Deluxe Chains Ponder Doubling Hotels In Some Cities

New York, Chicago, London and Tokyo are among the established international gateways where demand for high-end accommodations and service is deep enough for deluxe hotel companies to have multiple properties, provided they are in different neighborhoods and, in many cases, built in different styles. With deluxe operators in 2004 jumpstarting development, the trend is spreading to more cities.

Beijing and Cairo, for example, are among the cities where multiple property development is starting to take place. Four Seasons Hotels & Resorts this year opened a second property in Cairo, while Ritz-Carlton Hotel Co. will have a second hotel in Beijing in 2006. Both cities are sprawling metropolises. Essential to the deluxe hotel strategy is to operate in the part of a city close to where guests have business.

In a city without a clearly defined downtown, therefore, that can mean the need for more than one outpost. The risk of not being in the right location is that their loyal guests will have no choice but to turn to a better-situated competitor.

"Many international cities are well-suited for multiple projects because the cities are so large," said Scott Woroch, Four Seasons senior vice president for business development for Asia/Pacific. "When you factor in that we do midsize hotels that are residential in style, having two or even three hotels might only give us 600 to 700 rooms total. By contrast, a hotel operator with a single convention-style hotel might have the same number of rooms."

Development migrates to different parts of expanding gateway cities. "Most docklands around the world, for example, are being redeveloped today," said John Wallis, senior vice president of marketing for Hyatt Hotels Corp. "From Montreal and London to Melbourne and Dublin, developers are moving cities. It's a type of evolution. As such, there always are new development possibilities for us. In fact, all major cities eventually go through these types of cycles, though the shifts occur over time."

Multiple development presents the possibility to combine or share various services. "You have to be selective, but if the properties are similar and reasonably conveniently located, the two could share some of back-of-house services," said Roy Paul, also a Four Seasons senior vice president for business development. "They might have two security forces, but need only one security director, for example, or one financial controller, but two accounting teams. The efficiencies can be very effective. The key is to make sure you're not in any way compromising the service product."

Multiple hotels in one city work best when the difference in neighborhoods and styles is dramatic, according to Wolfgang Hultner, Mandarin Oriental CEO for the Americas. "That's when multiple hotels really make sense," he said, citing his company's two hotels in New York: the more intimate, highly residential feel of The Mark on the Upper East Side, versus the much larger Mandarin Oriental New York in the Time Warner mixed-use development at Columbus Circle.

Yet for an emerging deluxe provider, multiple projects might not be the first priority. "Granted, we have three properties in Vancouver, but more important for us would be locations that are key for our customers, where we don't have any product," said Chris Cahill, president and COO of Fairmont Hotels & Resorts. "Yet, it's the nature of development that you never know when opportunity presents itself. Clearly there are a lot of markets where we could have a second Fairmont."