ORLANDO, Florida—Margaritaville Holdings has turned the laid-back image of one Jimmy Buffett song into a billion-dollar business and has set its sights on aggressively growing its hotel portfolio to match the other facets of its business.
With three hotels in operation and a fourth one due to open soon, the company is poised to expand its footprint globally, according to CEO John Cohlan.
“We’re in the destination business; it doesn’t have to be on a beach,” Cohlan said. “The growth opportunity is somewhat boundless. We’re going to be destination-focused in America and around the world.”
Cohlan said the company has plans for “many projects,” including a $175-million resort in Hollywood, Florida, that is scheduled to open later this summer, and one he said the company is close to announcing, but he declined to reveal any details.
“It's very natural that a company with such a strong track record for success in the restaurant industry would evolve into the hotel sector,” said Lee Weeks, CEO of Coral Hospitality, in an email. Coral is Margaritaville’s co-manager in the Hollywood property.
“We are delighted to work with Margaritaville Hospitality Group as they embark upon this next step, helping bring their unique brand and high standard for customer service into the world of resorts,” Weeks said.
The Margaritaville brand concept is based on the song “Margaritaville,” Buffett’s 1977 tribute to spending an alcohol-laden season on the beach. Cohlan said the premise of the businesses built around the song is simply to show guests a good time—however they define it.
Margaritaville Holdings is a lifestyle brand management business that produced “well over a billion dollars” from its system-wide retail sales in 2014, Cohlan said. That doesn’t include any of Jimmy Buffett’s music—only the retails sales of its Margaritaville restaurants, Land Shark beer and others. Now, the company is turning its full attention to hotels.
“Hotels are our sweet spot. The reason it took us a while to get to the sweet spot in the brand is there’s a lot of capital involved in a hotel,” Cohlan said. “You have to establish yourself as a consumer brand before that kind of capital is willing to come to that table.”
‘Brand extensions’ paved the way to hotels
Beginning with what Cohlan called “brand extensions,” the company was able to build its presence on multiple platforms before becoming fully immersed in the cash-hungry hotel industry.
“We actually started more with the extensions, and we get to come to the (hotel) business with a lot of wind behind our sails,” he said.
The company has hotels open in Pensacola, Florida (162 rooms, opened in 2010); Bossier City, Louisiana (395 rooms, opened in 2013); and Pigeon Forge, Tennessee (137 rooms, opened in 2014).
The 349-room Margaritaville Hollywood Beach Resort is backed by an $80-million investment from Starwood Capital Group. Cohlan called the opening of the project a watershed event for the company, in part because it’s the largest new-construction project in Florida during the past eight years.
“In many ways it’s the most exciting thing we’ve done in 20 years,” he said.
Margaritaville’s capital sources for further expansion don’t necessarily have to be institutional grade, according to Cohlan.
“We want to partner with capital that gets it, capital that can add value,” he said.
The relationship with Starwood, including chairman and CEO Barry Sternlicht, has been a big help in establishing a threshold for future development, the Margaritaville leader said.
“Barry and Starwood have been terrific partners,” Cohlan said. “The term ‘value added’ from capital providers is used all the time, but rarely does it really translate. I really have to say in this case it really does translate well.”
There are no set requirements for capital partners in future projects, he added.
“We are flexible. What's most important is the protection of our rigorous brand standards in our agreements,” Cohlan said.
There’s so set number of rooms required for a Margaritaville hotel—it depends on the destination, he said. In addition, the company’s relationship with Naples, Florida-based Coral Hospitality is just one way a future resort could be structured. Margaritaville Holdings will manage the food-and-beverage and guest experience aspects of the Hollywood resort while Coral Hospitality will manage the hotel operations.
“We have a very similar approach and philosophy for doing business, so we work very well together,” Weeks said. “What we've seen in our hotel and resort portfolio, and what I think the Margaritaville (executive team) also sees in their day-to-day operations, is that consumers today don't want fancy or stuffy, and they certainly don't want cookie-cutter. What they do want are real, authentic experiences that provide high quality and high-touch personal service, delivered in a relaxed, yet fun manner.”
Future projects could have different models based on the capital partners and the needs, Cohlan said, adding that he wouldn’t rule out the idea of Margaritaville managing all aspects of future developments.
Vacation ownership, yes. All-inclusive, maybe
While Margaritaville also is entering the vacation ownership business—it is partnering with Wyndham Vacation Ownership to launch two Margaritaville Vacation Clubs in the Caribbean—the company will focus the majority of its attention on hotels.
Cohlan didn’t rule out Margaritaville venturing into the all-inclusive resort category at some point.
While saying nothing formal is in the works, Cohlan said the concept could work for the company in the Caribbean, where it has a big presence in the restaurant business.
“In the Caribbean, the idea of all-inclusive makes a lot of sense for us,” he said. “We’d be well positioned to do it. It can become enormous.”
The multiple food outlets required for an all-inclusive resort is already covered by the brand’s reach, Cohlan said. For example, the Hollywood property has eight restaurants that carry the various Margaritaville flags.
“Even though it’s not all-inclusive property, there are enough things to do there (to be one),” he said. “It’s all-inclusive in the sense that it’s a destination.”
It all adds up to big opportunities for the Margaritaville brand, according to Cohlan. What makes the brand work beyond the obvious connection to the song is its high visibility—it has high-profile eatery locations in Orlando and Las Vegas (where it also has a casino).
“We’re well known around the world with very high awareness,” Cohlan said.
A cameo appearance in the newly released movie Jurassic World helps cement the brand as a staple in consumers’ minds, he said.
“Everybody who knows it, experiences it,” Cohlan said.
A plan coming to fruition
Cohlan has been Buffett’s business partner for 20 years—and many management team members also have been aboard for that long. He said that gives the team a unique perspective as it goes full speed ahead into the sometimes-turbulent waters of the hotel industry.
“The most valuable asset we’ve created is a group of people who really understand what the consumer really wants from his or her Margaritaville experience,” Cohlan said.
What’s that experience? “You have to meet an expectation. That raises the bar,” he said. “It’s really a state of mind.”
The Margaritaville hotel brand falls squarely into a specific niche, Cohlan added.
“Jimmy learned it more profoundly than everybody: People like their fun,” he said. “At the end of the day it is the simplicity of what we stand for that is so powerful.”
That power could end up being a significant force in the hotel industry’s lifestyle segment, Cohlan said, adding that it was interesting to hear “lifestyle” so often at the 37th annual NYU International Hospitality Investment Conference because of the plethora of hotel brands that have been launched and categorized as “lifestyle” during the past five years.
“Everywhere you turned you heard the word ‘lifestyle’ and the (hotel) names are names that don’t yet mean anything,” Cohlan said. “We have a very identifiable lifestyle brand.”
Having Sternlicht—the man behind the W Hotels brand—as a partner helps further entrench the lifestyle notion in the Margaritaville hotel brand, Cohlan added.
“All these lifestyle hotels are going to be about a lot of people staying there and trying figure out what the lifestyle is,” Cohlan said. “In our case we have an enormous advantage. There really aren’t many true lifestyle brands, but one thing no one can disagree with is that Margaritaville is a lifestyle brand.”