Cost-light and local boutique hotels

PEEK INTO THE FUTURE: In this section, Raini Hamdi asks industry leaders to pen their thoughts on what the future will bring. Here is Loh Lik Peng, director, Unlisted Collection, on the future of boutique hotels

22-august-lohlikpengcolour

Singapore’s hospitality scene has changed dramatically since I opened Hotel 1929 in 2002. When we opened 1929, the industry was moribund and dominated by older hotels, most of which were managed by the big hotel brands. In that environment 1929 was seen as a breath of fresh air; for such a tiny property in the ‘wrong’ part of Chinatown, it opened people’s minds to new concepts and redefined what was considered suitable locations for hotels.

Fast forward to today, there is a huge range of new boutique hotels spread around all corners of Singapore, especially in its distinctive heritage and conservation neighbourhoods. Is the market getting saturated? I do think we need a new paradigm for Singapore’s boutique hotel scene going forward.

Land and building costs in Singapore have accelerated beyond what is sustainable for boutique hotels. This means that hotel yields are now so compressed, and it is hard to justify the investment at a time when interest rates look to be rising and competition increasing. Singapore is getting a massive increase in new hotel room inventory while manpower is increasingly difficult to come by and visitor arrivals are starting to slow from record highs. How will existing boutique hotels cope with this?

Boutique hotels have always had less economies of scale than the large branded hotels, and the new business environment means cost pressures will increase while competition for guests will be much fiercer. To thrive in this new environment the incumbents and the new entrants must look beyond the traditional ways of operating. Singapore will be a much tougher environment in the next decade, and boutique hotels will need radical solutions to survive.

I believe the way forward is to embrace change and look at the traditional strengths in marketing and public relations, agility and flexibility that boutique hotels have always been good at. Building something bigger, better and fancier than your competitive set is going to be much harder to justify because those types of hotels are much harder to run in today’s environment. The new premium branded hotels that have recently come into the market will always have a massive advantage in facilities and service offerings compared to boutique hotels.

The large expansion of the hotel market leaves niches that I believe boutique hotels are much better at occupying. Cultural relevance and distinctive marketing campaigns built around local neighbourhoods and key cultural events, and a strong emphasis on interesting stories relevant to today’s global traveller, will allow boutique hotels to continue to be interesting and relevant. We will also need to strip ourselves as much as possible of the heavy fixed costs that large hotels are capable of absorbing and start giving today’s guests only the things that are truly important to them. This means less fancy check-in desks and less traditional manpower-intensive luxuries, and more local tie-ups up with interesting businesses and events so that guests can enjoy the true experience of being in Singapore without the hotel carrying such costs.

We need to move to a model that caters to the modern traveller’s real needs without bearing the costs of Singapore’s increasingly expensive business environment. This will require agility and flexibility like never before. I hope we as an industry are up to the challenge!

By Loh Lik Peng, director, Unlisted Collection

This article was first published in TTG Asia, August 8, 2014 issue, on page 10. To read more, please view our digital edition or click here to subscribe.

Sponsored Post