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Christiane Germain chooses between local artists at Winnipeg’s Gurevich Fine Art (Carey Shaw/Carey Shaw)
Christiane Germain chooses between local artists at Winnipeg’s Gurevich Fine Art (Carey Shaw/Carey Shaw)

Can Quebec’s Germain family outsmart hotel giants in the boutique niche? Add to ...

The fluorescent-lit parkade beneath Montreal’s new Alt Hotel sits a gleaming Tesla, the super-sleek electric car that starts at $70,000. The vehicle belongs to a guest, but the specialized wall charger through which the car gets its juice was installed by Alt to attract clients—particularly the hip and monied.

Alt’s parent company, Group Germain Hospitalité, is the first Canadian hotelier to cut a deal with Elon Musk’s automaker, and the fact that Tesla drivers—who are about as niche as any market can be—have sought out the hotel is a good sign. But there’s a much larger strategy at work for Germain. In the cutthroat hotel market, anything Alt can do to stand out as a distinct brand is worth pursuing.

The Germain family opened Canada’s first boutique hotel in Quebec City in 1988, back when the term “boutique” had barely entered the traveller’s lexicon. With just 126 rooms—about one-fifth as many as the nearby Château Frontenac—Hôtel Le Germain-des-Prés was wildly different from the larger chains it competed against. Its focus was on style and design, rather than scale, from the stand-up showers and modern furniture to the soft lighting, unique artwork and bowls of fruit in the lobby. It was luxury without the price tag, and the concept was a hit.

In fact, Le Germain did so well that it wasn’t long before other hoteliers began to mimic it. Today, industry giants like Westin, Sheraton and Marriott all have boutique subsidiaries of their own, while independents have popped up across the country to capitalize on travellers looking for an alternative to the impersonal, cookie-cutter chains.

All of which raises the question: Has the hotel market hit Peak Boutique?

“It’s overused,” admits co-president Christiane Germain—who runs Germain with her younger brother, Jean-Yves—of the boutique moniker. But there’s good reason for that. Christiane says simply: “It sells.”

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Christiane and Jean-Yves still remember the first time they walked into a boutique hotel: the Morgans, New York City, 1985. The two had grown up in Quebec City, where their parents, Victor and Huguette, had bought a convenience store in 1957, which they parlayed into a lunch counter and, eventually, a successful steakhouse. By the time Christiane and Jean-Yves were old enough to join the family business, it included a property management company and a portfolio of residential and commercial buildings.

On a business trip to Manhattan, they checked into the recently renovated Morgans Hotel on Madison Avenue, which was getting a lot of buzz. Christiane instantly understood why—walking into the place was like witnessing a new invention. Gone was the beige-and-white motif that characterized most hotels at the time. Instead, the decor was rich with colour, and the bathroom walls were adorned with bold black-and-white checkerboard tiles. In most of the rooms, bathtubs were scrapped in favour of stand-up showers with glass doors stretching from the poured-concrete floors to the ceilings. That in itself was revolutionary for a North American hotel. Shiny steel airplane-style sinks replaced the traditional vanity, and the lobby looked like a living room, with furniture sourced from Parisian flea markets.

“The design was really exceptional,” says Christiane, sitting with her brother 30 years later in a brightly lit, colour-splashed meeting room at the Alt Montreal. Both are fashionably dressed in that seemingly effortless French mode. They look far younger than they are (she is 59, he is 58).

“You remember, Jean-Yves? The rooms were not large, they were small. But the use of the space was really quite—it was new.”

“Showers,” says Jean-Yves.

“Yeah, showers.”

Morgans is credited with starting the boutique phenomenon. Opened in 1984, it was the brainchild of Ian Schrager and Steve Rubell, the promoters behind New York’s legendary Studio 54, the mecca of ’70s disco culture—until the Internal Revenue Service ended the party by sending them both to prison for tax evasion.

Upon their release in 1981, Schrager and Rubell turned their attention to the hotel business. Their idea was to create a spot so hot, people wouldn’t just want to stay there—they’d want to be seen there. Schrager and Rubell bought a stuffy old place called the Executive and hired French interior designer Andrée Putman, who devised the bold colour and decor scheme. In an interview soon after it opened, Rubell tried to describe what set Morgans apart. “Well, if a Holiday Inn is like Macy’s or Bloomingdale’s, we are like a boutique on Madison Avenue,” he said, according to Alan Philips, chief marketing officer of the Morgans Hotel Group, which now owns 13 boutique hotels around the world. “And that’s where it came from.”

So what is a boutique hotel, anyway? That, says Philips, is “one to be argued for the ages.”

Originally, it meant a hotel that was smaller than 150 rooms (though that has been stretched in recent years to 200-plus). However, Philips says the term has more to do with qualitative measures than quantitative. “If you really want to hit it in the best way possible, you want the hotel guest to call their friends and say, Where are we going tonight? And they’ll say: Your hotel—it’s the coolest place in town.”

The Germain siblings decided they wanted to create their own “it” spot in Quebec City. Le Germain-des-Prés opened—sans bathtubs—three years after that stay at Morgans. The Canadian boutique was born, entering an industry dominated by huge chains like Sheraton in the mid-market, and by Canada’s own Four Seasons brand in the luxury segment. Le Germain settled somewhere in between.

Christiane and Jean-Yves (she handles operations, he oversees the finance side) honed their model for 10 years before opening a second hotel in Quebec City in 1997. Two years later, they expanded to Montreal and, in 2003, to Toronto. Today, there are five Le Germains and five Alts. The higher-end Germain locations (in Quebec City, Montreal, Calgary, and two in Toronto) are aimed at travellers who want luxury, but in a more laid-back atmosphere. Walk into a Le Germain and the first thing you notice is the darker tones and soft lighting. Christiane can’t find the right word in English to describe the vibe, so she settles on enveloppante, a word that implies a comforting, cocooned feeling.

Alt is the younger, funkier brand, aimed at a crowd the company describes as “trendy but unpretentious” or “inspired and creative.” Think app developers on vacation. There is one Alt location in Quebec City (the original Le Germain-des-Prés, which was converted seven years ago), two in Montreal, and one each at the airports in Toronto and Halifax.

Now Groupe Germain is in expansion mode. This past December, it raised $80 million from a consortium of Quebec heavyweights, including the Caisse de dépôt et placement du Québec, La Capitale Financial Group, Industrial Alliance, Fonds de solidarité and investment bank DNA Capital. The eventual plan is to bring the total number of Alts to 15, creating a nationwide chain of cheap-chic boutiques. An Alt is set to open in Winnipeg in April, followed by another in Ottawa next year. A Le Germain will also open in Ottawa in 2017.

But the Germains no longer have the boutique market to themselves. Jean-Yves figures there are 30 such hotels in Montreal alone, and the industry giants are aggressively growing out their own boutique brands—Marriott is adding 60 of its AC hotels in the U.S. and Latin America over the next three years, and has teamed up with Ian Schrager on another boutique offshoot called Edition Hotels.

And that presents a problem for Groupe Germain: They want to get bigger, but they can only hang on to their customers if they don’t deviate from the original, intimate concept. “Our challenge,” says Christiane, “is to grow and be able to remain small.”

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The economics of the business have changed lot since the Germains came on the scene. Stand-alone hotels in the downtown core are unusual now, replaced by mixed-use developments. The new 550-room Delta is the first dedicated hotel to be built in Toronto in two decades.

Groupe Germain first partnered with a developer five years ago to gain access to precious downtown land it otherwise never could have afforded. Its Calgary Le Germain location, which opened in 2010, is across the street from the Calgary Tower, and includes office space (owned by the Germains) and condos. “It’s a prime piece of real estate, and just doing a hotel on it would not have worked at all,” says Hugo Germain, Jean-Yves’s son and the company’s director of development. Christiane estimates they would have needed to open 400 to 500 rooms to justify the price of the land. Since Calgary, all the company’s new hotels have been housed in mixed-use buildings. The $27-million Alt in Montreal’s Griffintown shares space with condos. The soon-to-be-opened Winnipeg location houses office space. The future Le Germain in Ottawa will be part of the city’s new art gallery and will also have residential floors.

“It’s a barrier to entry to be stand-alone,” says Jean-Yves.

The company is also targeting cities that are starved for beds. Ottawa and Montreal, in particular, have lost several older hotels, which have either shut down altogether or converted to residential units, rather than embarking on a costly revamp. In the last year and a half, according to Monique Rosszell, managing director at industry consultancy HVS Canada, Montreal has lost roughly 1,500 rooms (including a 700-room Delta and a 488-room Holiday Inn). Ottawa has lost about 1,000—among them, the 328-room National Hotel. Together, that’s the rough equivalent of 12 or 15 boutique hotels. To compound the squeeze, new rooms haven’t kept pace with the closures—room numbers across Canada grew by just 0.5% in 2014 and 1.5% in each of the two previous years, says industry analysis firm STR—one of the lowest increases in years. Average growth has historically been about 2.3% a year, adds Rosszell, but the 2009 debt crisis put many hotel projects on hold, and some were never revived.

Some of that demand has been eaten up by Airbnb and other sites that allow travellers to rent rooms in other people’s homes. But the overall market, driven by the core business traveller, remains strong enough that many cities are ripe for expansion, or so believes Groupe Germain.

But the boutique model depends more on filling rooms than a big hotel does. In a smaller building, every dollar must be wrung out of the facility because there are fewer economies of scale. “The boutique concept is not easy in terms of managing it well, because you don’t have a large capacity,” says Gabor Forgacs, an associate professor at Ryerson’s Ted Rogers School of Hospitality and Tourism Management. “It’s important when you look at a boutique hotel that you try to sell each room each night for good dollars, because you don’t have 1,500 rooms.”

For most hotels—big or small—that means pricing rooms based on supply and demand. Want to stay on a Saturday night? Be prepared to pay far more than on a sleepy Monday. But the Germains are bucking that industry norm at their Alt hotels, with fixed pricing—$154 a night at both their Montreal locations, for example, regardless of whether it’s high season or low, a weekend or weeknight.

Forgacs, who was a manager at Four Seasons before joining Ryerson, is a fan of the idea. “That was bold,” he says. “That was against everything that everybody was doing. And so far, it’s holding up.”

But as Hugo readily admits, a lot more goes into a hotel than just the price tag. Success and failure is often determined by other factors, especially in the boutique market.

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If you want to know how old your hotel is, take a look at the electrical sockets. If they’re conveniently located above or beside the nightstand, you’re in a newer hotel, or at least one that’s undergone a significant renovation.

Times change, as does technology, and the job of a hotel is to stay on top of those trends. Before everyone started using their phones as alarm clocks (not to mention checking their e-mails and Twitter before turning out the light), electrical outlets were hidden behind furniture to keep unsightly cords out of the way. Today, that’s an inconvenience.

Since Groupe Germain is mostly building hotels from scratch, it can incorporate new design details into each room. It began installing iPod docks in its rooms back in 2003—but even those are out of date now as people increasingly use Bluetooth to sync their devices. “We need to think where the technology is going,” says Hugo. “It might sound obvious, but we’re always questioning how much wiring to put in a room. Is wiring still relevant? Where is it going to go, with WiFi and Bluetooth, with TVs?”

When it comes to furniture, however, the key is not to chase trends. A typical hotel will go five to seven years before updating its rooms. So even the boldest, hippest hotels must be conservative. Alt rooms have partially exposed cement walls, giving them a slightly artistic look. Bonus: They also cost less, which allows designers to put more money into statement furniture like a trendy chair that can be easily swapped out to update the look, without a major overhaul.

Rooms are smaller, too (though with lots of height, since the ventilation equipment is built into the walls, not the ceiling). In a bigger hotel, says Hugo, “you might have 350 square feet of space, but there is a corner you never use. Well, in our case, that corner will be basically removed. Or we’re going to be enlarging the window and putting in higher ceilings.”

“Sometimes we have to, I will say, to fight with each other,” Jean-Yves says of the battle between design and cost.

Those debates invariably include Christiane’s 33-year-old daughter, Marie Pier Germain, who has a degree in mechanical engineering from Queen’s and serves as the chain’s director of professional construction services. She and Hugo, 35—who has a Queen’s MBA—represent the next generation of Groupe Germain and are carving out roles for themselves in the operation as it grows.

It’s not clear how big the Germains want to get. “In the last five years, we’ve grown more than we did in the 20 years before that,” says Christiane. And though they’re committed to remaining a purely Canadian play for now, that’s not set in stone. “Once we achieve our objectives here in Canada,” she says, “then our model may change.”

That’s likely a few years off yet. For now, the focus is on cities like Winnipeg, Ottawa and, eventually, Vancouver, with its sky-high real estate costs. Clearly, the Germains believe we haven’t hit Peak Boutique—not yet. But with the Marriotts of the world flooding the market, they’ll need to balance their own ambitions with the reality of competing against rivals a hundred times their size.

“We’re a small player,” says Christiane.

“A very small player,” agrees Jean-Yves. “And when we do our market research, it brings us down to earth. We’re making progress, no question, but we’re fighting against the big guys—the big guys.”

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