ABTN speaks to Paul White, CEO of Orient-Express Hotels, about the state of play in the luxury hotel business, where Europe is headed, and why trains beat hotels hands down.
Orient-Express owns or part-owns 50 businesses operating in 24 countries. Its 41 hotels include the Hotel Cipriani in Venice, the Grand Hotel in St Petersburg and the Hotel Ritz in Madrid. The group also has six tourist trains, including the legendary Venice Simplon-Orient-Express.
How are things in 2011 for Orient-Express?
We had a good year in the States last year, great elsewhere, slightly disappointing in Europe. Now Europe is coming back, and the US is a little disappointing. Also, bookings are coming in so late that for our general managers it can be like driving in the fast lane with your eyes closed. Generally we are tracking more than 20% ahead in Europe, the rest of the world is coming along nicely, but US domestic is not as strong as we had hoped. What is underpinning Europe is the US traveller, but in the US domestically they are not spending. With the leisure traveller we will see occupancy and rate growth. With business travellers meanwhile we are seeing occupancy, but it’s very difficult to push corporates on rate. Overall, though, I feel pretty good about this year, I think we’ll do well.
Could you tell us a little about the history of the group?
Very simply, a gentlemen called Jim Sherwood bought the Cipriani in 1976 and went on a shopping spree. Then Simon Sherwood came along and turned it into more of a business. What we are doing now is redefining it as a company. We have sold a few properties which were not a great fit with the portfolio and we want to position ourselves as a luxury brand. I don’t want to sit alongside Four Seasons and Ritz-Carlton, I want to sit alongside Hermes, Louis Vuitton and Ferrari.
And will the expansion mean you move into management contracts rather than owning or part-owning the properties?
The management contract issue is driven by two things. One, our balance sheet will not enable us to go in as an owner in London, Paris and New York. The second is that in our best ever year of trading, we only had 60% occupancy. So there’s a big opportunity there. Having a management contract in London or Paris will raise the profile of the company and will help fill those rooms. We still want to be an ownership company where there’s an opportunity, perhaps Central America, for instance, and South East Asia, where it makes sense to be.
Why not just sell the properties and concentrate on the management contracts?
I don’t see it as part of the story going forward. Once you’ve sold everyting, you can’t go back. I see there being a balance. Around 80% is hotels, and 20% is the trains and safaris. I think it will be similar in terms of ownership and management. And where we can we would like to have an equity share in a development. Partly so we can look across the table on equal terms, and partly because we would be the natural buyer if they ever leave.
Everyone wants to be in cities – what’s your unique selling point?
Because of our leisure focus, not just a pure corporate focus, we have the ability to have hotels at a much higher RevPAR (revenue per available room). There are only a couple of places in the world where we are not number one in RevPAR. That’s the selling point. Also, because of our scale, an owner is not dealing with a vice president for development, they get the personal attention.
You don’t have a loyalty or recognition programme. Any plans?
We’ve never gone down the route of points, but the level of repeat guests we get signifies there is a lot of loyalty there. We made a significant investment last year in CRM (customer relationship management). The whole way we are using the brand is that the pre- and post-trip contact is through Orient Express, but when you’re at the propert it’s with the property. We are looking at the value-added side, the real guest recognition side.
Our employees are our biggest sales force. We have started a cross-selling programme where they can visit other properties in the group on a complimentary basis after a year’s service, building up to five years service where they can go for up to a week. And then they come back and tell our guests about it and “sell with conviction”. This year is all about getting the message of Orient Express out there, but keeping a bit of mystique about it.
Why do trains as well as hotels? Wouldn’t it be better to concentrate on the hotels?
No. The trains and cruises are the shop window. People see the train, and I’ve got Agatha Christie as my best marketing tool. It’s also very profitable. It’s more of a commodity style purchase. The market research showed us the main competition to a purchase of an Orient Express train or cruise is a diamond ring. Because they have a much larger lead time, they have been very much more robust during this cycle than the European weekend break. It’s part of the reason we are perceived in the market as a luxury brand.
What will the future hold?
If you look at what has happened in the last two years, Europe got decimated. The currency on top of everything else didn’t help. South America and Russia to a certain extent made the difference for us. A third of our profit before tax came from those two regions. Now I think Europe will come back.