerging travel trends such as bleisure, where a leisure component is added to a business trip; workations, where some work is tacked onto a holiday, and dog friendly travel such as Ovolo’s V.I.Pooch stays,” said McDade.



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