One-On-One with Ritz-Carlton President And COO Simon Cooper: Recovery Steady As Groups Return
Ritz-Carlton Hotel Co. president and COO Simon Cooper recently spoke with Business Travel News hotel editor Michael B. Baker about corporate travel's role in the luxury tier and changes within parent company Marriott International.
Business Travel News: Are you seeing business and group travel levels recovering?
Simon Cooper: 2010 probably is going to be categorized by two things. One is a steady return of business. I wish I could use the other s-word, sudden, but it will be steady. Because 2010 is not going to be a rebound, but more a continuation of 2009, it is going to create a certain amount of distress in the real estate asset arena. You began to see it last year. The first one to stop work was Boyd Gaming in Las Vegas. From then on, you saw a number of things. None of us will escape the fact that the performance of many hotels in a number of markets, given the dramatic RevPAR reductions and reduced business volumes, is going to create a certain amount of distress in the commercial real estate aspect of the business.
BTN: What's the rate outlook?
Cooper: Rate integrity is very difficult. We're always trying to walk a very fine line. It's very important to keep our hotels busy. It's not just a financial implication. It's also because we have terrific ladies and gentlemen for whom we want to continue to provide employment. Unfortunately, we have probably today about 800 fewer leaders around the world than we did this time last year, not to mention fewer hourly employees, obviously, related to lower occupancy and smaller banquets.
We're trying to walk a very tight line between what it takes to get an individual or group to book and what kind of a rate compromise we have to give to get them to do so. Ultimately, busy hotels operate better than at lower occupancies, so we want to keep our hotels busy and our ladies and gentlemen gainfully employed. This won't last forever, and we're going to need them as we work our way through this.
BTN: Do you foresee further cuts in service offerings, like restaurants?
Cooper: We and our competition are down to a pretty tight base of business, and I doubt you'll see much change.
BTN: Does the perception problem still persist for luxury hotels?
Cooper: We see very little of that anymore. We're seeing a number of groups coming back, either because they had to have their meetings or they had them elsewhere and they had too many complaints. We're being flexible. Group is an area where there's no shortage of space both in our hotels and our competitors. The values out there at the present are very attractive, and they'll remain that way through 2010. We all have to operate more intelligently, but it is a very competitive environment. Groups are coming back, and I'm not seeing anywhere near the angst that there was last year.
BTN: What is your strategy?
Cooper: Things like Meaningful Meetings are a great way of closing business. When people are at the tipping edge, it's a great way to say that we understand it's a challenging environment. You want to meet with us, but is there something else we can do to firm up the business? It's amazing how beneficial it's been to some groups.
Meetings are coming back. They're certainly not as lavish as they used to be. Checkbooks are very tight. If you're having a meeting in one of our hotels, don't look for the overflowing fruit bowl. They're being more cautious, and it's reflective both of a consumer psyche and that a lot of businesses didn't do particularly well through this, and while they want to get their customers or their employees together, they're still being thrifty in terms of the meeting content, how to go about it and what they're going to spend. We're trying to adapt to that and recognize that it's reality.
BTN: Is this the "new normal?"
Cooper: If you think of the latter half of the last decade, up until early 2008, as five years of excess, I don't think you're going to see that for a while. It's going to be a very measured recovery from both a very discerning consumer and a very discerning corporation.
BTN: Do you ever see rate-inclusive Internet access ever being a standard at luxury properties?
Cooper: I don't think so. Most luxury customers have different spending habits. We have had programs where we have a certain amount of fixed packages, certainly in the summer with the non-seasonal traveler who is a little more budget-conscious.
BTN: You recently announced the closing of your Lake Las Vegas property. Are other markets particularly challenging or great performers?
Cooper: With Lake Las Vegas, you've only got to see the challenges of Vegas, and you can well understand that Lake Las Vegas does better when Vegas is busy, and the village was never really that complete. It really wasn't an experience that was commensurate with what our guests are looking for. There was a certain inevitability to it. When somebody asks me which is our best performing hotel, usually I'll say, "On what criteria?" If you ask me today, it would have to be China, and it would be Sanya. Our resort in China last year tripled what they thought they would do in terms of budget. It's been an enormous success, with 95 percent Chinese customers. Asia is recovering more quickly and was much stronger through 2009 than any other market.
BTN: What developments are on tap for this year?
Cooper: This year, we'll open Pudong, and toward the end of the year, we'll open Ritz-Carlton Hong Kong—at 118 stories, the tallest hotel in the world.
BTN: Do you see financial markets loosening?
Cooper: There's a certain amount of distress North America has to go through before credit is readily available for hotels. Outside of North America, there is much more activity and credit available.
BTN: How has reorganization within Marriott affected things?
Cooper: It's affected a lot of people, many more at Marriott. Marriott has been a Washington-based company with international operations. They clearly recognize that growth is going to come from global operations rather than from North America in the future. They clearly realize to take advantage of that, they're going to have to have a global organization. That's why they're transforming from a North America-based company with international operations to four continental structures, in order to be much more aggressive and put more resources into major continental markets, such as Asia, where there is much more potential in terms of consumer wealth, spending and economic growth.
BTN: Do some of Marriott's new brands, like Edition and the Autograph Collection, present a challenge in terms of maintaining identity?
Cooper: Edition isn't in the luxury set. For Marriott, that's Bulgari and Ritz-Carlton. Edition is more targeted at W and upper upscale lifestyle. It's certainly a positioning that W has done particularly well with, in terms of growing their global presence. Autograph is a brand of the times, because in 2009 a number of independent hotels had an even more challenging time than branded hotels. If you have a great independent hotel, maybe you'll want to come under the brand umbrella of Marriott, with our various marketing channels.
BTN: How have you seen service evolve at Ritz-Carlton?
Cooper: Imagine the lobby of the Ritz-Carlton Boston 25 years ago. You know it was a pretty homogenous customer in terms of age, style, race, etc., and relatively simple to figure out what they wanted in terms of service. Today in the lobby of a Ritz-Carlton hotel, genders vary, dress codes vary, races vary, ages vary and you now have families, so there is so much more diversity. There is no one-size-fits-all in terms of service delivery.
BTN: What about club floors?
Cooper: We've upgraded our club floor product in a number of our international locations and some of our domestic locations. It has three purposes. It's great for business travelers who want a more secluded environment to meet with somebody. They're very good for female business travelers because you don't have to go to a restaurant if you want a light snack. They're good for business travelers in international locations where they've taken their spouse.