Why Invest in Boutique and Extreme Hotels

Among travelers worldwide, demand is growing for hotels with unique design, located in unusual locations, and offering guests extraordinary experiences.

For Russia, this is still a new phenomenon—but the need for such establishments among travelers is already taking shape.

One popular accommodation option for this type of vacation is boutique and extreme hotels.

Anna Kulikova, Partner at FANTALIS, explains what these are, how this market works, and how to invest in such projects to ensure returns.

Tourism Trends in 2024

To understand which hotel will be profitable and how to design it, you need to look at the end user: what are their needs, tasks, goals, values. Today, several tourism trends relevant to hotel construction can be identified.

1. Digital Detox
The digital detox trend emerged several years ago and has only continued to grow. Boutique hotels far from civilization offer metropolis residents, tired of the around-the-clock flow of information, an opportunity to rest and recharge in seclusion.

2. The Path to Oneself
Today, 46% of tourists tend to choose wellness hotels. At the same time, there is also a growing interest among travelers in unusual types of recreation—such as meditations by a waterfall and "forest baths." The demand for recreation in natural locations grew by 40% in 2023.

3. Conscious Tourism
Awareness of "green" initiatives is growing among travelers. In 2023, 90% of consumers sought to choose a more eco-friendly option for their trip. 39% of tourists are willing to pay more for such travel options.

What are Boutique and Extreme Hotels?

A boutique hotel is a mini-hotel with unusual room design and a high level of service. The term "boutique hotel" appeared in the UK in the 1980s. Rooms in such hotels differ from each other but are designed in a unified style. Boutique hotels are often located in historic buildings with original architecture.
Another distinctive feature of such hotels is a cozy public space where guests can communicate and interact.
Staying in a boutique hotel is more expensive than in a regular hotel—unusual design and high service levels require more significant investment, so prices will also be higher.
Extreme hotels are located in hard-to-reach, wild places: deep in the taiga forests, at the foot of a volcano, on a mountain top, or on a deserted island.
The main activities in such locations are extreme sports, helicopter flights, rafting, fishing. In this case, the hotel blends into the landscape and creates a feeling of unity with the nature surrounding the guest.

How the Russian Boutique Hotel Market Works

In Russia, as around the world, guests increasingly prefer to stay in unusual hotels located in nature. Furthermore, many people now find it difficult to travel abroad, so they look for ways to have an unconventional vacation within the country. These consumers are accustomed to getting special experiences and excellent service.
Boutique and extreme hotels are a response to the need for premium hotels.
Abroad, this direction of tourism design has been developing for a long time.
For example, in Africa, there are safari hotels with wildlife photography. For Russia, however, this is a new market, despite the country having more than enough unique natural locations—from the well-known Altai, Baikal, Karelia to the currently developing Kamchatka and Arkhyz. At the same time, tourist interest in this type of recreation is growing.

What Affects the Profitability of a Boutique or Extreme Hotel

1.      Location
Location is especially important for extreme hotels—in this case, the remoteness of the location and the pristine nature are paramount. This way, the guest gets what they planned the trip for—experiencing an untouched area.

2.      Design
Architecture immerses the visitor in the intended atmosphere of the hotel. If the hotel is in the middle of forests and mountains, its design should echo the locality, and architectural solutions should allow the visitor to interact with the surrounding nature.

3.      User Experience
A boutique or extreme hotel provides the guest not only with accommodation but also with experiences.
Every detail typically has a function embedded in the space usage scenario. Fishing in the forest or a helicopter flight to a volcano—the space must be adapted to gaining this experience comfortably.

4.      Service and Unique Gastronomic Experience
People are willing to pay for a unique experience, but in such cases, they expect a high level of service.
Today's consumer may pay a considerable sum to achieve the impossible: to be far from civilization, in the middle of untouched nature, enjoy unique and authentic delicacies, but with excellent living conditions and service.

How Much Does It Cost to Build a Boutique Hotel?

There is an opinion that only a hotel with at least 40 rooms can be successful. A large room inventory certainly allows attracting more guests, but the advantage of boutique or extreme hotels is that they are not a mass-market product. In this case, the emphasis is on unique advantages for which the guest is willing to pay. If the hotel has well-thought-out leisure scenarios and considers all visitor needs, it will be profitable even with fewer than 20 rooms.
As a rule, the cost of designing and building one premium-class room in a hard-to-reach territory is about 40 million rubles. To create a boutique or extreme hotel with quality design and architecture, one needs an entrepreneurial spirit, vision, and skills.
From an investment perspective, such a hotel would be beneficial because there are currently very few such projects in Russia—around eight.

Investing in a Boutique or Extreme Hotel Project

Typically, investments in boutique and extreme hotels require around 500 million rubles or more.
As in any field, it is important to understand the payback period. Request a financial and economic model of the product. It should include realistic and pessimistic scenarios.
It is also important to calculate contingency expenses: if money runs out in the middle of the process, all investments will be lost.

Risks in Boutique Hotel Design

In the case of building a hotel in a natural area, it is important to consider environmental aspects. It is necessary to check whether permission for tree felling has been obtained and to develop design solutions that cause as little harm to the environment as possible.
For instance, when building hotel apartments in Kamchatka, it is better to position buildings so as not to damage the ancient stone birches. These same trees will become part of the guests' tourist experience.
The hotel needs a competent manager, adequate service staff, and equipment. This removes certain risks for the owner. It is also worth remembering to organize the supply of drinks and food and to carefully set up logistics.

Where is it Best to Design Boutique and Extreme Hotels?

For building extreme hotels, it is better to avoid locations like Moscow and St. Petersburg. Kamchatka and the Far East remain uncharted territory for many people, so it is worth paying attention to these areas.
For people traveling to Kamchatka or Altai, the journey is akin to flying to another planet, so standard wooden guest houses should not be built in such places. It is preferable to create an extraordinary architectural object that becomes one with the natural landscape.
There are few boutique and extreme hotels in Russia—building and maintaining a hotel in the wilderness is difficult. This is precisely why entering the market with such a project is extremely advantageous today: the need for unconventional types of recreation is growing among tourists, while supply is only just forming.
Investments in extreme hotels have every chance of fully paying off.

Source: https://welcometimes.ru/opinions/zachem-investirovat-v-butik-i-ekstrim-oteli