Four Seasons Weathering Storm - 2001-07-16

BTN: In light of this year's industrywide softening of occupancy rates and room revenues, there are some who believe the deluxe tier is the most recession resistant. Is this your opinion?

Wolf Hengst: I don't think any business in times of recession is recession proof. I do believe, however, that our typical guest around the world doesn't stay in our hotels simply because they're luxury properties. What we do--and what we believe luxury achieves--is provide a level of service that allows our guests to "travel light," to concentrate on the business at hand, to travel surprise-free with a sense of security and comfort. And for that, our customer is willing to pay a certain premium.

BTN: But the economic slowdown must be having some effect?

Hengst: As I look at the past 25 years, there have been a number of economic cycles. While there certainly has been an impact at Four Seasons, as there has been at every hotel company, our customers tend to be more loyal because they have to continue doing their business. They're there to function at the highest level at all times, so we provide them with an environment that allows them to accomplish this.

BTN: Four Seasons recently announced aggressive expansion plans. Will the present economic situation cause you to rethink these plans?

Hengst: In fact, the opposite probably will be true. Depending on their level, down cycles actually provide us with opportunities for accelerated growth, to strengthen our product and grow into new markets.

BTN: Four Seasons has 51 properties around the world. As you move forward, how important is the business traveler to your strategic thinking?

Hengst: It's really the core of our business. We're in almost all the financial centers of the world, and we're the only company at our level that can say that. Be it small group or individual, corporate travel is the backbone of our business. This naturally flows into the leisure business, because customers who have accepted the standards of a Four Seasons as business travelers then expect the same when they travel on their personal time. They're the same customer. We see it every time we open a hotel. Look at Paris, where we opened a year ago. The Paris customer is very much the Four Seasons worldwide customer, the business traveler who occasionally stays an additional two or three days to enjoy the destination.

BTN: Do you actively negotiate rates in return for volume commitments?

Hengst: We have major corporations throughout the world that do business in multiple destinations, while some just stay in a handful. The hotels typically negotiate individually and extend corporate rates, depending on their negotiations. Depending on the volumes companies give us, which will vary from city to city, they get a commensurate negotiated rate. Typically, for major corporations we have a worldwide corporate rate, which they're eligible for, based on certain criteria. The rate itself varies. The rate in Houston, for example, isn't the same as the rate in New York.

BTN: Is there a minimum number of hotels a buyer would have to use to be granted national or global account status?

Hengst: It's the amount of room nights per year and doesn't have to be in a certain number of hotels. It can be one or two or three hotels that would give them that privilege. A couple of hundred accounts worldwide fall into this category.

BTN: Given how soft the market has become in certain cities, it's hard to believe that availability of rooms was a major issue through most of 2000. Can an account produce too much volume, particularly on peak midweek nights?

Hengst: If we've made a commitment, there are no barriers. If there are barriers, then they're negotiated. The hotel may say, "We'll give you so many rooms at the negotiated rate." If the hotel typically runs Monday to Thursday at 100 percent occupancy, then a deal will be negotiated to give so-and-so so many rooms, but that's rare. If a deal is made on a given rate for a certain time, they honor it. Similarly, we don't negotiate the last room down. It's not something we've entertained, and I'd be surprised if it was something we're going to look at in the near future. If there's a room available, the traveler with the negotiated rate gets the room.

BTN: So far this year, Four Seasons has opened hotels in Dublin, Caracas and Prague, with a San Francisco property opening shortly. In light of these diverse locations, how do you ensure a consistency of both product and service?

Hengst: Our business is really about human resources, meaning it's the quality of people that we have that can go from one location to the other to carry the culture forward, and the standards that are really part of that culture. We have tremendous bench strength to fill new positions as we open around the world. I would have thought Cairo, for example, where we opened a year ago, would be one of the most difficult cities to launch a new hotel because there weren't any international quality luxury properties already operating there. But the hotel opened as well as anything we've opened in the past 15 to 20 years.

BTN: To what degree does the property have to reflect the local culture?

Hengst: The business traveler expects the same quality and level of service, regardless of the local culture. What we strive to do is create an amenity environment that is reflective of the local surroundings. In certain parts of Asia, for example, it's expected that you provide butler service, something that you wouldn't do--and Americans wouldn't want--in North America.

BTN: Is there an actual playbook you use when opening a hotel?

Hengst: Yes, on a couple of levels. Most importantly, you have physical standards that are incorporated into each hotel, in terms of size of the guest room and the bathroom, and that you have certain facilities--everything from the number of restaurants to the spa to the fitness center. At the same time, the hotels physically may look very different from one location to the next because they represent different cities and cultures.

BTN: And the service levels?

Hengst: Here, too, we have distinct standards that have to be maintained from one hotel to the other. They tell you when certain things have to happen and in what amount of time, everything from how long it takes to get room service deliveries to one-hour pressing, overnight laundry, etc. And not just so-called room service, but truly 24/7 room service, where you can get anything at any time. As a result, if you stay in New York or Prague, there are certain performance standards you can count on. None of the guest experience is left to chance. It's a science, an organizational process.

BTN: What about Four Seasons' often-cited focus on personal attention?

Hengst: By all means, it's the sensitivity of asking a telephone caller at midnight in an international hotel if the person realizes what hour it is. "Do you want to be put through or do you want to leave a message?" This is a policy for our telephone operators, but it's also about being intuitive when you provide service. What is it that will drive you nuts at two o'clock in the morning? You know, this focus is something we've been working on for four decades. Doing nothing else. In a 200-room hotel, there are 5,000 encounters a day between the customer and our employees--bellman, doorman, front desk, concierge, housekeeping, telephone, laundry, you name it.

BTN: How does technology fit into this approach to service?

Hengst: What you do is keep up and provide what the business traveler of today requires. Just as in 1979, when we were the first to introduce the new technology of that day into our hotel in Washington. Believe it or not, that technology was the television remote control. In the same way, by the end of June we had high-speed Internet access installed in all our North America hotels and every property worldwide will have it by year-end. But it's not the technology. What we learn again and again from our customers is that they expect we're going to do these types of things. "You don't have to be on the cutting edge," they tell us. "What we want you to do is provide the consistency of service, day in and day out, give us that first."

BTN: Travel buyers responsible for global programs are intent on working with companies that have properties in a range of international destinations. To what degree does this influence your choice of locations?

Hengst: We try to go where our customers go. We're on pace to continue the current growth of the company, which is anywhere from five to seven hotels a year. We expect to continue to focus on small to midsize properties, so it wouldn't be unreasonable to expect the company to double in size in the next 10 to 15 years. As for whether we're a truly global company, I'd say we were certainly global because we are in the key business and financial centers of the world. That's really the most important ingredient. Yet, there are a few places still missing in that picture.

BTN: Your recently announced projects in San Francisco and Miami are part of larger, multi-use developments that include high-end condominium apartments. How large a part of the appeal is the Four Seasons brand name?

Hengst: Branding is critical. It's like when you can afford to buy a Mercedes-Benz, not only because it enhances the image you want, but you're buying security, technical expertise, future sales value, all these things. In the multi-use projects, purchasers can take advantage of all the services of a hotel guest. We provide services based on their needs, you have an à la carte selection. So the purchaser is really buying a Four Seasons experience and an independent apartment.

BTN: Many hotel companies have grown the past few years by acquiring or developing other brands, typically at different price points. Can you see Four Seasons adopting a multi-brand strategy?

Hengst: We think it's an advantage to have a single brand, because you're only doing what you do best. For 40 years since the company was founded, we've focused on running luxury hotels that provide a level of service our customers need to do business. There's no confusion for our guests or for our employees.