Fairmont Details Growth Strategy

Now fully linked under a privately held company, the Fairmont, Raffles and Swissotel brands are poised to more aggressively pursue the global corporate market.

The brands are running as one organization under a single management platform, following the completion of Kingdom Hotels International and Colony Capital's acquisition of Toronto-based Fairmont Hotels & Resorts last summer, said Matthew Sparks, Fairmont Raffles Hotels International's senior vice president for development in the Americas. With this integration, travel buyers and meeting planners seeking deluxe and upper upscale properties now have a new single source for global hotel programs.

"We can utilize our sales and marketing resources to better address the specific geographic and product-type needs of our guests, including corporate clients," Fairmont's Sparks said. "From a North American perspective, Swissotel is somewhat limited in scope, yet several Swissotels are under development internationally. For corporate guests and meeting planners, it's nice to have that additional scope in venue to provide." Fairmont's expansion likely would be of interest to corporate meeting buyers, as about 50 percent of Fairmont's business is group travel, he said, a bit more than other hotels of the same size.

Fairmont Raffles can take a broader look at expansion than individual brands could in the past, Sparks said. Swissotel has 21 properties operational worldwide, largely in Europe and Asia, and it has new properties opening in China, Estonia and Turkey this year. Its only presence in the Americas is a Host-owned hotel in Chicago and hotels in Ecuador and Peru, but the company is examining opportunities to grow the brand within North America, Sparks said. Meanwhile, Fairmont—which has about 50 hotels, mostly within the United States and Canada—will be eyeing more international opportunities.

"In Asia, we really have a very limited Fairmont presence, and that really speaks to us of the opportunity to grow those brands, where there's a strong representation and a good knowledge of the brand elsewhere," Sparks said. "There's a strong growth of pipeline product that we have coming in the Middle East, and also a strong development list and some projects that should be announced shortly in Asia. Still, Fairmont will continue to be the workhorse of North America for us, just because of its prominence here."

Maria Chevalier, vice president of global business intelligence for BCD Travel's Advito consulting division, said the strategy is similar to Hyatt Corp.'s portfolio expansion, when it began adding lower-tiered brands to supplement its upscale offerings. It helped Hyatt meet more diverse corporate needs, she said.

"It gives us a few more tools in the toolbox, whereas before, as a stand-alone company, the range of opportunities would not be as broad," Sparks said. "If it's an opportunity that's a little below Fairmont's positioning, perhaps that's a great place for a Swiss, and if it's a little above Fairmont's positioning, it's a great opportunity for a Raffles."

There also will be opportunities for operational efficiencies among the brands, Sparks said. Some of the existing hotels also could be repositioned if they would fit better with another brand—some Swissotels might make better Fairmonts, or some Raffles properties might make more sense as a Swissotel, for example.

"That's a process that's going to be ongoing. We will try to position the hotels throughout the portfolio in the most appropriate brand for them," he said. "There's all sorts of considerations you have to take into account when you do that, so it's not something we take lightly. We'll spend a lot of time thinking about it before we make any changes."

The tricky part of such moves, Sparks said, will be ensuring that all the respective brands remain distinct. To that end, each brand will continue to have a decision-making platform for its operations separate from the parent company.

The move to private ownership also will propel future developments, he said. Not having to focus on quarterly earnings will allow for investments that could take several years to bear fruit, Sparks said.

"We can be a lot more flexible in the types of vehicles we use in investing with partners on Fairmont affiliates," he said. "For us, it's opened a door to a whole new way of looking at transactions."

Advito's Chevalier said the newly consolidated high-end Fairmont is good news for travel buyers. "That segment of the industry is thriving, and we're struggling with high occupancy," she said. "Anything to support Fairmont's expansion effort is a good move."

Four Seasons Hotels, one of Fairmont's deluxe competitors, should echo the move to private ownership next month, with a $3.8 billion buyout offer from a group that includes Kingdom Hotels—which is an investment arm of Saudi mogul Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud—as well as Microsoft Corp. chairman Bill Gates' investment firm and Four Seasons CEO Isadore Sharp. Shareholders next month will decide on the offer.

Analysts said such buyouts indicate the luxury tier is attractive to investors and should provide growth opportunities.

"Four Seasons, by becoming private, should have a greater leeway in controlling its destiny in the growth of the brand," said Sean Hennessey, president of New York-based Lodging Investment Advisors.

With Fairmont, that growth eventually could include acquisitions, Sparks said. Any acquisitions likely will remain within price points similar to the Swissotel, Fairmont and Raffles brands, although the company is ruling nothing out.

"We're a very aggressive and well-capitalized organization with very strong sponsors, so I'd be shocked if there wasn't additional acquisitions and growth in the very near future," he said. "I would never say that we wouldn't look at some select-service options that could take advantage of some of our branding and infrastructure strengths, but primarily our growth will be in the upper upscale or luxury segment. That's where our focus and our expertise is."