Traditional hotel companies are allowing owners more flexibility as they roll out branded boutique experiences.

The reason why big brands are moving into the boutique sector is simple, said Mike Muir, VP of North American development for Best Western International: “It’s a great experience.”

And?

“It’s a moneymaker,” he added.

Mike Muir (right) explains why Best Western moved into the boutique space with its Vib brand, while Constantine Dimas of Loews Hotels listens in. 

Those benefits and more have made the segment too tempting to resist, as was made evident during the “Big brands face off” panel at the recent Boutique Hotel Investment Conference. During the 30-minute session, Muir and fellow speakers Constantine Dimas (representing Loews Hotels & Resorts’ OE Collection soft brand) and Greg Mount (representing Red Lion Hotel Corporation’s Hotel RL brand) discussed the allure of boutiques—and how they planned to capitalize on them.

“For us, it was a segment that we weren’t in,” Muir said. “It was a transition for us to be able to get into a spot that we weren’t. In Europe and throughout the world, we have a lot of boutique-type properties, but we weren’t really classifying it as boutique.”

Last year Best Western launched its new boutique offering, Vib, along with a soft brand.

“We just wanted to be able to get to a space that we weren’t, and we knew that we had pent-up demand from consumers,” he added.

Dimas, OE Collection’s chief business officer, described a similar scenario that led in part to the brand launch earlier this year.

“We were passing on a lot of deals and not being able to add value to ownership and add value to guests in a certain segment,” he said.

Finding value in flexibility 

Loews executives quickly realized a tremendous amount of value could be realized by offering more choice. For guests, that meant offering more choice about where to stay within a portfolio—whether a traditional branded hotel experience or a more unique, curated independent stay.

Thus, the OE Collection was born.

For owners, Dimas said, choice materialized within the confines of the management contract.

“The choice that we gave to ownership was that our duration of management contract is (among the shortest in) duration in the industry,” he said. “Our feeling was we should earn your business. And when we perform you would want to keep us.”

Flexibility in term length is a recurring theme for big brands operating in the boutique space.

Loews offers a five-year contract for OE Collection hotels, with an opt-out clause if an owner sells earlier, Dimas said.

As a “quasi-franchisor,” as Muir described it, Best Western offers four-year deals for Vib, after which owners can renew on an annual basis.

Mount described Hotel RL’s contract structure as “very flexible.”

“We offer flat fees versus percentages,” he said. “Our marketing fees are flat. We’ve put in termination language that allows owners to terminate after two years.”

Discretion and distribution

Big brands are loosening the reins elsewhere, as well.

RLHC, for instance, is granting owners more freedom to adopt the distribution strategies that work best for them. http://www.redlion.com/rlhc

“We have embraced the (online travel agencies),” Mount said. “We have embraced that they are here to stay. If you are booking through an OTA, we still recognize you as a loyal guest.”

The best way to compete in e-commerce is to present your product where customers shop. Within the travel industry, that’s usually OTAs, he said.

Dimas spoke of discretion as it relates to the service experience.

“OE for us represents original experiences,” he said, describing the collection as an incubator of brands of one.

Loews executives don’t want to push a prescribed style of service on owners or guests. The on-property experience should be as unique as the boxes in which they occur, Dimas said.

“For us the premium point of differentiation is on the original experience that each hotel has. … We want them all to be originals,” he said.