Bartels: There's Room For Recovery

Veteran hotelier Juergen Bartels, who recently became CEO of Le Meridien Hotel Group, spoke last month with BTN hotel editor Bruce Serlen about when occupancy rates and room revenues are likely to recover and how Sept. 11 affected his plans for reviving Le Meridien.



BTN: The lodging industry, both domestic and international, has been severely depressed this year. When do you expect business travel to pick up?

Juergen Bartels: U.S. travelers cannot hold off any longer than mid-January. Business doesn't stand still. This is the number-one business nation and its business is business around the world. Singapore, Hong Kong, London and Frankfurt are all waiting. Right now, U.S. business travelers are saying no, but come six weeks, they'll start to say, "Okay, we've got to go."

BTN: Just how steep has the decline in business travel been for Le Meridien, which has most of its 144 properties outside of the United States?

Bartels: The drop has been significant, especially with U.S. business travelers, but it hasn't been felt uniformly around the world. Business travel from the Middle East to Asia, for example, is increasing. Intra-Asia business travel is increasing. Intra-Europe travel isn't increasing yet, but I expect it will. Intra-America business travel also will increase, because all these millions of Americans who have canceled in the short term will not cancel out period.

BTN: Are you seeing the same reticence of international travelers to come to New York, let's say, as U.S.-based travelers to travel internationally?

Bartels: It's been equal. In a way, it's as if America has given up on the rest of the world and the rest of the world has given up on flying to America.

BTN: Having lived through other downturns in business travel, how is this one different?

Bartels: It's unique because first there was the economic piece and then there was the terrorist piece. In terms of a recovery, I checked to see how Le Meridien fared after the Gulf War. In the first three months after that war, our business in London, for example, increased 57 percent. Within a year, it had resumed 100 percent. Based on this experience, business travel this time should start to come back soon.

BTN: But isn't January typically a slow month for business travel?

Bartels: Yes, but there's pent-up demand for travel from September through December. Business travel also basically shuts down from Dec. 18 to Jan. 6. That's when I expect business travelers to start to say, "I've got to go." In all fairness, there'll be no justification for staying home beyond that.

BTN: Ironically, Sept. 11 was the date you were scheduled to announce your plans for overhauling the Le Meridien chain, which Nomura acquired from Forte in July. What is at the heart of that overhaul?

Bartels: Meridien is remaining the brand name, but a majority of the properties are becoming what we call Art & Tech hotels. We're creating a brand within a brand that's going to claim the territory of cool hotels in the world. These hotels are edgy. The guest rooms will have not only style but substance, from the bed to the plasma screen television to the bathroom. The designer we chose had never done a hotel because I didn't want anything that's in anybody else's hotel room in our room. Boutique hotels, by the way, always tend to carry a revenue premium over the chain hotels.

BTN: You must believe there's a demand for this by business travelers—and, more importantly, travel buyers.

Bartels: When a hotel says "boutique" and business travelers go for it, they don't know what to expect. And they like that idea. The underlying uniformity of our industry—that when guests have seen one hotel, they've seen them all—turned out to be wrong for frequent business travelers today. They're too sophisticated, their experience level is too high. As for the buyers, they had left Meridien three or four years ago to go to more stylish hotels. They're seeing the new model rooms now.

BTN: Hasn't Starwood Hotels' Barry Sternlicht achieved this with W Hotels?

Bartels: W fits the bill. After all, Barry didn't make it a Sheraton or a Westin. But even with W, boutique hotels right now have no critical mass. They're basically one hotel based on local business, not even national business. There are 25 cool hotels in London, 25 in Paris, maybe 25 in New York, but we're a global brand and will have 1,000 salespeople selling the hotels. We're the first to try to marry the power of marketing with a product like the Art & Tech room.

BTN: How will you approach the corporate buyer in terms of rate?

Bartels: My people are ready to respond to requests for proposals, but it was too soon to be selling the Art & Tech rooms in the RFP season that's just concluding for 2002 rates. I must admit, though, that the Art & Tech room won't be discounted. We will offer a rate to corporations, but won't discount the room for individuals. Volume discounts, yes.

BTN: What's the timeframe for the rollout of those rooms?

Bartels: We've got £360 million ($513.6 million) already approved and are meeting with owners to get another £500 million ($713.3 million). We're starting with our hotels in London, which is where we're based. Not every room in every hotel will become an Art & Tech room, though every room will be renovated. While the Art & Tech room will be very edgy, other rooms will be less edgy. None, however, will be traditional. The project will take 18 months. The new approach also extends beyond the guest rooms. It's going to be a total experience. We've redesigned staff uniforms, we're redoing the restaurants. I'm going to do a cool bar.

BTN: Critics might say that this is no time to invest heavily in renovations. How do you respond to that?

Bartels: I tell them there's a silver lining. The market is down now and that's when I'm taking rooms out of service for renovation. The economy is cyclical. Alan Greenspan doesn't know how long the economy will be down. But it will go up. We know that. So we set a target date for the economy to revive: I say it will be 18 months.

BTN: In terms of booking and other technology, is Le Meridien where it needs to be?

Bartels: No. Aside from the physical renovation, booking technology is the biggest thing we're working on. I understand the importance of this to the buyer. We were behind, but we won't be for much longer. The property management systems were in an early state of change. We're accelerating this so we can do data warehousing, guest histories, etc.

BTN: In terms of expansion, you said pre-Sept. 11 that Le Meridien will grow by two hotels a month—either new builds or conversions—for the next five years. Are these projections still realistic?

Bartels: Yes, opportunities still exist.

BTN: Where would you like the portfolio to be stronger?

Bartels: We're the most global European hotel company. We're in 55 countries. Among U.S. cities, we're in Boston, Dallas, New Orleans, New York, Chicago and Los Angeles, but we're still lagging in America.