One could find Best Western's boutique hotel strategy confusing on price comparisons, but it’s the customer’s choice if they want to pay for the experience.
The allure of boutique offerings is two fold, according to CEO David Kong: They appeal to larger groups of people, thereby increasing nightly occupancy. Boutiques also have no pricing benchmark in the hotel industry, meaning owners can charge what they like.
“Customers like to gauge whether a rate is fair rate or not. So there’s always a rate ceiling for brands,” he said. “But if you have a boutique brand, then people don’t know how to think about it. They don’t know if it’s like the Best Western Plus or a Best Western Premiere.”
The combination of higher occupancy and average daily rate results in better revenue per available room (RevPAR). The trade-off for travelers is they get a different experience at each hotel location. Best Western does not disclose financials as a privately held company.
The Right hotel Design
Best Western first ventured into the boutique space in 2016, with the launch of its GLo and Vib brands. Five GLo locations are open today, with 40 more in the pipeline, while Vib has won multiple design awards, Kong noted.
Travelers will promote all of Best Western’s boutique brands themselves on social media when they visit, the company says. But that puts pressure on Kong and his hotel owners to get each design right — including carefully considered artwork in guest room corridors and centerpieces in the lobby.
“For those hotels in particular, it’s all about social media buzz,” he said. “So we want people to take a lot of pictures and post them on Facebook or Instagram or tweet them out. We have a whole social media playbook that goes along with the vision of the hotels.”
Don’t Forget Its Luxury Play
Best Western has traditionally been a midscale brand over its 73-year existence. But the chain tapped into the exclusive luxury category with the acquisition of WorldHotels in February. The move added 300 hotels and resorts to the company’s global portfolio.
Kong says it will take years to work all the kinks out, as integrations are never easy. But the deal serves the greater purpose of catering to customers’ varying business and leisure travel needs.
“Every hotel group has different boxes [brand scales] it wants to fill,” he said. “And the more boxes you fill, you basically protect your market share while reaching out and grabbing someone else’s market share because that person doesn’t have it.”
Best Western Rewards loyalty program members will benefit most from the chain’s expanding portfolio. Like many of its rivals, the hotel group runs promotions through its loyalty program to entice travelers to book direct at lower rates, instead of with online travel agents, which help generate between 25 percent and 50 percent of Best Western’s stays, according to the company. Half of Best Western’s annual hotel revenue today comes from loyalty members, up 10-fold from the turn of the century.
“Hotel chains are thinking about about saving on distribution costs because OTAs are dominating the marketplace,” said Kong. “If you have direct booking with you, then you’ll lower those costs.”
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Photo credit: Rendering of Best Western's Aiden boutique brand that launched last fall. Best Western