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If there is growth to be had coming out of the worst year on record for the hotel industry, it’s in the so-called lifestyle hotel space, leaders at just about every major hotel company would say.

Best Western parent company BWH Hotel Group is no different. BWH’s boutique and lifestyle hotel growth trajectory — the company is adding five more of these hotels to its portfolio in coming weeks — shows even midscale hotel operators need to consider this sector coming out of the pandemic.

“If you are a developer looking for opportunities with the highest growth, you’re going to gravitate toward boutique and lifestyle hotels,” BWH Hotel Group CEO David Kong said.

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What is a lifestyle hotel? Depends on what company is answering.

Accor defines it as hotels with smaller room counts and that garner as much as half their revenue from food and beverage venues. Marriott claims even its Westin brand is a lifestyle hotel chain, given its focus on wellness. Generally, lifestyle properties rely more on experiences and heightened food and beverage offerings than the industry’s previous attention to consistency and familiarity with namesake brands like Hilton or Hyatt Regency.

Best Western has five lifestyle and boutique brands: Aiden, Glo, Vib, Sadie, and the BW Premier Collection soft brand. While Best Western continues to operate its namesake hotel brand and others in the extended-stay and economy segments, the company can’t ignore development trends. Some of its direct competitors like Choice Hotels also have boutique and lifestyle offerings like Cambria and the Ascend Hotel Collection.

Accor leaders estimate more than 20 percent of the world’s hotel supply could eventually fall into the lifestyle hotel sector. Best Western leaders think as much as a quarter of the company’s development pipeline may eventually be boutique and lifestyle hotels.

“Twenty years ago, institutional capital wouldn’t stand behind anything without a brand behind it,” said Brad LeBlanc, senior vice president and chief development officer at Best Western. “Today, they’re standing behind independents, soft collections, boutiques and every aspect of real estate development. It’s been a neat evolution to watch capital go from mainstream franchising and branding to independent, boutique, and lifestyle collection products.”

Follow the Money

Keep in mind: big bank and investment fund lenders still prefer if these independent hotels are backed by a larger hotel company. This is where so-called soft brands like the BW Premier Collection or Marriott’s Autograph Collection come in.

Hotels in these collections generally operate like independent hotels and have their own look and feel, but they also tap into the bigger company’s reservation and distribution channels as well as loyalty programs.

“Capital still wants brand distribution, recognition, and leadership,” LeBlanc added.

This has sparked widespread competition in the hotel industry among companies appealing to owners of existing hotels to take on a new brand affiliation, a process known as a conversion.

“We have a long, proven track record of growing net rooms, during lodging cycle downturns by igniting our conversion engine which is fueled by the strength and flexibility of our value proposition,” Michele Allen, Wyndham’s chief financial officer, said on an investor call last year at the beginning of the pandemic.

Best Western has to make the same value proposition, both against Wyndham and other major hotel companies.

The lifestyle and boutique sector is expected to see a significant increase in conversions due to owners wanting to hold onto some degree of autonomy under a soft brand compared to the more rigid standards that go with owning something like a Sheraton.

But they still want to tap into the distribution of a larger hotel company’s network. Aiden is a conversion brand and is where Best Western is seeing the most growth.

Daily rates increased by as much as 30 percent at a Best Western Plus-to-Aiden conversion in Austin, Texas, home to one of the first properties in the Aiden portfolio. Best Western Plus typically competes with brands like Hampton Inn and Holiday Inn Express, but the owner was looking to reposition the property into something more elevated. The company expects similar results at a recent Aiden conversion in Scottsdale, Arizona, from a Country Inn & Suites.

“If you have a tired product like Holiday Inn Express or something, you can reposition that,” Kong said. “If you’re going to put money into renovating into the next generation of Holiday Inn Express, why not just convert it into something like a boutique lifestyle hotel because of the advantages?”

Conversions vs. Retention

Boutique and lifestyle hotels may be a growth driver, but they are still a smaller footprint in the greater Best Western portfolio. There are less than 200 of these hotels out of the nearly 5,000-hotel company network.

If distribution and brand awareness are key, Best Western — while a recognizable brand — faces competition from bigger companies like Choice Hotels and Wyndham. But Best Western’s unique corporate structure may come into play here, at least in terms of preventing existing owners from leaving and converting to a different brand.

The private, nonprofit Best Western operates on a model where the company licenses brands to owners who become voting members of the organization. Public hotel companies like Hilton and Choice Hotels operate on franchise models where owners may voice concerns on operational matters, but they ultimately don’t have the power to vote down policy like a costly new brand standard.

“We have a membership body that’s been loyal to us for 75 years,” LeBlanc said. “The membership body remembers how well we treated them in great times and the very difficult times like 2020.”

The company was quick to reduce or waive property and marketing fees in the early days of the pandemic last year.

While Best Western’s private status means it doesn’t release financial information, Kong did note the company was most comparable to Choice Hotels in its 2020 performance. Choice was an industry anomaly, as it posted a $75.4 million profit last year while others lost millions, if not billions, of dollars.

Kong previously tried to take the company public and touted the potential to make Best Western more competitive if it became a for-profit enterprise. Those efforts stalled, and he wasn’t willing to comment on if the matter would have made Best Western any stronger during the pandemic.

“It’s anyone’s guess as to how it could have panned out, but that’s water under the bridge and I don’t really even want to talk about it because it’s counterproductive,” Kong said.

But Best Western’s leaders do see future benefits from the loyalty of its existing membership. Many of its properties are passed down through families.

“It’s easier to do business with those you’ve done business with in years past and those you trust,” LeBlanc said.

[CORRECTION]: A previous version of the story incorrectly identified the Best Western brand Vib. This story has been corrected.

Photo Credit: Best Western's push into the lifestyle hotel sector (pictured: Aiden by Best Western) signals an expansion of boutique-like hotels in the middle market of the industry. Best Western Hotels & Resorts