Small is beautiful: Boutique hotels are in

Real estate developers have jumped aboard the trend for small boutique hotels with gusto as the number under development shows

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The buzzword among real estate developers is boutique. As the hotel sector continues to expand with new, bigger hotels – a Hyatt, Four Seasons, and Hilton are all under construction – developers have also hit on the notion that not only is small beautiful, it is also lucrative. It has taken a while for the penny to drop. More than a billion dollars has been invested in hotels since 1995, and only one developer in Beirut, hospitality mogul Bechara Namour, has gone boutique with his 30-room Relais & Chateaux Albergo on Abdel Wahab El Inglizi (even the gilt-edged InterContinental Le Vendôme doesn’t really qualify as boutique). But this is set to change.

At least four boutique hotel projects, with a combined investment of close to $500 million, are already underway in the downtown area, a prime attraction for increasing numbers of both Gulf Arab and Western tourists. There is unconfirmed talk of a fifth boutique project on Uruguay Street, and Solidere is being inundated with inquires by developers eager to cash in on what they see as the shape of things to come. Real estate insiders and hospitality executives unanimously agree that the boutique hotel segment in Lebanon holds potential, not least because visitors to Lebanon are among the biggest-spending tourists in the world. “A visit to Lebanon is expensive. Life here is expensive. So, the quality of service must be high. Boutique hotels will appeal to them,” said Albergo general manager Michel Chardigny.

“There’s no doubt there’s a market,” concurred real estate adviser Michael Dunn, “although it is fairly seasonal. There are more and more Gulf Arabs, and if we get it right they’ll come all year round. But the boutique hotels will really have to market themselves.”

Out of town, Gulf Arabs accounted for the vast majority of guests at the recently opened Chateau Raphael boutique hotel in Maameltein – a Jounieh coastal strip notorious for its nightlife – according to one of the hotel’s employees. The “Chateau” opened for the beginning of the summer season and offers 17 suites (seven duplexes, seven junior suites, and a royal suite) ranging in rack rates from $285 to $715, as well as two restaurants (one Lebanese and one Italian/Chinese) and a swimming pool.

“We had a group from Germany and we have one coming from Cyprus, but most of the visitors in the summer were Gulf Arabs from Kuwait and Saudi Arabia,” the manager explained. Currently, only two rooms are occupied. “Dead season,” the employee explained.

The Chateau was originally earmarked as the boutique arm of the Safir Hotel group, which runs the Beirut Safir Heliopolitan Hotel, but a spokesperson for the chain said negotiations fell through. Chateau Raphael owner George Anastasiades, who also owns Anastasia Travel, was not available for comment.

Chardigny said the boutique hotel sector potential in Lebanon reflected a global shift in guest preferences towards smaller, more personable, and quieter hotels. “All around the world now people don’t like big hotels anymore. It’s a new phenomenon. Over the last five years or so, people have begun attaching much more importance to privacy, discretion and top-quality personalized service. I think the time of the big ‘palaces’ like the Savoy is over. Now, rich people want to feel as though they are at home,” said Chardigny. Some real estate insiders predict that emerging boutique hotels, particularly those associated with international brand names, will provide serious competition for the so far unchallenged Albergo. “I think they’ll knock the Albergo off its perch. It’ll be downgraded to a three-star boutique hotel,” contended one real estate insider. “If you look at the bar, it’s horrible. The reception area? It’s horrible. It doesn’t create a nice atmosphere when you walk in. The restaurant is, boudoirish, feminine and tacky. The swimming pool might as well not be there.”

Chardigny, however, does not seem concerned. “Everyone is a competitor. For the moment Relais & Chateaux are the best quality chain. But the others are very good too. We are worried. We will wait and see.”

While developers are busy as the proverbial bees, real estate experts doubt that all will be genuine boutique hotels. So what’s the magic formula? According to Dunn, a guest must feel that they are unique, that they couldn’t possibly get a better hotel. A car should be waiting for them at the airport. And from then on, they must be continuously coddled, in a luxurious environment of discrete but unmistakable exclusivity. “It’s service, service, service,” he said. “You’ve forgotten your toothbrush? Don’t worry. Your trousers are pressed at three in the morning. You have a bottle of champagne in bed. These hotels are for spoiled people who want to be pampered. Most hotel rooms are so unmemorable.”

The developers of the Abchee Group boutique hotel next to the Virgin Megastore declined to talk to EXECUTIVE about the project, saying it was too early to do so. But Solidere, the company responsible for most of the revitalization of downtown, said the building had been designed by world-renowned architect Kevin Dash and constituted an overall investment of roughly $70 million. The building will offer private parking and will boast several high-end retail outlets – the marketing of which is to be overseen by RAMCO Real Estate Advisors. But the project has its critics: one real estate consultant, who asked not to be named, said: “It’s too noisy for a boutique hotel, probably too busy. A traffic intersection like that is going to be busy all through the night, and for the next number of years dirty, dusty and noisy. I’m very surprised, unless their objective is to make money out of the shops.” Construction of the boutique hotel close to the Banque Audi headquarters downtown represents an $85 million investment by Al-Mawarid Bank, owned by the Kheireddine family. The project – to be completed by the end of 2007 – is the brainchild of Al-Mawarid Chairman Salim Kheireddine. Tranquility will be ensured by the hotel’s location on a roughly 8,000 square meter plot of land in a peaceful corner of the downtown district known as Wadi Abou Jamil. The hotel will be composed of 10 inter-connected buildings arranged around a sizeable garden courtyard. It will incorporate an above-ground built-up area of 15,000 square meters – including three restaurants – and a below-ground area of around 45,000 meters servicing the hotel. Al-Mawarid is hoping to engage in a partnership with the “W” chain luxury boutique hotel arm of Sheraton’s Starwood Group, but is also involved in talks with two other leading hotel chains.

The all-suites hotel will count a hundred “keys”– almost too many for a boutique hotel. The smallest suite will cover about 55 square meters and the largest around 300. Rates will range from about $350 to several thousand. Naturally keen to emphasize one of the key attributes of any successful boutique hotel, Marwan Kheireddine, Al-Mawarid general manager, said: “The service will be by far superior to existing levels of service in Beirut hotels. Our clients will be high net worth individuals – either tourists or business people – demanding, and willing to pay for, exclusive, personalized services.”

As part of a third boutique hotel development project – owned by Solidere – a building roughly opposite the upper end of Maarad Street, and called “Le Grand Theatre,” or “Grand Theater,” a reference to its previous incarnation, is also being refurbished. It will adjoin two constructed buildings, which will house a boutique hotel and restaurants. The premises will be leased to a tenant, who would manage the entire complex. Meanwhile, development of an old salmon-colored building abutting the Riyadh El-Solh Square car park, is being overseen by sole owner Mousbah Bakri, who has already spent tens of millions of dollars buying the building from former shareholders – both family members and previous tenants – and refurbishing. Interestingly, Bakri said he would have preferred to develop office space in the building. But according to the terms of the contract under which he repossessed the building from Solidere, he is obliged to ensure that it retains its original function – that of hotel. Nonetheless, he is equally confident that his boutique hotel will perform, especially among Western tourists enamored with the idea of staying in a quaint heritage-laden building at the heart of the renascent downtown district.

Although some real estate observers suggested Bakri’s hotel would actually do better than the grander boutique hotels under construction, others questioned the building’s suitability for a hotel project, saying the rooms would be too small, and the building was too old. “You would have to spend more money than it was worth,” said one developer. Solidere is confident the boutique hotels will enhance the appeal of the capital’s Central District. “The developers are doing a wonderful job,” stated Solidere executive Monib Hammoud. “The boutique hotels will complement the other hotels in Lebanon. They will reposition Beirut on the international architecture and design level and will help upgrade the tourist industry to international standards.”

However, as the boutique hotel craze takes hold, it is also attracting profit-hungry investors who don’t know what it takes to establish a successful boutique hotel. And the last thing Solidere wants sullying the Central District is a string of failed boutique hotels. “Many people are approaching us with plans to develop a boutique hotel,” observed Hammoud. “Many don’t have the right conception of what a boutique hotel is. We monitor the supply. We don’t want oversupply. We make sure the mix and the balance are respected.”

“Most prospective developers don’t bother to spend the money on acquiring the necessary expertise for a feasibility study or market research,” said Kheireddine. “There is room for a couple of boutique hotels downtown. That’s all.”

Not everyone is convinced that Gulf Arabs will, in fact, flock to the new boutique hotels. Albergo Manager Chardigny said that although some Gulf Arabs do stay at his hotel, most visitors hail instead from Europe and America. “It’s not really Gulf Arabs’ style,” he said. Other observers agreed that Gulf Arabs may prove hard to lure away from glamorous hotels like the Phoenicia and those that have mushroomed across the Gulf.

Dunn disagreed: “Gulf Arabs love places like boutique hotels,” he said. “And they’ve got the money to pay.”

“The vast majority of our clients are going to be from the Gulf,” echoed Kheireddine. “It is wrong to stereotype Gulf Arabs. I have a lot of Gulf Arab friends who are as sophisticated in their taste for wine and French art as anyone else in the world.”

The $7 million hotel

Lina Mroueh, owner of up-market “Lina’s” sandwich chain owner, intends to develop a $7 million boutique hotel in a 1930s building “close” to downtown Beirut. Mroueh declined to disclose the exact location of her development but revealed that the property purchase would account for about 60% of the investment. Echoing Albergo manager Chardigny, Mroueh said she was tapping into potential offered by a new breed of hotel clientele – one that increasingly eschews big hotels – and by the increase in visitors to Lebanon as a whole.

Buoyed by the success of her sandwich chain, Mroueh is confident her instincts will again deliver a quality product. “All you need is entrepreneurship, the right operator, the right concept, and a lot of Lebanese-style hospitality and warmth,” she explained. “And you need happy, dedicated staff. I will go the whole nine yards. Quality is everything.”

Would her hotel would fit the classic boutique profile? “It’s not about luxury. My hotel will be chic. Simplicity is more luxurious. Boutique is an attitude. You can wear things from Marks & Spencers, even if you didn’t pay much for them, and look good if you have the right attitude.”

Mroueh plans to ensure that, once built, her hotel will achieve an international cult status. “I have a network of people, internationally, who will be happy to come and stay at the hotel. They will build brand awareness,” she said. “They’ll be an international crowd, Europeans, Gulf Arabs, Korean and Japanese businesspeople.”