Luxury Institute News

January 29, 2009
Campden FB

To some, it may sound like an odd pairing. Owner of the family-controlled Marriott hotel chain Bill Marriott is jumping into bed with king of the hipper than thou boutique hotel Ian Schrager. Their new $2.8 billion joint venture, recently named Editions, is a chain of fashionable, affordable hotels which promises not to look like a chain and has made a commitment to environmental responsibility.

While Schrager will lead the charge on concept, design, marketing, branding, food and beverage, Marriott is overseeing the development process and will operate the properties. Hotels are planned for Los Angeles, Washington, Chicago, Miami, Costa Rica, Madrid, Paris and London and could eventually extend to 200 locations.

With around 3,000 properties and 500,000 rooms spread throughout 70 countries, the Marriott empire spans the gamut from moderately priced chains like Courtyard and Fairfield to the sumptuously luxurious Ritz-Carltons.

Meanwhile, Schrager’s scarily fashionable hotels from the Sanderson and St Martin’s Lane in London to the Hudson in New York, the Mondrian in Hollywood and Delano in Miami, regularly welcome the likes of Kate Moss and Madonna. The design, not to mention the social scene, in Schrager’s dramatic lobbies, has revolutionised urban hotels and spawned a host of imitations.

With plans for the first opening slated for 2010, it’s early days yet. But could the edgy Schrager and super conservative Marriott come up against each other? After all, Marriott hotels have bibles in the bedside tables while Schrager’s hotels are typically frequented by design-conscious types.

Brooklyn-born Schrager co-founded the hedonistic nightclub Studio 54, which later closed and saw Schrager emprisoned for tax evasion. Bill Marriott is a Mormon who took over a root beer stand in Washington DC owned by his father and went on to build the biggest chain of cookie cutter hotels in the world.

Still, there is lots to suggest the collaboration could be timely. Recent months have seen occupancy rates at both hotel groups dip 10%. Before the economic downturn though, boutique hotels’ per room revenue growth in the US has averaged 11% a year, a third above the norm for the industry, according to Smith Travel Research.

Schrager believes über designed hotels have now reached their peak. “It’s time to go away from design because it’s over the top now,” he said recently.

In addition, the day of the cookie cutter hotel might just be over. New York based Luxury Institute research suggests consumers are now far more inclined to choose intimate venues in hospitality with great service and unique experiences.

Luxury Institute founder and CEO, Milton Pedraza, is upbeat about plans for Editions. “At a time like this you need deep pockets and staying power as a boutique hotel designer and developer. Marriott has access to their own funds and can access the funds of others since it has such a great track record,” says Pedraza.

So perhaps Editions could well be the start of a beautiful relationship. Pedraza certainly thinks so. “Now is the right time and it makes for a great marriage. Marriott knows how to locate, build and manage hotels and Schrager knows how to design and create a great boutique hotel experience,” he says.

Al Bayan
January 1, 2009

Mr. Cooper is the first to be interviewed in Al Bayan among a selection of 16 leaders in a new Business section called “From the Top.”

Some would accuse CEOs and Presidents of being behind the current crisis, while some others think they are victims. But in either case, they shouldn’t be silent but explain what’s happening and give their opinions. Arabs tend to say “I don’t know” and this make us see a future full of questions without answers; but this is an Arab habit, we face problems with tears and we suffer… from what we read every day we first thought that the crisis is a UAE one, or exclusive to Dubai.

Introduction:

Therefore our paper decided to feature the in depth opinions of International Leaders on this issue.

His name is like that of a Hollywood star and his looks convey the same impression. But in fact, he doesn’t work in the movies and the stars sleep on his beds’ pillows in a luxurious environment. He doesn’t speak much to the media; he runs 72 hotels in 25 countries, and in the last two years he needed lot of energy to be present to open 33 new hotels.

Simon Cooper, the President of The Ritz-Carlton, a brand that movie actors mention in their films, spoke to Al Bayan Business about the international strategy of the luxurious hotels with regard to the financial crisis that threatens the luxury world by losing a lot of customers, and shared the group strategy for Dubai and UAE in the coming years.

Says Mr. Cooper: The evolution of The Ritz-Carlton brand is not only done by changing styles from aristocratic/conservative to contemporary, which applied to the majority of the group hotels in the recent years, but also in not giving up “the elegance.” If the history remembers what Edward Weiner has done, the famous developer who built the first Ritz-Carlton hotel in Boston in 1927, they should know that what Simon Cooper is doing today is not dissimilar. Weiner, during the 1929 crisis, decided to keep the lights on in some unoccupied rooms to show that “success” is still there. Cooper, after seven decades, has his own recipe to fill rooms while the crisis ghosts are coming back.

His recipe has many ingredients: Ladies and Gentlemen: that’s how the Ritz-Carlton describes their own employees.

According to Mr. Cooper, these employees build a luxurious brand for the hotel and not the other way around. What if the crises force the management to resize their Ladies and Gentlemen team? Mr. Cooper replies: “We have moved many of our employees from hotels that are very affected by the crises like in the US and Europe to our hotels in the Middle East and Asia”. With the decrease of Marriott International income (the mother company that own Ritz-Carlton) by 7.1% in the third quarter of 2008 compared with the same period of 2007, it becomes realistic to move an executive chef from the States to our Jumeirah resort in the UAE. We want to provide our employees the possibility of working 30 hours a week so they can keep their benefits.” Mr. Cooper thinks that keeping the workforce is the biggest challenge: “These people know by heart the credo content (a Ritz-Carlton guide carried by everyone in the company in the world) and it’s not easy to let these people go”.

Baby boomers

Mr. Cooper noted that the picture has changed and headlines have been amended. Baby boomers are now a demographic everybody wants to tap. Hotels are looking now at retirees and their disposable income as the liquidity they’re looking for. Of course we will witness shortly many hotel products and offers for this category of people who are now around 65 years old, while there will be a drop in the number of young executives whose liquidity has been affected because of the diversity in their business activity. The new strategy that the Ritz-Cartlon Hotel Company is now applying features offers that can keep the customers more than a week in the hotel. He said that the world will notice again this age group that they’d thought were inactive. These are the people who will now have the funds at a time when the luxurious brands in the world are facing a challenge in attracting guests/consumers.

When the US and her allies won the second world war, the American soldiers came back to the States where a lot of girlfriends, fiancées and wives were waiting for them. This was in 1945, when the US witnessed the birth of a big number of babies (baby boomers) especially in 1946 which was considered as the birth year of a full special American generation.

“Luxury for whom?”

Milton Bedraza, the CEO of The Luxury Institute says in a series of studies that the financial crisis had in the last months “an impact that could lead to paraplegia” on the luxury products in the US market which is considered the largest in the world. It is expected that the sales will drop dramatically, more than in the last two crises. He added: “the jet planes, the jewellery and the expensive clothes sales have decreased because the consumers are going back to the traditional bases in spending, as the price is very important.”

An explosion that did not last Says Mr. Cooper: The luxury products markets in the world witnessed an “explosion” in the last decade while salaries were increasing, especially in emerging markets, such as Russia and China, where many consumers were able to buy expensive handbags, Italian clothes, Ferrari cars and sleep on Ritz-Carlton pillows for a long period for the first time in their life. During that period, the traditional brands of luxury products including Bulgari and Cartier introduced new production lines that many people can afford to buy, aiming at reaching a bigger number of consumers. The world was getting ready for an extravagant wave of luxury before being stopped by the dam of the financial crisis.

Did we say everything? Not really. Some markets like Asia and the Middle East are still far from the deep impact of the crisis. We froze two projects in the US but we’re going on with our projects in Dubai, Ras Al Khaimah, Egypt, Bahrain, Oman, Doha and others. People will not stop enjoying the experience of luxury in luxurious hotels, but we need to design more creative and feasible products from the value point of view.