Sincerely, BLLA

Navigating the ROI Impacts of COVID-19 on the Boutique Hotel Sector

Boutique properties are a unique class of hotels, with benefits and challenges that vary from their larger branded counterparts. In the wake of COVID...

Boutique properties are a unique class of hotels, with benefits and challenges that vary from their larger branded counterparts. In the wake of COVID-19, boutiques have had occupancies down, doors closing, and survival strategies to test out practically on the fly. Yet major ROI impact has led to new pivots and methods to keep these properties afloat.

Some of those ROI impacts worth noting are as follows:

Downsizing in hotels: According to AHLA statistics from October 2020, 68% of hotels now have less than half their staff working full-time. This sort of downsizing was a means to protect cash flow in uncertain times. For boutiques with slimmer margins and smaller staffs, this loss of staff could lead to costly recruitment or training investments down the line. That said, optimizing practices in the wake of downsizing might do boutiques good. The balancing act of downsizing has ROI impacts that boutiques might feel more acutely than larger competitors.

Occupancy drops: A big factor in boutique ROI, many boutique properties were operating at less than 10% occupancy in the early days of the pandemic, sometimes even dropping into the single digits. Mass cancellations were coming in waves in the spring of 2020. Boutique hotels may not have the quantity of rooms offered by bigger brands, but even in hotels of less than 200 rooms, guests might have numbered four or five per night. Occupancy rates may face a long road to recovery, though with increased vaccinations, travelers may be more willing to return to their favorite boutique hotels in 2021.

Shareholder concerns: The disruption of COVID-19 meant that CEOs, owners, and managers of boutique properties were suddenly in the position of addressing major shareholder concerns. The need for clear messaging in the face of losses and setbacks was immense. Now in hindsight, studies show that most effective CEO statements tended to employ rational language that emphasized their transparency and competency when addressing stakeholders.

Loss of staff: Even after massive layoffs at the onset of the pandemic, job losses climbed again in November. In one study conducted around this time, more than half of hotels reported that they anticipated closing their doors for good without additional aid. Still, spared staff weren’t immune from COVID concerns. Furloughs, concerns about sickness, and caretaking or exposure responsibilities pervaded, and sacrifices to things like benefits were still at risk, creating environments of worry and uncertainty among employees.

Maintaining services: In the face of newly limited staff and shareholder concerns, boutique hotels were still responsible for keeping up their standards of service – even when serving fewer guests. With less operational staff to carry out day-to-day functions, managers and higher-level hotel employees found themselves doubling as line workers just to survive. For instance, a small bed-and-breakfast in Dutch County, PA was determined to save money and stay afloat, so the owner took on mowing the lawn and handling payroll.

With all of these troubling effects of COVID, how can boutique hotels readjust? Luckily, being small and independent might actually lend itself to more nimble pivots. Here are some strategies boutiques might consider in moving forward and overcoming these ROI impacts:

  • Apply for loans: Many small businesses are eligible for federal funding in the name of COVID-19 relief. Look into what options might be available for your boutique. Income from such loans might be well applied to upgrades or renovations that would improve guest experience or ideally draw new guests to visit.
  • Invest in technology: Touchless check-in options and/or new cleaning equipment are business investments that will almost certainly outlive the COVID era. Clean, health-conscious practices and tech-driven solutions will set your boutique on the right track, help you meet the expectations of visitors, and allow you to keep pace with competition.
  • Get creative: Start to expand your revenue streams. Think about new marketing strategies or consider new ways to draw guests to your brand. Does your boutique have a top-tier restaurant that would offer takeout? Would customers who can’t visit purchase your soaps, candles, or other wares from an online shop? Have you expanded into social media? Elevate your offerings in new ways and look for returns from new investments.

Boutique hotels may have been hit hard, but all isn’t lost in the years to come. Guests will still seek out personal, unique experiences from boutique brands as travel starts to pick back up. For the brands that can pivot and adjust to this changing world, there’s no telling what success might lie ahead.

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