Boutiques May Be Adapting Faster Than Other Hotel Sectors, but Still Hurting – By Jim Butler

A hotel room
Boutiques May Be Adapting Faster Than Other Hotel Sectors, but Still Hurting – By Jim Butler

The theme of the Boutique Lifestyle Leaders Association’s (BLLA) upcoming Boutique Lifestyle Digital Summit is ‘Dare to Adapt’ and there are some compelling arguments as to why the boutique space may be able to adapt to the current economic crisis faster than other sectors in the hotel industry.

“Boutiques can pivot easily,” said Frances Kiradjian, Founder and CEO of the BLLA. “They can make decisions quickly without checking in with brands.”

Take cleaning, an area of great to concern to guests in the current COVID-19 environment. As new information and cleaning methods come to light, boutiques can implement them quickly. As Kiradjian said, “By design, some boutiques have a smaller footprint and fewer rooms, smaller elevators, smaller public spaces, and dedicated staff members who care about delivering a customized experience for each guest.”

Guy Maisnik, Vice Chair of JMBM’s Global Hospitality Group, who will moderate the panel “Protecting Your Assets Amid a Pandemic” at the BLLA’s Digital Summit, agrees that boutiques have great flexibility, and being nimble and able to change quickly is critical in this market.

“For one thing, many hotels have gone toward smaller guest rooms and larger indoor communal public spaces,” he said. “Obviously, such configuration does not work in this environment.”

Maisnik said that many boutiques are heavy on food and beverage, which provides needed income. Those that have outdoor areas, such as rooftop decks will fare even better.

Kiradjian points out that guests wanting a quick getaway to relieve the monotony of sheltering-in-place, are looking for a smaller hotel like a boutique, due to social distancing requirements.

“Boutiques located with an urban area’s “drive market” have another advantage,” she said, noting that travelers continue to avoid air travel.

Even with these advantages, boutiques are struggling to gain occupancy and stay above water.

“Owners in all hotel sectors are talking to their lenders,” said Maisnik, explaining that lenders are refraining from receiverships and foreclosures, as the capital to buy foreclosed properties hasn’t come forward. “Right now, lenders are waiting and seeing”, he said. “Some borrowers have turned in their keys, but not many.”

What does the future look like?

“In normal circumstances, entrepreneurs take risks,” said Maisnik. “But this is not a normal circumstance, and the risks are not predictable. No one could possibly predict a global pandemic.”

“Wall Street is doing well,” he said. “But given the political environment, it is not going to look good for the bankers on Wall Street to shut down the employers on Main Street. Wall Street and Main Street need each other.”

As workouts and bankruptcies increase, Maisnik thinks we may see unique applications of existing law that will help borrowers, especially those whose businesses were doing well before COVID.

“When issues are litigated in the courts, we will find some judges very sympathetic to borrowers,” he said. “Everything, including force majeure in certain jurisdictions, is on the table.”

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. Please contact us if you would like to discuss any issues or development that affect your hotel interests. We would like to see if our experience might help you create value or avoid unnecessary pitfalls. Who’s your hotel lawyer?