Boutique hotels: Is private equity taking centre stage?

As the world emerged from the various lockdowns of Covid, there was a boom in holiday traffic as holidaymakers took ‘revenge holidays’ seeking to take back the holiday they had missed out on across those years. In more recent years, traveller numbers have stabilised while still offering real opportunities for growth despite challenging broader economic conditions.

As Savills noted ‘2024 saw a seven year high for hotel transaction volumes’. Although the market has slowed since that peak, single-asset transactions now account for a greater share. This indicates a stabilisation of the market and renewed interest in standalone assets, particularly boutique hotels. The trend towards such acquisitions is reflective of the spend by holidaymakers as those with stronger occupancy and repeat custom drive a better bottom line for investors leading to higher private equity interest.

Why Boutique Hotels

While large chain hotels are seeing steady results, the modern traveller is turning more and more to boutique and luxury hotels in search of the ‘total experience’. Boutique and luxury hotels tend to offer a more bespoke, personalised and immersive experience often offering a more unique stay than the large scale cookie cutter approach of chain hotels.

This chimes with the demands of holidaymakers. Millennials and Gen-Z holidaymakers are often seeking a more authentic experience which is often better catered for by the boutique hotel than at large chain hotels. Instead of the mass breakfast buffet they are opting for an artisanal pastry with a locally sourced coffee. Instead of the lounger by the pool, it’s the local culinary experience that is sought after.

But it isn’t just the younger generations driving the boom. Often those outside these generations have greater disposable income and are looking for a more comprehensive and luxurious experience than may be available within the traditional hotel experience.

Or for the conscientious traveller, the appeal of a boutique hotel can be more easily marketed as the ethical, environmental and socially responsible small player in a world dominated by the mass produced global market.

Similarly, the boutique industry has benefited from changes in the nature of the modern working world as they cater effectively to global nomads. As the number of these globe trotting workers increases, there is a greater demand for personalised spaces where individuals can work but which also offer a real sense of community, openness and individuality.

The Changing Face of the Boutique Industry

The boutique sector also includes a growing number of businesses who are identifying opportunities to repurpose and redevelop existing property or even taking on the opportunity to create a new experience where previously there was none.

There is a marked growth in opportunities for those seeking to convert existing property spaces into hotels which is seen in the increasing reclamation across Europe of old office space which is becoming micro living units or hotels.

Similarly in our ever connected world there are real opportunities for those offering the ‘off-grid’ experience. The humble tent is not enough for all tourists with glamping and ‘eco-stays’ becoming ever more prominent.

Investment

With the various opportunities for growth within the boutique industry as well as the broad definition of what classes as ‘boutique’ it is easy to see the rationale for investment by private equity. However, in a challenging market, there is a real demand from private equity to see strength of return but also quality within the team operating the hotel to ensure a return on value.

Want to learn more about the outlook for the hospitality industry? Download our latest On the EDGE: Hospitality trends in 2026 report.