Chris Cahill,chief operating officer for Fairmont Raffles Hotels International, talks about how the merger of Fairmont and Raffles hotels is working
How are things globally?
Challenging. I used to think having hotels all over the world was a good thing so you wouldn't be too dependent on one market, but in this particular market it's challenging everywhere. In the US, we have a lot of hotels and it is very difficult. Europe is less of an issue for us, primarily because we don't have as many hotels open. The Savoy isn't open now and Paris is still being developed, so because they're not open we're not hurting so much. The Middle East for us is our two properties in Dubai and we are feeling the effects there as well, though overall it's a small part of our portfolio. Then Asia and China in particular have been really slow, Singapore as well. So it's been pretty bad news all over the place. We're in 29 different countries.
How do you sell your way out of it and encourage people to travel?
I think there has been a fundamental change in the accommodation sector over the last 10 or 12 years. Prior to the mid ‘90s, when you had economic downturns, people tended to pull back. But starting from then, there was growing evidence that people had moved vacations and travel from discretionary to essential spend. That's been challenged, but so far around the markets around the world, leisure is up. Rates are down, so people are getting the benefits of the compressions, but nevertheless leisure is still up and this bodes well for the recovery of the sector. The second thing is getting rates back is tied to getting people moving. Since leisure is already there then business at some point has got to come out. Once they have confidence in the global banking system, they will start travelling. We're seeing bits and pieces of it all over the place, lots of short term corporate meetings, where they say ‘We finally have to bring people together and plan on the future'. So I don't think there's anything you can do to stimulate travel, I just think people need to believe we've hit the bottom.
You are in charge of both Fairmont and Raffles. Do you think people understand the difference between the brands?
Research would say they understand the difference. Raffles is the super luxury, transient brand, with fairly large guest room sizes and lots of suites. It tends to be more internationally sophisticated in terms of design. Raffles hotels are not going to be as rooted in the local community as Fairmont, which is ‘authentically local', being all about the destination, unrivalled presence and having much more scale and substance to them. When we merged the companies in 2006 we felt Raffles wasn't clear and was small enough that now was the time to make the changes, and it has helped spur the growth. So the Raffles Plaza in Singapore was a 750-room meetings hotel and we converted it into a Fairmont. The Montreux Palace in Switzerland had 55% of its business from groups and business while for Hamburg in Germany, which was a property that we owned, we could have made a decision to go either way, but we felt that the mix of business in that hotel fitted much better with Fairmont.
We made a strategic decision if you're going to run multi brands, you want them very distinct. No disrespect to the mega multi brand companies but they can end up with them being pretty similar in look and feel and separated by price and feel only, which is a tough way to keep a brand separate. We didn't want to create a super brand. Having said that we leverage the company in every way we can. So all back of house activity will support all three brands: development, legal support, reservation platform, global financing, accounting, technology and procurement are all shared.
We also merged global sales, because we have made it easy for them to explain the difference. So we do a lot to leverage it without diluting the brands. Fairmont was a fairly robust company with 50-some hotels going to 70, so we were able to use a lot of that infrastructure and any best practice the other brands had, but it allowed us to save time, money and effort because developing this stuff takes so long. We try to do benchmarking against multi brand companies but our scale is so small with only 92 properties, it's hard to tell we do a lot of benchmarking on the property side.
Where will you be in 2012?
Based on what we currently have under construction/development, we'd be at about 120 hotels in total. But that presupposes we won't add anything else in the current environment, and I'll think there'll be conversations, particularly for Swissotel and Fairmont. Swissotel has a great opportunity in this environment, for conversions as well. Generally you don't like to tie brand to country of origin, but in this case it's in the name, and it has a lot that people feel pretty good about today: safety and security and so on. It is in the sleeker upper upscale category which competes with the Marriott and Hiltons of this world and in a lot of markets it can compete very effectively because they are so well respected. We've just opened Shanghai, Kunshan, and also Beijing and I can see a lot more happening in China, so I'm cautiously optimistic but it doesn't have the same profile but might have more potential in this environment.
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Fairmont Beijing |
Raffles has only seven properties, with 15 in development. Isn't that daunting?
Two years ago it was more daunting when it looked like we could have 25 because there was so much coming. Now developments are stretching out and not coming online as fast as we thought they would for a whole bunch of reasons and it allows us to have more time to absorb them in the system and get them open properly.
How is your geographical footprint with the brands, and how will the new openings such as the two new Mecca properties help?
One of the great things about the merger between Fairmont and Raffles was there wasn't really a lot of geographical overlap, so that helped. Going forward, the new openings are helpful, but it's not as great as we'd like. If I look at Fairmont, we are going to add another property into Vancouver and one into Pittsburgh, so that's a couple more in the US and Canada, the Savoy in London is obviously helpful for Europe, as is new Le Royal Monceau in Paris. If you can start knocking off some of those key cities then it makes a big difference to the brand development. Cairo Nile City is helpful for Middle East, as are the Mecca properties, and we have a new property in Zimbali adding to the Zimbali Lodge, so I think the concentration on Africa is a good thing. We also have Beijing opening this year, Kunshan and also the Peace Hotel next year in Shanghai. So that's all going to help Fairmont get concentration where there was very little. In the case of Raffles, Mecca is going to be good for us. They are going to be the two most prominent hotels in that destination targeted against a very narrow and specific demographic. We've had a lot of conversations internally about having the two properties there, around how do we then leverage that for our others hotels in Asia, America or wherever. So we would use that hotel as a billboard for the brands.
How is India looking?
We have two Fairmonts going in right now - Hyderabad and Jaipur, but it's a market we would like to get more products in for any of the brands. We are getting two started with Fairmont, which has always got its challenges because you need concentration, but we have a lot of other projects under discussion so we felt pretty confident that these two wouldn't be orphans and then we backfill some properties.
Why didn't the Savoy become a Raffles?
It just didn't fit. We didn't want to have the image of Raffles to be heritage or colonial, we wanted it to reflect its true brand attributes, which when we went and talked to the customers was residential, transient, and more intimate spaces, so they are very exclusive and tend to be smaller. Fairmont is multi-segment business - meetings, travel agents, corporate transients, leisure transients. It's got it al and a relatively big banquet house like the Savoy which has an unrivalled presence was more a Fairmont. And the contracts were already long done by that time.
Is Raffles Singapore for sale?
When we merged the companies in 2006, our stated strategy was to sell down the property, which we did, selling 18 hotels, so our objective is to become a pure play manager with some partial equity. It [selling the Raffles Singapore] is not inconsistent with our strategy, it came out in the press that it was an imminent thing but there was a little bit of hype about that. Right now the market isn't great for selling. We wouldn't sell without a long term management contract, so it would remain part of the group.
What do you think the future will hold?
When the world stabilises, who knows what's going to be the perception of people and the type of product they want to pay for? We've been through an era of super luxury and conspicuous consumption, so will people want inconspicuous consumption and in doing so change their value set around the product?