Boutique Hotel Guru Mike Depatie Discusses Hotel Industry Worries
Boutique hotels have grown in popularity to the point that traditional hotel chains have copied the concept and there's still a lot of room for growth. Bisnow caught up with KHP Capital Partners managing partner, president and CEO Mike Depatie, who is among our all-star lineup of hospitality industry experts presenting at Bisnow’s Lodging and Innovation Series on April 28.
Boutique hotels have distinctive designs and provide guests with personalized service and unique experiences. Traditional hotel chains, including Curio by Hilton and Autograph by Marriott, have copied the concept to compete with independent boutique operators. We discussed the boutique appeal with Mike, as well as his firm’s current projects and concerns for hotel developers and operators going forward.
The former president and CEO at Kimpton Hotels & Restaurants, Mike is a boutique hotel pioneer. His current venture is at a private real estate equity firm focused on investing in boutique and independent hotels. Mike tells us two of the biggest worries for hotel owners and developers are the growing impact of Airbnb on hotel revenues and the status of the current real estate cycle.
Above is KHP Capital Partners' Kimpton Canary Hotel in Santa Barbara, CA. Below is the hotel's pool deck.
Airbnb is a hot issue because the homesharing service is starting to more meaningfully cut into hotel revenue, particularly during high-demand periods that may be seasonal or generated by popular sporting, convention or other events. During these periods, hotels charge the most aggressive rates. Mike explains these peak-rate periods are important to a hotel’s profitability and “can play a significant part of determining a hotel’s average rate.”
“There’s also a lot more uncertainty now about the future than I’ve seen in the last couple of years,” he continues. People are concerned about the length of the current real estate cycle, wondering when it will end and if there's something they are missing, he said.
"The fundamentals still look positive, but there’s real concerns about the amount of new supply coming online, especially in the major markets," Mike tells us.
Above is KHP Capital Partners' Kimpton Hotel Palomar Philadelphia. Below is a bathroom in the hotel.
He notes KHP Capital recently closed a $210M fund. “We will be investing this capital over the next two years and are actively looking for hotels to acquire and convert to Kimptons, true independent boutique-style hotels or other up-and-coming boutique brands,” Mike says.
He suggests the boutique segment is still in its early days, so there’s still plenty of room for growth in this sector. KHP Capital invests in North American full-service hotels in urban core markets and select vacation destinations that can be repositioned to boutique style hotels and also looks to invest in adaptive reuse projects, where an existing office building, warehouse or other building can be converted to a boutique hotel.
Since 1997, the firm (and its predecessor under the Kimpton umbrella) has managed five equity funds, totaling more than $900M, and currently owns 19 hotels valued at over $1B, including 18 Kimptons. Four of those are under development, including The Gray, an adaptive-reuse project that is converting an 1894 Chicago office building to hotel use; an expansion of an independent boutique hotel in South Beach, FL, called The Anglers,which KHP acquired in 2012; and development of two ground-up projects in Hollywood and West Hollywood, the Argyle and the La Peer.
Above is a guest room at KHP Capital Partners' Kimpton RiverPlace Hotel in Portland, OR. Below is a bar at Kimpton Hotel Palomar in Washington, DC.
“Developing Kimptons is a substantial part of what we do,” Mike continues, “and we arguably have the most experienced team doing it. I know, because nearly the entire Kimpton development team came with me to KHP.”
Hear more from Mike and other leading hospitality professionals at Bisnow's Lodging and Innovation Series on April 28, at the Sheraton Downtown Los Angeles, 711 S Hope St. This all-day event begins with breakfast at 8am and ends with cocktails at 6pm. Sign up here!
