In yesterday’s Tourism blog I outlined the major brands owned and controlled by the top six hotel chains. In the analysis that I carried out it was clear that not all chains occupied every segment of the hotels market. Some firms tended either towards covering all segments, as in the case of Accor and Wyndham, or they focused on the high-end segments of the market, such as Hilton and Starwood. Increasingly, though, as the hospitality market starts to grow again after the economic woes of recent years, chains are starting to expand their hotel offering, especially in key markets such as Asia and the Americas.

One segment that is proving to be extremely popular is the boutique hotel. Favoured by clients often from the A/B/C1 socio-economic groups, who have access to high levels of discretionary income, the boutique hotel is often reviewed in glossy magazines and newspaper supplements and discussed widely in social networking circles. The ‘funky chic’ aspect associated with these places to stay is hard to define. It conjures up ideas of small rooms, quirky designs and uber-cool bars, where design and fashion are merged.

The tendency now is for boutique hotels to be thought of as offering a ‘lifestyle’ statement to its guests. Another definition, more in line with the segmentation techniques used in the hospitality industry can be found in this report from Locum Consulting:  

• they appeal to leisure and business travellers, especially women
• they usually offer between 150 and 200 rooms
• they mimic a home environment
• they provide highly personalised service
• they have a distinctive style
• they offer a wide range of modern amenities including wifi
• they have strong brand appeal

No surprise then that the big chains are queuing up to offer their own luxury boutique hotels, as yesterday’s analysis indicated.  As the Locum Consulting report notes: “The more that Establishment hotel chains see their market shares shrink, the more they will try to replicate the successes of the so-called boutique sector. And the more they will try to achieve this through design and product details, rather than true individuality, personality and culture”.

So it was in 2008, then, that Starwood brought legal action against Hilton for stealing documents to help it develop its own version of Starwood’s ‘W’ brand. Hilton had plans to rush through the launch of its own brand, ‘Denizon’. Two former Starwood executives joined Hilton’s luxury hotel development team to help. A federal investigation ensued ending up with the following agreement terms:

• Hilton is banned until January 2013 from developing a brand to compete in the same category as Starwood’s ‘W’ chain
• Hilton had to pay Starwood $75 million in compensation
• Hilton would be supervised until January 2013 to ensure that it behaves properly.

Yesterday’s blog linked out to a Travel Weekly article that pointed to IHG’s new brand plans as a sign that hotels are on the rebound. The same piece raised the prospect that Hilton is busy developing its own ‘lifestyle brand’, noting an unnamed spokesperson’s comments that while it is banned from launching a boutique brand for the next two years, there’s nothing stopping it working on plans to do so. A liberal interpretation of the terms of agreement between Hilton and Starwood? Time will tell.