The recent announcement of Robert De Niro’s planned luxury boutique hotel in Covent Garden has turned fresh attention to the continuing trend of high end boutique hotels opening in leading international cities under the sponsorship, not of established luxury hotel brands, but of movie celebrities, leading designers, luxury goods brands and other new entrants to this lodging niche (e.g. Bulgari, Armani, Palazzo Versace).

Operating luxury hotels, with their demanding clientele, has traditionally been the preserve of well-established luxury lodging groups, that developed their brands over generations. How is it possible for such new entrants to successfully compete? Time will tell, but a multiplicity of societal and industry changes underlie this development.

Firstly, in places like London, Paris, Hong Kong, San Francisco and New York, with their vibrant city centres full of world class dining, entertainment, retail and cultural offerings, visitors see their hotel, no matter how special, as only one of the focal points of their visit. Savvy individual travellers, once outside their hotel room, are more likely to head elsewhere for meals, shopping, general relaxation and nightlife. A boutique operator does not need to offer full service meeting, dining/banqueting and other services, which dramatically limits their need for building size and staff, allowing them plenty of financial headroom to compete with established larger properties so long as they provide deluxe rooms and service with selective dining and lounge facilities.

And the high end designers and suppliers to the trade are no longer the captive of the major lodging brands, meaning their services, outfitting, and consumables can be sourced effectively by knowledgeable independents. Large cities are well populated with experienced hoteliers, always eager to sign on with an interesting new hotel. As has been true in the United States for many years, Europe is now host to a healthy number of unbranded operating groups, who will white label their operational capabilities at all levels.

Combine this with the growing purchasing power of millennials, with their passion and thirst for cutting edge goods and experiences, a savvy boutique hotel owner/operator, together with a branding affiliation to a known connoisseur of luxury lifestyle such as a Hollywood movie star, has the opportunity to compete head on with established hotel brands.

The other historical advantage of the lodging majors, marketing and distribution, has been undercut by the rise of online travel service intermediaries such as Expedia and Travelocity, to the point where groups like Hilton and Marriott now offer affinity brands for independents who want to run their own hotels but take advantage of the reservation platforms of larger groups (e.g. Curio by Hilton and Autograph by Marriott). And individual hotels can now easily offer ready access to their own website.

The commercial agreements underlying boutique luxury properties have accordingly required significant adaptation. In addition to the usual management, joint venture and loan agreements, there are a variety of other special contracts involved with third party operators, online/specialist travel agents, celebrity licensors, restaurant and retail groups, name designers, et al. Additionally, every country and city will have its own complex set of rules and regulations impacting hotel development and operations. Operating licences, building approvals, employment laws, proposals and tourist taxes, entity registrations…the list is long and the rules are ever changing.

No discussion of this kind would be complete without touching on the overwhelming influence of social media platforms in recent years, which has resulted in a modern cult of “celebrity” as never before. The ensuing marketing benefits to be reaped via endorsements from movie celebrities using such media for promotional purposes have been nothing short of astounding (and would of itself warrant another discussion entirely). This clearly has been a very useful element facilitating the synergy between the modern domination of celebrity culture and astute marketing goals, which of course has been exploited to great effect in cases such as celebrity hotel ventures.

As with any consumer brand, building recognition starts with an individual hotel property. Each component such as the location, physical product, service and ambiance of the hotel is fundamental. In today’s world, the right boutique product in the right market, is ever more able to capture and sustain a loyal base.

This article was originally published on 1st November 2016 in Retail Leisure International.