High cost of running boutique hotels

Challenge

But boutique hotels bring certain benefits in terms of operations and profitability, professionals said. Besides strong customer demand, the economics are favorable for operators. For example, boutique owners do not have to pay a franchise fee to become part of a larger chain. The hotel can survive and succeed without such costly amenities as restaurants, ballrooms and meeting spaces. However, these amenities, when styled in a boutique manner, can bring significant additional profitability to the hotel's revenues.

Bringing a fresh concept and venturing into a new market comes with its challenges. These include nurturing the demand, defining a clear marketing approach as well as manpower constraints.

Boutique hotels generally target customers in their early 20s to mid-50s enjoying mid- to upper-incomes, hoteliers said. A key issue in marketing a boutique hotel or resort involves sending the right message to these target customers.

"We mainly target those who own private cars and prefer driving themselves as well as those on vacation with family members," said He Jin of Fulinlehui Resort.

Official statistics show that the number of motor vehicles in Hangzhou's urban areas - 870,000 at the end of February - is expected to surge to 1 million at the end of this year. The growth rate of those traveling in their own cars also outpaced that of ordinary tourists.

But the occupancy rate at He's hotel is stunningly low: only about 4 percent since its opening one year ago. To survive the resort has long been relying on revenue from the catering service offered at the hotel, which brought in about 9 million yuan ($1.4 million) in the past year.

Its owner attributed its stagnant sales to the clear division between Hangzhou's boom and slack seasons and the hotel's insufficient publicity efforts.

"We are fully booked during high season," He said. "But when the low season descends, we could be totally empty."

Regarding its low profile, the owner said he declined to cooperate with travel agencies for fear of them bringing in group tourists, which can lower the hotel's prices and service.

Marketing an independent boutique hotel can also be difficult because of financial restrictions and other resource limitations. As such He planned to add 30 more rooms when further developing the current facility.

Lu Jiangwen, general manager of Hangzhou's Tea Boutique Hotel, said that a boutique resort has to resist the temptation to be too general in the hope of getting a larger slice of the market and should focus precisely on the target group.

In a costly move to attract the target customers, the hotel slashed the number of guestrooms and used the limited space to erect an authentic Thai-style spa and a French bar.

"To be honest, the salary paid to the therapists from Thailand accounts for a handsome share of our entire expenditure," Lu said. "But the Tea Boutique Hotel only cares about one thing and that is providing the target customers with a genuine Thai spa and our best service."

The French-style cocktail bar is designed with the same purpose in mind, the manager said. The costly drinks deter unwanted customers who happened to have booked into the hotel but win applause from high-end customers.

The high-profile reception, which includes presenting guests with free bottles of water collected from the local Tiger Spring, known for its premium water quality, is designed to improve satisfaction levels among the right group, he added.

The considerate service, as well as the close connection that hotel guests experience with members of staff, is what distinguishes boutique hotels from their standardized cousins. At the former, staff are instructed to remember guests' names, something difficult to achieve in large-scale hotels.

A guest suite at Amanfayun resort in Hangzhou. Amanresorts International Pte launched Amanfayun in the city In January 2010, its 24th property worldwide and second in China. The resort offers guests a unique rural retreat on the outskirts of the city. [Photo/China Daily]