When FRHI Hotels & Resorts acquired a 50 percent stake in the historic 279-room Claremont Hotel, Club & Spa in March, the move was consistent with its long-term growth strategy.
“The 1903-era hotel is very much a luxury property and located close to a key gateway market—specifically the San Francisco sub-market of Berkeley, Calif.,” FRHI President for the Americas Kevin Frid told a media roundtable in New York last week.
“In addition, every property in our portfolio is branded under one of our three luxury brands: Fairmont, Raffles, or Swissotel. So The Claremont is scheduled to carry the Fairmont flag once extensive upgrades, which are already underway, are completed,” he said.
Currently owned by Qatari and Saudi Arabian interests and headquartered in Toronto, FRHI manages 110 hotels in 35 countries. Fairmont is the largest of the three brands with 68 hotels. “We’re rather unique in the industry in that we’re a multi-brand company, but all of our brands are in the luxury category,” Frid noted.
That said, the company goes to great lengths to differentiate the three within the crowded—and highly competitive—luxury space. Frid describes Raffles, the smallest of the trio, as “uber luxury,” while Fairmont is about providing guests with “genuine connections” and Swissotel superior “quality of life.”
The company positions itself as a management company, pursuing third-party management deals, though as with The Claremont will take an equity stake when it identifies a property in a market where it wants one of the three brands represented. “Our intention is to be asset light in terms of ownership, but there continue to be opportunities in strategic locations where it makes sense to have skin in the game,” said Frid, who was named to his present role 14 months ago, having been with Fairmont and its at-the-time sister brand Delta Hotels since 1982.
New York is one of those high-value markets. The roundtable was held at The Plaza in New York, a Fairmont managed hotel. But neither Raffles nor Swissotel has a flag there, though Swissotel had managed The Drake, which has since been demolished. So New York is high on the wish list, as is Paris for Fairmont and London for Raffles.
There’s not a lot of luxury hotel new construction today, especially in markets like North America and Western Europe, Frid acknowledged, citing high barriers to entry, scarcity of prime building sites, and high costs. What little new development there is will likely be conversions.
Asia and the Middle East, on the other hand, have seen significant hotel development in recent years, especially in China, “with developers approaching us with projects,” Frid noted. The three brands combined, for example, have 10 hotels open in China with an additional 12 under construction or in the pipeline. Frid, however, said he expects the pace of luxury development in China to slow in the coming years. “The real demand now is for more mid-price product,” he explained.
A bright spot in terms of North American luxury development has been mixed-used projects, whether the mixed use is residential or office in addition to lodging. The Fairmont Pittsburgh and the Fairmont Pacific Rim in Vancouver are recent examples, along with The Plaza, which underwent a partial residential conversion in 2008. “When it comes to financing today, it’s much easier to build a luxury hotel in many markets today when it’s part of a mixed-use project,” Frid said.
Confirming the industry consensus, he said that 2014 has proven to be a positive year for occupancy, rate, and profitability. “The luxury segment, in particular, has done well and the fundamentals look good going into 2015.”
All industry segments are performing well, added VP of Sales and Marketing for the Americas Jeff Doane. “Leisure and individual business travel came back first, following the recession, while the group segment lagged. But now group is growing at a healthy pace as well,” Doane said.
Asked about which countries or regions he saw coming into their own as luxury destinations in the next few years, Frid cited Mexico and South America. “The Mexican economy has rebounded recently and an area like the Rivera Maya has really emerged strongly,” he said.
“Likewise, the western coast of South America holds a lot of opportunity for us,” he concluded, noting that Swissotel already has a foothold in the region with hotels in Quito, Ecuador, and Lima, Peru, with a hotel in Guayaquil, Ecuador, due to come on line in 2017.