REPORT FROM THE U.S.—Now that Fairmont Raffles Hotels International has all but completed divesting assets from its balance sheet—selling 35 properties since 2006 but retaining long-term management contracts on most—the company is shifting its focus to strategic global growth.
In his new role as president and COO, Michael Glennie will help the company pursue its goal of growing its portfolio by 50% to 150 properties during the next five years, he told HotelNewsNow.com.
“That’s pretty dramatic,” said Glennie, who formerly served as president of real estate and development for the company and replaces Chris Cahill, who left the company to join Las Vegas Sands in March. “Almost 90% of our growth is outside North America, and that’s really a function of the fact that development, certainly new-build, has almost ground to a halt in North America. We started looking overseas a couple years ago and since have moved to increase resources in places like Zurich, Dubai, Singapore, Shanghai, and India.”
He said each of the three brands in Fairmont Raffles’ portfolio—Fairmont Hotels & Resorts, Raffles Hotels & Resorts and Swissôtel Hotels & Resorts—are focused on getting into primary cities across the globe. But it’s no easy task.
“Those cities are much more difficult to get into; there’s a scarcity of inventory, very restrictive development zoning and intense competition,” he said.
The company will continue to hold on to a select few assets; it also will buy, renovate and resell a few others, Glennie said. Specifically, Fairmont bought out the Fairmont Sonoma Mission Inn & Spa in Sonoma, California, last month. Fairmont already managed the 228-room property and had a 20% stake in its ownership, but decided to up that stake to 100% when Crescent Real Estate Equities defaulted on a $55-million loan last year.
“The strategy there would be to put in some capital, improve it, get the earnings up and cycle it back out,” Glennie said.
Fairmont Raffles was “incredibly lucky” by bringing most of its assets to market between 2006 and 2008, when hotels were fetching peak values, he said. The outlier would be the Fairmont Copley Plaza in Boston, which FelCor Lodging Trust purchased from Fairmont in 2010. “We did well on the Copley but obviously (the sale price of $98.5 million) was a reflection of the times,” he said.
Besides the Mission Inn, the company fully owns two other hotels: the Fairmont Southampton in Bermuda and the Fairmont Hotel Vier Jahreszeiten in Hamburg, Germany.
Back to operations
For Glennie, he said moving from a development role partially back into an operations role will be a smooth transition as he’s held several operations positions in the past. Before joining FRHI, Glennie was president and CEO of Ripplewood Lodging and the Phoenix Resort company. Before that, he was president of the Boca Raton Resort & Club. During the tenure of his career, he also held a variety of management positions with RockResorts and was the manager of New York’s Waldorf-Astoria.
The challenges of operating a hotel today are no different than they’ve been in the past, Glennie said.
“We’re coming out of one of the worst recessions and everyone has cut back, and now we’re starting to see the business improve,” he said. “Now we’re focused on making sure service levels are as strong as they can be. We’re getting the best and the brightest employees and making sure they’re well trained. Service can be a key differentiator.”
In his role, Glennie will focus specifically on partnering with the right owners and ensuring those owners create the right product. “We’ll make sure it’s competitive and delivering the right operating margins because at the end of the day that’s what it comes back to,” he said.
Fairmont, Raffles and Swissôtel each have a unique positioning among their competitors, Glennie said. Because FRHI has experience owning and operating large assets with complex food-and-beverage programs, the company brings a unique perspective, he said.
“I think every brand is constantly looking at taking existing hotels and making sure they’re competing with new product—particularly when it comes to F&B,” he said. Restaurants always need ‘reconcepting’; you need to keep them alive. It’s a constant cycle.”
For the Fairmont brand, one challenge is balancing a mixed portfolio of heritage hotels, such as The Savoy in London, and modern new-build hotels, such as the Fairmont Pittsburgh (Pennsylvania). The company must ensure continuity and consistency across the brand in those various types of assets. The best way to accomplish that, Glennie said, is to keep the historic nature of some hotels but add modern amenities, such as a trendy restaurant.