Chi-Chi Meets Quirky

Deluxe hotels try to raise their hip quotient

By Carol Matlack

Le Méridien opened a 294-room luxury hotel in Vienna four years ago at a cost of $160 million. But when Le Méridien Senior Vice-President Eva Ziegler strides through the lobby on a recent visit, she is not impressed. "There is no emotional connection in this room," she says with a wave at the high-gloss white walls and sleek modern furniture. "We need an anchor point—a pool or something with water." Ziegler joined Méridien last year, following its acquisition by Starwood Hotels & Resorts (HOT ), to spearhead a makeover of Méridien's 120 hotels. With touches such as art exhibits, a custom-blended cedar scent, and original music compositions piped into lobbies and hallways, "we aim to inspire our guests at every turn," she says.

These days, a successful luxury hotel needs a lot more than designer bed linens and a white-gloved doorman to stand out from the crowd. Boutique hotels, featuring imaginative designs and quirky extras such as a goldfish companion for solo travelers, are stealing a march on big innkeepers, whose more traditional properties can look bland by comparison. Over the past three years, boutique hotels' per-room revenue growth in the U.S. has averaged about 11% annually, about one-third above the industry average, says Smith Travel Research of Hendersonville, Tenn.

That helps explain why Méridien and other big chains are scrambling to develop their own distinctive styles. Marriott International (MAR ) recently inked a deal with boutique hotel pioneer Ian Schrager to develop 100 hip new properties. Hyatt and Intercontinental are rolling out boutique-style chains, too. Starwood, which already runs the successful boutique-inspired W chain, is launching others. "Anybody that has a four-star brand is looking in this direction," says Tom McConnell, senior managing director at Cushman & Wakefield Inc.'s hospitality group.

At Méridien, the task has fallen to Ziegler, 40, a native Austrian who was Toyota Motor Corp.'s (TM ) brand honcho in Europe. The chain has had a rocky history: Founded by Air France (AKH ) in the 1970s, it passed through a series of four owners in the decade before Starwood bought it in 2005. By taking advantage of Starwood's centralized reservations and back-office services, Le Méridien says it boosted per-room revenues 12.2% last year, above the average for all boutique hotels.

To differentiate Le Méridien from other chains, Ziegler is marketing it as a destination for art enthusiasts. She has cut deals with local museums to allow hotel guests free entry by presenting their room key cards, and she has hired modern art curator Jérome Sans to organize special exhibits. Can a splash of art, perfume, and music turn Le Méridien into an industry star? With some of its older properties requiring extensive renovations, the answer won't be evident for several years. But Ziegler is confident that she's on the right track. "Emotional connections lead to loyalty," she says, "and loyalty leads to increased profitability."

Matlack is BusinessWeek's Paris bureau chief

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