Lifestyle hotels are continuing to raise the bar for the industry through differentiation, innovation and value-for-money, according to research released today by PricewaterhouseCoopers LLP.

The fourth ‘European Lifestyle Hotel Survey’ reports that this niche sector continues to have widespread consumer appeal and, although there have been new developments throughout the lifestyle segment, the budget end saw the most action in terms of new names and new ideas.

Liz Hall, head of hospitality research PricewaterhouseCoopers LLP and editor of ‘Hospitality Directions Europe’ commented:

“While many larger hotel chains continue to try to emulate lifestyle hotels’ distinctive offer, we found that the real action in terms of innovation and value for money is still being driven by the smaller operators, particularly in the new, up-and-coming branded budget lifestyle segment.

The top 25 hotels in our European survey saw a 5.9 per cent increase in room capacity compared to a year ago and now account for 11,386 rooms.

We also analysed the performance of 60 UK lifestyle hotels that total over 4,000 rooms. This analysis showed that the UK lifestyle sector is still more volatile than the rest of the hotel industry but should experience good RevPAR growth of 7 per cent this year, 4.1 per cent in 2007 and 4.8 per cent in 2008.”

There is some evidence that the sector is now becoming more attractive to investors particularly venture capitalists and private equity firms. In the past, lack of scale has tended to make returns insufficient to attract investment groups, but this may be changing.

Liz Hall, head of hospitality research PricewaterhouseCoopers LLP and editor of ‘Hospitality Directions Europe’ commented:

“Its always going to remain a niche sector but we found some evidence that new, quality products with the potential to be rolled-out as small branded groups are attracting growing interest from venture capitalists and private investment groups. Investors are seeking replicable concepts that could build critical mass in new and emerging markets.”

Drawing on PricewaterhouseCoopers parallel research into lifestyle media, the burgeoning lifestyle hotel sector will increasingly be required to really know the customer in this vibrant, ever changing environment. As technology is driving consumer behaviour more and more, businesses need to pay increasing attention to the growing demands of their customers.

Sharon Stotts, director performance improvement consulting PricewaterhouseCoopers LLP commented:

“What we are seeing is a revolution where the consumers will soon overtake businesses in demanding what they want, when they want it, in a way they want it.
The challenge for hoteliers is to develop business models that are flexible enough to deal with the technologically-driven consumer while also focusing on new revenue-streams. A customer’s pre-trip experience is even more important in developing hotel experience; and technology is being used to track customers’ preferences before, during and after a visit.

Just as we are seeing in the media sector, delivering the content that customers are looking for is increasingly the key to success. But consumers are fickle and fashions change ever more quickly. For hoteliers with a highly perishable product, this presents some real challenges in keeping up with and staying ahead of the game.”

Dowload PWC's "European Lifestyle Hotel Survey 2006" (PDF 756KB)