NEW YORK—After more than a year since their highly publicized brand launch, the executive team behind Virgin Hotels finally has something concrete on which to hang their hats: the site of their first property.
The company on Monday morning announced it purchased for an undisclosed sum the Old Dearborn Bank Building in downtown Chicago in an all-cash transaction. Virgin will reopen the former office building as the 250-room Virgin Hotel Chicago in the fall of 2013.
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| The Old Dearborn Bank Building |
The announcement comes after months of hard work scouting opportunities in top markets in the U.S. and London, said Anthony Marino, the managing partner of Virgin Group’s leisure and hospitality division.
“When we came across (the site), we were really thrilled,” he said. Not only was the building a historical landmark that offered Virgin a chance to grow the brand in something rooted in Chicago’s past, but it lacked the typical constraints developers typically encounter in historic properties, such as tight spaces and lack of natural light.
Virgin selected The John Buck Company to execute the redevelopment of the iconic hotel.
Suffice it to say, this first acquisition was certainly worth the wait, Marino said.
“When we launched the business last September, we launched it into a frothy time in the public-equity market that then saw fairly significant run ups in the selling prices of urban commercial real estate, particularly hotels,” he said. “That made it challenging for us to find projects that were sensible from a real estate perspective. I think much of the hotels community, except for the (real-estate investment trusts), were having very aggressive pricing and you had to really stretch hard to make the deals work. That made the time to our first announcement a bit longer than we would have wanted.”
Interestingly enough, the hotel might not be the first to open under the Virgin flag. The group has several other opportunities in markets like New York, Washington, D.C., Miami, Los Angeles and London, one of which might open sooner than the Virgin Hotel Chicago, Marino said.
Development Ad Will Appear Here
A flexible platform
While Virgin will own and operate the Chicago property, the brand’s expansion could easily take other forms as well, Marino said.
“Our platform is set up to be pretty flexible in how we grow the brand,” he said. “It would be through ownership, or it could be through third-party management. The key part is finding the right projects with the right partners and sharing the same vision.”
Virgin Hotels President and COO Raul Leal, who boasts 25 years of industry experience, is building the company’s management platform.
Development will come through a mix of office/hotel conversions and ground-up development.
Marino would like to have at least 10-12 properties open within five years, the broader market permitting.
“We’ll ride the cycle like everyone else is, but the key thing is we’re committed to do that and to grow the brand right,” he said. “Virgin has been around as a company and a brand for 40 years. … We invest the time, we commit the capital, and we believe that at the end of the day … the best product will rise to the top.”
Brand standards
The hotel industry affords competitors an infinite amount of time to play catch up, Marino said. For that reason, Virgin is hesitant to reveal too much about its brand standards and differentiators.
“We want to keep our brightest ideas close to the vest until we get closer to introducing customers to our product,” he said.
Marino did point to Virgin’s other product lines for examples of how the company thinks in terms of service, design and accessibility.
“We don’t focus on being the least expensive, but we focus on being a product that people want to pay for,” he said.
“We always have an ear toward what our customers want. Sometimes your customers are clear about what they want, and sometimes they’re not. Sometimes you have to take a leap and say we think this is what they need but they just don’t know it yet.”
Chicago bound
There’s a reason Virgin announced its first hotel in Chicago. “It’s a Virgin city,” Marino said, pointing to the 90% brand recognition in the market.
“We want to be in markets where we can capitalize on the interest there is out there and our consumer taking advantage of what the brand has to offer,” he said.
“Chicago is culturally booming, Marino added. “If you take a look at what’s going on there, it’s incredible what’s going on in Chicago. From a corporate and economic perspective … it’s as strong as it’s ever been and getting stronger.”
Better yet: Both Virgin airlines—Virgin America and Virgin Atlantic—fly into one or both of Chicago’s airports.