With experiential travel in high demand, the future remains bright for boutique hotels, writes Trio Capital Vice President, Kyu Baek Kim.
The demand for boutique hotels continues to rise, extending into the upscale and midscale segments. This shift is evident as global operators, such as Accor with Handwritten Collection and Wyndham with Trademark Collection, move downstream.
Corporate giants like Hilton and Hyatt are also entering this space by acquiring or partnering with boutique brands, but it remains to be seen whether these recent acquirers can preserve the unique character of these properties.
Experiential travel is another key trend, especially in leisure markets, where consumers are increasingly valuing unique experiences and gravitating towards quality offerings, as seen at Mamaka in Bali.
In terms of opportunities, hotel conversions are becoming more attractive due to high construction and financing costs. This is particularly true for tired, generic hotels in need of reinvention, especially in markets where boutique and lifestyle options are still emerging. Similarly, smaller, independent hotels struggling to keep pace with new trends or considering an exit post-Covid also present potential for conversion.
However, challenges persist, including a lack of liquidity pressure to facilitate value-add plays at the asset level, a bid-ask price gap, and a lack of transactional activity in recovering markets like Bali and Phuket. Additionally, high development costs further hinder the initiation of new projects, reinforcing the trend towards conversions, as noted with larger players strategically moving into this space.