Hilton: Reunited, Full Steam Ahead
By Karyn Strauss, Associate Editor -- Hotels, 1/31/2006 11:00:00 PM
- Hilton: Reunited, Full Steam Ahead
- Starwood Shares Best Practices To Weather Any Storm
5 Minutes With: Kerry Hatch, President, St. Regis and The Luxury Collection
- Lucky Number 8
- Hoteliers
By Karyn Strauss and Derek Gale,Associate Editors
BEVERLY HILLS, CALIFORNIA After more than 40 years the Hilton family of hotels is back together again. The US$5.71 billion acquisition by U.S.-based Hilton Hotels Corp. (HHC) of the lodging assets of UK-based Hilton Group plc—collectively known as Hilton International—marks the next chapter for the legacy brand as it embarks on a major multibrand expansion plan worldwide. But growing and diversifying its portfolio is not the only story here. HHC also is moving full steam ahead with the launch of a US$1 billion re-imaging campaign and is leveraging the power of the Waldorf=Astoria name (owned by HHC since 1949) by introducing a new product line, The Waldorf=Astoria Collection, and a Waldorf=Astoria brand.
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| The inaugural members of the new Waldorf=Astoria Collection are (clockwise from l.) The Waldorf=Astoria, New York; The Arizona Biltmore Resort & Spa, Phoenix; The Grand Wailea Resort Hotel & Spa, Maui; and La Quinta Resort & Club, La Quinta, California. | |
It has been a busy few months on both sides of the pond. Here’s a summary analysis of what’s happened, what the implications are and what the future may hold for the “new” Hilton Hotels Corp.
The Deal: Background & Terms
While the companies split in 1964, by 1997 globalization was becoming increasingly important, so under the leadership of new CEO Stephen Bollenbach, HHC embarked on the first step toward reuniting the two companies by forming a strategic sales and marketing alliance with Hilton Group.
In 2002, the alliance was expanded to include joint-venture ownership of the Conrad Hotels luxury brand. Coming full circle now, Bollenbach says he views this latest transaction as “the final logical step in a process that began in 1997.”
Further, with the strength of HHC’s portfolio domestically and the beginning of the hotel sector recovery in Europe, Matt Hart, president and chief operating officer of HHC, says the timing is right to unify the company. “Business in the U.S. is strong; our balance sheet is strong; financial markets are favorable and interest rates are low,” Hart says. “We’ve had successful interaction over the years; we know the company, the people and the priorities. Their strategy was similar [to ours] emphasizing the fee part of the business by selling hotels and maintaining long-term management contracts.”
Ian Carter, CEO of Hilton International, who will remain in that role under the new structure, adds that “It’s very rare in an M&A situation that the two companies are almost a mirror of each other—with very little overlap. For us the whole story is about brands and growth.”
The all-cash acquisition, which is expected to close at the end of the first quarter, will add 40 hotels owned by Hilton International, 200 leased properties (122 of which are branded Scandic), approximately 160 management contracts and 80 LivingWell Health Clubs to the HHC portfolio. (Hilton Group will retain its gambling businesses and is expected to be renamed Ladbrokes.) The biggest impact of the deal is that HHC now will have the chance to grow its domestic brands—Doubletree, Embassy Suites, Hampton Inn and Hilton Garden Inn—worldwide, as well as continue with the development of Conrad and Scandic, the Hilton International-owned, mid-market Scandinavian brand.
While HHC will incur more than US$4 billion of debt—including US$130 million of assumed Hilton Group debt—the company says it will continue its strategy of selling off assets, including some prime properties it now will own in Europe, to repay debt. Further, the company expects to realize about US$30 million in annual cost savings—US$15 million for the first year—as a result of new operational synergies.
Implications
Hilton brand extension worldwide is the most significant aspect of this deal. As CIBC World Markets says, “the company now has growth potential that is comparable to that of its peers.” It is this opportunity to diversify the Hilton portfolio in the 80 countries where it already has a presence that is the most exciting for Carter. “Our first priority will be defining where, when and how we want to use the Hilton family of brands outside the U.S.,” Carter says, adding that Scandic is still very much part of the consideration, particularly in the Baltic region. India and China clearly are high on the radar as well as Brazil and the United Arab Emirates. As for how the expansion would be structured, Tom Keltner, executive vice president and president of HHC’s brand performance and development group, says, “We must figure out what areas and what brands, then we can figure out management or franchise or other structures. We’ll go region by region and look for opportunities to put in enough units to grow well.”
Additionally, as one seamless entity, the new company should be able to offer greater consistency “in terms of the Hilton brand promise,” says UK-based consultant and former Hilton executive Michael Hirst. Hirst says it is vital that Hilton’s quality “be the same inside and outside the United States.” As such, any sub-par Hilton hotels may be ripe for conversion to one of HHC’s mid-market brands, he says, adding that he sees the greatest potential for Hampton Inn and Hilton Garden Inn in Europe.
Doubletree, he says, lacks clear brand differentiation from Hilton, and as for Embassy Suites, “the cost to build a suite product in Europe is too much because of the cost of land.”
Lesley Ashplant of UK-based Dame Consulting, agrees with the potential of HHC’s mid-scale brands. “The UK market can probably absorb a good, modern mid-scale product as it doesn’t really have much in this range,” Ashplant says, adding a couple of cautionary notes. “Marriott Courtyard never really took off here, and I’m not sure why, although lack of scale was probably a factor. Secondly, development is much harder to achieve here than in the U.S., land costs are appreciably higher and the planning process interminable.”
Next On The Agenda
While HHC mulls its expansion options, hot on the heels of the merger come two significant marketing ventures that will help shape the direction of the new company. In early January the company announced a US$1 billion “re-ignition” campaign that will include property enhancements, new guest services and advertising. Across the portfolio guests can expect refurbished meeting space, lobbies and guest-rooms. They also will see healthier menu concepts and better business centers. The advertising theme, “Travel Should Take You Places,” will focus on meaningful experiences facilitated by travel and Hilton’s role in creating those experiences.
HHC also is showing a new commitment to delivering the most luxurious experiences by leveraging the cache of the Waldorf=Astoria name to launch The Waldorf=Astoria Collection and Waldorf=Astoria brand. The collection will feature a portfolio of some of the world’s top independent hotels and resorts, all managed by HHC, and therefore linked to such items as the company’s frequent stay program. The first three member hotels (in addition to New York City’s Waldorf=Astoria) are CNL Hotels & Resorts’ Arizona Biltmore Resort & Spa in Phoenix; Grand Wailea Resort Hotel & Spa, Maui; and La Quinta Resort & Club, La Quinta, California. Each hotel will maintain its name but will be co-branded with “The Waldorf=Astoria Collection” tag.
In addition to acquiring management contracts for the collection, HHC also will develop the Waldorf=Astoria brand of both new builds and conversions in gateway cities around the world. Think Waldorf=Astoria Paris but with a younger, hipper vibe than the original hotel.
As for the possible conflict with the previously announced plan to grow the luxury Conrad brand to 50 hotels by 2010, Hart says, “We think the world is large enough for us to manage two luxury brands.”
To celebrate The Ritz-Carlton, Key Biscayne’s distinction as Miami’s only AAA Five Diamond resort, General Manager Marco Selva is randomly placing a sparkling diamond necklace under one lucky guest’s pillow each month from January to May 2006. Each necklace from SABBIA fine jewelry includes five diamonds totaling nearly one carat as well as a sapphire—to represent the Ritz-Carlton’s signature cobalt blue—and is valued at more than US$3,000. For the grand finale in the May, instead of the necklace the hotel will give away a pair of diamond and sapphire earrings by Mouawad. To qualify, guests only need to book a guestroom or suite at the published rate.
NORTH AMERICA
Starwood Capital To Launch Crillon Brand
GREENWICH, CONNECTICUT Starwood Capital Group has announced plans to build a brand around its recently acquired Paris gem, the Hotel de Crillon. The company will look to develop new Crillon hotels and serviced residences in key cities worldwide, from New York and London to Delhi and Dubai. Resort and ski destinations may follow. “When Starwood Hotels & Resorts acquired ITT in 1998, there was only one St. Regis hotel. In my 10-year tenure as CEO, we were able to grow the brand to a dozen hotels and a significant pipeline under development,” says Barry Sternlicht, Starwood Capital chairman and CEO. “With the travel industry experiencing tremendous growth in many regions of the world, the time is right to launch a new, premium luxury brand like the Crillon.”
Starwood Capital’s move comes just days after Hilton Hotels Corp.’s announcement that it will create a Waldorf=Astoria luxury brand. Why the rush to get into the ultra-luxury market? “Globally, individual wealth levels continue to grow,” says Mark Woodworth, executive vice president, PKF Consulting, Atlanta. “This trend, along with increased sophistication levels of more high-end travelers, presents a growing number of opportunities for hotel firms that offer a product to this market. The Waldorf=Astoria and Crillon meet this standard.”
Marriott Rolls Out New Spirit To Serve
WASHINGTON, D.C. With the guiding mantra “the way hospitality acts not just looks,” Marriott International is moving beyond hip hotel design with its “Spirit To Serve Our Guests,” a new program to take personalized service to the next level. The mission is to engage customers from the point of first contact through the length of their stays. The program will cover five key interactions: 1. calls to reservations that now pre-identify guest preferences; 2. pre-arrival emails to help with travel planning—including weather forecasts and restaurant recommendations; 3. Marriott’s “Rewarding Welcome,” which will allow hotels to recognize guest preferences at check-in; 4. a virtual concierge program that lets guests select special services and amenities online; and 5. “Dream Tracker,” a new system to help Marriott Rewards frequent-stay program members better track points toward future vacations. Guests also will be able to access bills online to avoid check-out.
“Personalized service is critical to delivering a high-quality guest experience,” says Amy McPherson, Marriott’s executive vice president of sales and marketing. Amitava Chatterjee, senior consultant, hospitality and leisure, IBM Global Services, concurs: “If you look at the hotel product—the bed, pillows, furniture, TV and then the tangible surroundings—a room’s a room, and a bed’s a bed. What’s going to differentiate companies is really service.”
Affinia Relaunched As Denihan Hospitality Group
NEW YORK Following a US$532 million recapitalization and consolidation of ownership, the former Affinia Hospitality, now known as Denihan Hospitality Group (DHG), plans to grow its Affinia Hotels and Benjamin brands nationally. The company also has formed a new management division to own and operate the two brands, as well as to manage other branded and independent hotel properties.
“In today’s climate, there are enormous opportunities to expand both The Benjamin and Affinia brands into the top 25 [U.S.] urban markets as well as to grow the entire portfolio through management contracts,” says Patrick Denihan, co-CEO. The company will look first to Chicago, Boston, Washington D.C., Los Angeles and San Francisco.
While aiming to grow through both acquisitions and management contracts, the major focus will be on acquisitions, Denihan says. “We want a strong equity position in [our hotels],” he says. “If a management contract takes us to an equity position, so be it— and wonderful. We’d like to make sure that it is strategic.”
For now, the company’s immediate plans include renovation of The Shelbourne Murray Hill, currently operated by DHG as an independent hotel, and the relaunching of that property with the Affinia flag. The company will maintain its New York base of operations, which includes its central reservation system, sales and marketing, operations and development.
ASIA
ITC To Expand With Or Without Sheraton
GURGAON, INDIA With solid increases in occupancy and rates at luxury properties throughout India, strong regional economies, limited new supply on the drawing board and continued rapid tourism growth expected both inbound and domestically, ITC-Welcomgroup, Gurgaon, India, wants an even greater presence than the 60 hotels it already has nationwide. The company plans to add at least nine properties in cities such as Madras, Bangalore and Hyderabad, and possibly in Goa and some state capitals as demand exceeds supply, according to recent comments made by Chief Executive Nakul Anand. It may also look to add properties outside its homeland in London and Singapore.
Meanwhile, the company’s 30-year affiliation with Sheraton Hotels & Resorts may be coming to an end. ITC jointly manages 10 properties with Sheraton, but the most recent contract has expired, and ITC executives have said the relationship is being reassessed. This could mean that either ITC or Sheraton parent Starwood Hotels & Resorts Worldwide is exploring alternative alliances.
SINGAPORE From the Sanskrit word meaning “surprise” comes Alila Hotels & Resorts, a new niche hotel management company for the boutique market. And from that moniker comes the company’s mission: to surprise and delight the guest through superior service and attention to the smallest details.
The first Alila Villas resort in Uluwata, Bali.
“The Alila experience is centered around building unique emotional ‘moments of truth’ between the guests and the destination,” explains Frederic Simon, managing director. “We accomplish this through a dedicated sense of details, trying to really understand and value the destination, and ensuring that all our employees are empowered and passionate about designing and sharing their local know-how.”
Alila is a vertical brand that operates properties under three categories: Alila Hotels & Resorts, which are high-end resorts and urban properties; Alila Villas, ultra-deluxe condo-resorts; and Alila Living, urban serviced apartments. While the three brands are differentiated by ownership opportunities as well as price point—Alila Hotels & Resorts have an average daily rate of US$120 to US$180 and Alila Villas average US$400 or above per night—all emphasize their strong sense of place, focus on design and highly personalized service style.
The properties all feature the expected high-end amenities—luxurious bedding and bath products and state-of-the-art technology as well as spacious interiors and, often, breathtaking views. The design is eco-friendly, and in resort destinations, highlights the natural beauty of the properties’ surroundings. It is the personal touches, however, as Simon says, that characterize the Alila brand. For instance, at the newly opened Alila Living property in Jakarta, guests can have their bath amenities and even scents personalized to their tastes.
There are currently three Alila Hotels & Resorts properties in Indonesia: two in Bali—Alila Ubud and Alila Manggis—and one in Jakarta. The first Alila Villas resort is under development in Uluwata, Bali, overlooking the Indian Ocean, and the first Alila Living property, Kemang Icon by Alila Living, in south Jakarta opened in November. Without going into too much detail, Simon says Alila properties reported record figures for 2005 and are the market leaders in their categories. As a result, the company is enjoying much developer and owner interest to grow the brand.
“It seems that new owners are more willing to look at niche brands as the product offering in the market increasingly varies. Many owners in Asia are looking at mixed developments, including a resort and real estate for sale,” Simon says. “A niche brand is more flexible and can provide a broader range of assistance based on more personalized experience and relationships.”
Alila’s development pace across Asia is brisk. The company wants 12 to 15 properties within the next five years. And while the company wants to grow all its brands, Simon says most of the current developments are Alila Villas. Additional properties under way include two Alila Villas in the Maldives, one Alila Villas in northern Thailand, one Alila Villas in southern Vietnam and an Alila Resort in southern China. “We’re also in very advanced discussions for an Alila Villas in Mauritius and an Alila Villas in the Gulf area,” Simon adds.
In terms of marketing the growing brand, Simon says the company relies heavily on word-of-mouth recommendations, so it makes customer service a top priority. To assist with additional global sales and marketing support, Alila properties are represented by the Design Hotels consortium. Further, Alila wants to develop partnerships with luxury retailers and tour operators in Europe, Australia and Asia.
 Starwood’s Kevin Regan with U.S. Senator Susan Collins. |
WHITE PLAINS, NEW YORK If and when another devastating hurricane—or earthquake, tsunami or even terror attack—strikes, would your hotel be ready? Is your crisis management plan in order? Will employees know how to respond? As hoteliers ask themselves these questions, so too has the United States government questioned its preparedness in managing a crisis. In light of its its “too-little too-late” response to Hurricane Katrina, the U.S. Senate Committee on Homeland Security and Government Affairs has turned to four private-sector companies that best handled the recovery efforts in a fact-finding mission to learn best practices that can be applied to future crises.
Representing the hospitality sector in a hearing before this committee was Starwood Hotels & Resorts Worldwide, whose three New Orleans’ hotels—the W French Quarter, W New Orleans and Sheraton New Orleans—were the first downtown hotels with power, trucked-in water, air conditioning and re-opened restaurants and bars following the storm. Kevin Regan, regional vice president for the Southeast U.S. and the Caribbean for Starwood, whose response efforts were documented by CNN, was asked to share Starwood’s story and offer advice. The company’s well-executed response sets a strong example for all hoteliers in handling future crises.
Empowerment Of Employees
According to Regan, after the 9/11 terror attacks, Starwood redesigned its formerly disparate crisis management plans to have one global plan that would encompass any type of disaster. The company worked with an outside consulting firm to create a plan that structures preparedness and response for every level of the organization and instills “responsibilities and authority at each level,” Regan says. The new plan also provided for ongoing communications throughout the organization by setting up emergency command centers and a corporate “go” team that would coordinate efforts with the regional teams.
While most crisis management plans focus on this chain of command, what the Starwood plan entails, in essence, is giving employees the power to act. While the U.S. government stood by waiting for someone in charge to take the lead, Regan says Starwood’s plan empowered those employees closest to the issues at hand to make crucial decisions, including ordering any equipment and services needed, such as ensuring there would be enough food and water for more than 1,000 guests through the period of the storm and several days beyond.
Regional teams, meanwhile, assembled equipment such as generators and arranged for power technicians, assessors and recovery teams to be positioned in strategic locations so that supplies could be trucked in once the storm had passed. The corporate crew was left to devise a payment scheme for employees and arrange temporary housing.
Leadership And Communication
The other essential ingredient of the company’s success, Regan says, was that it had visible leadership at all times. At the corporate level this meant that when the first warnings were issued, the emergency command centers immediately began communications between the regional teams and the hotels. It also meant that Regan and his team arrived in New Orleans the Wednesday after the storm—days before any federal crews made it into the city.
At the property level, it was the general managers who were the visible leaders for guests. “Communication with guests and providing constant reassurance was key. There are so many rumors that fly around, panic can set in quickly,” says Dan King, GM of the Sheraton New Orleans, which sheltered approximately 1,500 guests, associates and family members. “We did everything we could to communicate what was going to happen and how we were going to handle it.” King said letters were placed under all guestroom doors, voicemail messages recorded and the fire alarm’s speaker system was used for additional announcements. The hotel’s director of security also ran a Q&A session. “What was most important was to maintain a sense of calm,” King adds.
Expect The Unexpected
While years of working in the U.S. Southeast and Caribbean region meant Regan was no stranger to hurricanes, Katrina had two unique challenges: massive flooding and security. But because the company was so well prepared for the “expected” aspects of the storm, Regan says it was better able to handle the unexpected. This translated to hiring extra private security personnel and a company to deal with the hotels’ sewage systems so water could be brought in.
 Kerry Hatch, President, St. Regis and The Luxury Collection |
Amidst great growth in the luxury hotel sector, Starwood Hotels & Resorts Worldwide appointed Kerry Hatch to the newly created role of president of St. Regis and The Luxury Collection, making her the highest-ranking woman in the company. The appointment of Hatch, a longtime American Express executive with a brand-building background, fits with CEO Steven Heyer’s strategy to transform Starwood into a brand company (Heyer is a former Coca-Cola executive). Since joining Starwood four months ago, Hatch already has overseen the opening of the new St. Regis San Francisco, and will do more of the same going forward as the brand plans a number of new openings over the next three years. HOTELS caught up with Hatch to discuss her entry into the hotel business, her role as a powerful female executive and her plans for Starwood’s luxury brands.
HOTELS: Why were you interested in being a part of the hotel business and what does it mean for you to be in a newly created position with no model to follow?
Hatch: It was three things: (1) The chance to work with a fabulous brand like St. Regis, build it and do something spectacular with the assets. (2) To join a large company with lots of resources yet which is quite entrepreneurial—one that wanted to transform to become more of a brand company. (3) And I was also intrigued by Steve [Heyer].
There were components of the position before— Starwood just chose to elevate the importance of it around a growth strategy. I am here to build the brands, build the footprint and grow the business during the coming years. I will pull together the business plan and make it hum a bit better. No blueprint is exciting for me.
HOTELS: You spent two decades with American Express—what can you take from that experience and apply to the hotel industry? And what distinct challenges will you face in this industry?
Hatch: At American Express I held seven positions in 22 years, so I’m used to going into new positions and developing things quickly. I learned a lot about customers, branding and loyalty creation. Now I have a new and different model to change the consumer experience.
This is about building brands—creating a significant lifestyle brand for St. Regis and a hotel brand for The Luxury Collection. It’s less about the hotel business and more about consumer lifestyle creating. I love to build brands, focus on consumer needs, create service transformation and create new experiences for consumers. And whether doing it in financial services or hotels, you use all the same tools.
But this one is global. I haven’t done global brand building before. And building something with a physical footprint— I worked more through direct marketing and advertising. Having hundreds of people that represent the brand... that creates opportunities to delight customers. Or risks, depending on how you look at it.
HOTELS: We’ve heard about St. Regis’ aggressive growth path and the properties scheduled to open over the next three years. What are your long-term growth goals for the brand?
Hatch: Could we triple or quadruple over the next five years? Yes—it’s all about what makes economic sense and what you can do well. But we are not thinking that doubling is sufficient.
If you take the luxury consumer overall [including Luxury Collection consumers], there is no shortage of interest. The appetite is there—there’s more demand than ever.
HOTELS: Is mixed-use a long-term strategy for Starwood in luxury hotel development?
Hatch: Absolutely. I think it’s a great part of our [St. Regis] heritage, and it’s valuable to developers. More importantly, consumers vote every day that they love it. Before opening San Francisco, we had sold 80% of the units. If consumers like it, you’ll continue doing it. There is lots of wealth today, and people want multiple residences.
HOTELS: Steve Heyer says you have a ‘passion for winning.’ St. Regis and The Luxury Collection are doing well for Starwood but are being outperformed in RevPAR growth by the W brand. Does this motivate you?
Hatch: I want to do better than my competitive set in the marketplace—I’m much more externally competitive. I want to be better than Four Seasons, Peninsula, etc. You must understand the consumer, build to your competitive advantages and the competition’s weaknesses. That’s really where my focus is. If I did better than W, but not better than my luxury competitors—I wouldn’t feel very good.
HOTELS: What’s it like to be a female top executive in an industry dominated by men? Do you see yourself as an advocate for women in the hotel industry?
Hatch: I think of myself first and foremost as a business-person, and secondarily as a woman. Having said that, I recognize that I’m a role model for others—it’s part of the territory. I take being a role model to heart. But pushing any company to promote based on anything other than performance is not really what I think about. I love to develop talent—but I have to say that I like to develop men as much as women.
I think most of my career I’ve been able to be a role model because the challenge is balancing family life and a career—can you do both? Modeling that you can is far more powerful than anything else you can do.
WHITE PLAINS, NEW YORKIf Westin markets it, will they come? The innovative brand of Starwood Hotels & Resorts is best known for launching the “bed revolution” when it introduced its Heavenly Bed. While it took some time for other hotel companies to follow suit, eventually nearly everyone has hopped on the better bed bandwagon. Now with its decision to become the first 100% smoke-free hotel chain (at least in North America), the industry is waiting to see if Westin will once again be a trendsetter.“While I don’t know what the reaction will be, I don’t know if it’ll have the bounce of the Heavenly Bed because [forbidding smoking] has become common,” offers Lalia Rach, associate dean, Preston Robert Tisch Center for Hospitality, Tourism and Sports Management, New York University. “People don’t allow others to smoke in their homes or their cars, and smokers have adjusted. Smokers in New York City have adjusted, and the ban has been successful—restaurants and bars haven’t gone out of business.”
Redefining The Brand
As of January 1, all 77 Westin hotels in the United States, Canada and Caribbean have cleaned and/or replaced draperies, carpeting and bedding to usher in a new era of non-smoking hotels, representing an investment of about US$250,000, according to Sue Brush, senior vice president for Westin. In time it is likely that Westin’s additional 44 properties around the world will adopt the new standards. The reason behind the decision, Brush says, is that going smoke-free is in line with the company’s brand positioning of “personal renewal,” introduced in 2005.
To support this healthy lifestyle positioning, Starwood conducted extensive customer research and found that 92% of Westin guests request a non-smoking room when traveling and do not smoke in any part of the hotel. In addition, 86% of Westin customers agreed that going smoke-free is an important first step in creating a healthier environment, and 80% said they prefer when restaurants and other indoor public spaces are free of cigarette and cigar smoke. “The findings were really overwhelming,” Brush says. “Of all the Starwood brands, Westin has the fewest smokers.”
It was because of these huge percentages that Westin decided to go totally smoke free when only 5%, or 2,400 rooms, of the Westin portfolio were designated smoking rooms anyway (and eight hotels in the system were already smoke free).
With the renovations complete, Brush says Westin will be launching an extensive marketing campaign this month, with the theme “This is how it should feel.”
Backlash?
According to Brush, there’s been very little negative feedback to date. While the company has had a few phone calls, overall the support has outweighed any criticism. The California Medical Association, for example, even released an unsolicited press release of its own endorsing the Westin brand.
So with all the early support, does Brush think other hotel companies, even those within the Starwood system, will follow Westin’s lead? “I can’t speak for other brands, but if we look at other industries, like the airlines, Northwest was the first airline to go smoke free, and everyone was shocked by it, and now they all are smoke free. So it does pay to be the first to market.”
While the industry debates the issue, in recent months several independent hotels have publicized their new smoke-free status. The announcement also has forced some of Westin’s competitors to weigh in on the matter. J.W. Marriott Jr., for example, told USA Today in December, “We haven’t made that decision [of whether to ban smoking]. Whatever the rules are in the cities and towns, we will follow those. We’ve had hotels which try to go all no-smoking for guestrooms. But big groups say, ‘Hey, 20% of our people smoke. We need to book our group.’”
Marriott has a point. While Brush says that its eight hotels that were smoke-free prior to the mandate did not lose any business because of it—including convention-friendly hotels like the Westin O’Hare Airport—it will be interesting to see how meeting planners react to smoking bans. Another issue is that much of the rest of the world still smokes. How will other markets react to the ban?
“The more interesting aspect to me [rather than group business] is how international visitors will take it,” Rach says. “While places like Ireland now have smoking bans, I don’t think it’s filtered into their hotels.”
SYDNEY Eight years ago Paul Fischmann was working for a real estate developer and suddenly found himself in charge of a 100-room, 3.5-star Sydney hotel. Although the developer purchased the property with the aim of selling off the floors as residential apartments, the local city council did not approve the plan. So with no hotel experience, the two became instant hoteliers.
Making that endeavor a success, Fischmann moved on to succeed in Australia’s booming backpacker hostel business. It was those experiences that paved the way for his new venture, Eight Hotels, a new type of lodging company that is filling a growing demand for lifestyle hotels in Australia.
“Most of the hotels in Australia are your international brand names. The boutique hotels that exist are generally very small, mom-and-pop style,” Fischmann explains. “For example, Brisbane is probably the fastest growing city in Australia, and there are no boutique hotels. But at the same time there are a lot of Australians and international travelers who prefer that small hotel feel. I think there’s a big market for that in Australia.”
And Eight Hotels wants to lead the way. The two-year-old company comprises three Sydney hotels—The Pensione, The Altamont and The Kirketon. That, however, is quickly changing. The company recently took over a former Millennium hotel in Sydney and is turning it into its new luxury boutique brand, Diamant, which Fischmann says will be “similar to the W hotel chain whereby we’re trying to develop really interesting, design-driven hotels, but without the pretentiousness sometimes associated with boutique hotels.”
In terms of expansion, Fischmann says the Diamant and the successful, budget-oriented Pensione are the company’s growth vehicles. For Pensione, deals have been signed in Melbourne and Brisbane as well as another in Sydney. For Diamant, the first one opens in Sydney later this year, and deals have been signed to bring it to Brisbane, Melbourne and Canberra as well.
Forming Eight Hotels
The Eight Hotels story begins with Fischmann buying a run-down, heritage building in Sydney, which, after much refurbishment, became The Pensione hotel. While he was developing that property, a lease became available on the Altamont hotel, a property that had been marketed as a very exclusive hotel because a once-famous nightclub was located in it. However, as those celebrity-filled days were over, Fischmann says the hotel was still very expensive and “out of the reach of regular travelers.” He repositioned it, dropped prices by 50% and opened it to budget-conscious travelers “who wanted something interesting.” In the next 12 months, the company is redeveloping the property to build a larger hotel there.
Shortly thereafter Fischmann also acquired the 6-year-old Kirkland hotel, which he describes as “Sydney’s version of The Royalton,” the swank, former Ian Schrager property in New York. “It was supposed to be Australia’s first boutique hotel, but in our opinion it was incredibly overpriced for what it was. The owners had done a lot of good on the marketing side (which, like the Altamont, is why Fischmann says he would never change the name) but were not the best hoteliers,” he says. So again he repositioned it at a lower price point to introduce a “cool, mid-priced hotel with really warm service.” The hotel has done very well, with reported average occupancy at 97.4%.
With three hotels with three names, Fischmann decided he should probably brand them under one umbrella company for marketing purposes, and that’s how Eight Hotels was formed.
Why Eight Hotels?
The name Eight Hotels came about in two ways. First, it’s a way of honoring one of Fischmann’s mentors—who had loaned him money to acquire The Pensione— because he owned a well-known fashion label in Australia called Table Eight. The other reason has to do with the Chinese belief that the number eight is lucky. As Fischmann explains: “When I was putting the Pensione deal together, the owners of the land were a Chinese family. We had had a very good first meeting, and at the end of the meeting they asked for my business card. I handed over my card, and they saw that my cell phone had a lot of eights in it. These huge smiles came over their faces because eight is a very lucky number to the Chinese. That actually had a lot to do with getting that deal off the ground.” Fischmann adds that with much of his business coming from Asia—and particularly the growing Chinese market—it would just be a good name to attract Chinese visitors. “And it is,” he says. “It does actually make a difference.”
In addition to its name being a strong marketing tool, Fischmann says the company relies predominantly on the Internet to get its name out and compete against the big brands. The company generates about 65% of its sales through the Web. The other strategy is simply word of mouth. “We want to make sure every guest that comes in the door has a great time at a great value,” Fischmann says. “We have lots of referral and repeat business.”
E scaping the day-to-day stress of everyday business life is one reason for the growth in adventure travel and, to satisfy this, developers are going further into hitherto undiscovered areas to offer extreme adventure. One of the companies building adventure lodges that offer activity plus eco-awareness is the established Amazon tour operator, Fremen, based in Cochabamba, Bolivia. They are forming the Tayka Network of Hotels, specializing in the Bolivian Andes, and among those under development right now are the Hotel del Desierto and the Hotel de los Volcanes, giving travelers the opportunity to visit the Uyuni Salt Flats and the Eduardo Avaroa Andean Flora and Fauna Reserve.
National or regional companies can provide balance to the global multi-brand giants, and there is great strength in a domestic brand, says Donald Macdonald OBE, the former Stakis executive who set up the eponymous Macdonald Hotels, West Lothian, Scotland. Having taken his company private in 2004, now 60 hotels strong, Macdonald says he is helped by partners: The Bank of Scotland and his Chairman Ramon Pajares. The group is always interested in existing hotels or new developments in the UK.
In Africa, one of the canny regional hoteliers is Saudi Arabian soft-drinks tycoon Adel Aujan. He first went to Mozambique in the 1980s, fell in love with the country and started building up such resorts as Matemo Island Resort and Medjumbe Island Resort on Mozambique’s north coast, close to the Tanzanian border. Now he is thought to be keeping an eye on Bazaruto Island, off the Mozambique coast.
Sun International, Sandton, South Africa, is already in Mozambique. Now, apparently, CEO Peter Bacon is looking north to Tanzania and Nigeria, and across to Luanda, Angola, on the west coast. Sun also is expanding domestically. The giant Sibaya casino and entertainment complex outside Durban, in KwaZulu Natal in the Eastern Cape, already has one integral hotel to cater to the growing number of high-rollers. But now a separate hotel is being built on virgin hillside near the Sibaya’s Zulu cultural village.
The Middle East is about to see the rise of its own-brand budget lifestyle properties. Rotana Hotels Management Corp., Abu Dhabi, UAE, is launching the Centro brand. President and CEO Selim El Zyr intends to have 25 Centro hotels open throughout the Gulf and the Middle East by 2010. High-tech and outstanding meeting facilities will be complemented by above-average fitness facilities, El Zyr says.
Deli-style dining and food to go could well appeal to local guests, who want privacy when dining in such countries as Saudi Arabia, where restaurants must have men-only areas and screened-off areas for families, plus all women.
Watch the growth of Celadon International Hotels, Da Nang, Vietnam. CEO Paul Stoll is setting up a trio of labels: The luxury Celadon brand, the budget Waves concept and Exotica, which will comprise individually themed hotels. He already has at least 10 projects underway throughout Vietnam. He also is targeting China, with Suzhou Shouzhou in China’s Shanxi Province signed and Beijing under discussion. The German-born Stoll is renowned for his marketing vision (after many years in Hong Kong with the Regent, Le Méridien and New World, in Vietnam he set up the Best Hotels Alliance and the World Heritage Road to give tourism clout), and he has found a new niche with Celadon.
Mainland China not surprisingly is attractive to nearly every international brand, and especially to those on its doorstep. Duncan Palmer, managing director of The Langham London and one of the eagles for Langham Hotels International, Hong Kong, says entry into China is essential. His company is looking for joint investment or management contracts. As more global mega-companies sell their bricks and mortar assets, so will owners appreciate working with management companies who still understand an owner’s viewpoint, he says.
Send your news via e-mail to: mary.gostelow@wowtraveler.net
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