Report | Future Cities

Bedding on Boutique Growth

June 27, 2023

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Key Points:

  • A travel evolution reinforced by the pandemic is driving the growth of Australia’s boutique hotel market, amid heighted demand for unique and hyper-personalised hotel stays.
  • While boutique hotels have traditionally achieved lower occupancies and in some cases lower room rates compared to their larger, international rivals, boutique hotels are now outperforming big box international hotels and highlighting a significant shift in domestic travel patterns.
  • An analysis of market performance of a basket of boutique hotels across Sydney, Melbourne and Brisbane shows that boutique properties had outperformed ‘big box’ international hotels since the 2020 onset of the pandemic across all three key performance indicators – Occupancy, Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR). At YE Dec 2022 the overall penetration rate of boutique hotels is more improved with occupancy up 21% on big box hotels. On a RevPAR basis, the basket of boutique hotels performed over 50% better, with occupancy rates and ADR being 21% and 27% superior to the luxury international hotels analysed.
  • The recovery of Australia’s visitor economy has been driven by domestic, leisure-based tourism. The growth of this local traveller has resulted in demand for a curated hotel offering, which is being met by Australia's new wave of boutique hotels that blend intimacy and sophistication and authentically resonate with the feel of the city being visited. The strong performance of the boutique sector also reflects new properties entering the market at higher ADR thresholds and smaller room counts relative to traditional large, luxury hotels.
  • However, traditional big box international hotels have always been heavily favoured by corporate travellers and international visitors and the continued recovery in corporate/MICE travel and a resurgence in international tourism will broaden the mix of hotel business demand and ultimately moderate the exceptional outperformance we’ve seen from the boutique sector in the past two years.
  • Overall, the continued growth of boutique hotels in Australia will rely on their ability to deliver a personalised offering, while capitalising on new and emerging travel trends such as bleisure, social engagement, forward-thinking tech and an increased focus on eco-friendliness. Boutique hotels are well placed to deliver due to their smaller size and independent operational structure.