Millennials are new inn crowd at hotels
Lower costs and premium rates sees big players focusing on lucrative sector
DRIVEN by the demands of a new plugged-in generation seeking “authentic” travel experiences with a local feel, the world’s biggest hoteliers are moving into a new sector in Europe – the “lifestyle” boutique hotel.
After many years focused on baby boomers and business travellers, brands such as Marriott, Hilton, Starwood and InterContinental Hotels Group are paying more attention to the so-called millennials, expected to be the biggest group of hotel customers by 2020 according to industry executives.
Hotels that want to attract this generation must avoid the cookie-cutter, one-size-fitsall approach. Citizen M, an affordable luxury operator with seven hotels in the Netherlands, Britain and New York, for example, positions itself as an anti-chain chain with a tinge of rebellion.
“Absolutely no trouser presses, bellboys, or stupid pillow chocolates,” it proclaims on its website.
The challenge for the mega-chains will be to maintain the required chic of being unique as they grow to meet demand across their markets globally, industry players say.
Usually defined as people who reached adulthood around 2000, millennials use online travel sites that aggregate thousands of hotels and make choices based on peer reviews, according to leisure-and-hospitality industry advisors Grant Thornton.
They want to feel like locals in a bar or lobby where they can hang out with people from the neighbourhood, plug in and work over a coffee, or tuck in to locally sourced food.
“Twenty years ago, you’d go to a hotel and sit in the bar and it would be boring because you’d only see other travellers. With these hotels, you get a mix of locals and travellers,” Liran Wizman, a developer who also owns his own portfolio of independent hotels, said.
InterContinental Hotels Group (IHG), which has a $1.8 billion turnover, says bou- tique hotels make up around 7 percent of some 1 200 hotels in its global pipeline.
With their massive resources, the big players are likely to steadily steal market share from independents in Europe’s top five hotel markets – Italy, Germany, Spain, France, and Britain – between now and 2018.
The millennials’ demand for an individualised experience is already well served by the “community feel” of Web-based site Airbnb and independent chains such as Citizen M, Grant Thornton said in a report.
“Millennials expect you to meet their personalised needs,” said Gillian Saunders, Grant Thornton’s global leader of hospitality and tourism. “Some might want a German-style continental breakfast, others a US-style grab and go. They want to choose their room, have more of their favourite drink in the mini bar.”
With premium rates and often lower costs, the returns can be impressive.
At IHG’s Indigo, an upscale boutique chain built to connect with and reflect local surroundings and culture, revenue per available room, a key industry measure, was $122.73 last year versus $75.72 for its Holiday Inn Express arm in Europe.
IHG’s $430 million acquisition of US operator Kimpton Hotels last year made it the market leader in the boutique space when combined with Indigo and another boutique brand, EVEN.
Stripping out furniture such as desks and wardrobes and replacing them with hooks, wall-mounted TVs and iPads, while leaving out conference rooms, mean boutique developments can often be simpler and cheaper to build and operate.
With big profits on the horizon, the pace of expansion is quickening.
Marriott plans to build 150 of its budget lifestyle Moxy hotels in Europe by 2020, while France’s Accor said it could add to its boutique offering, which includes Ibis Styles, M Gallery and Mama Shelter.