NEW YORK—Ian Schrager’s newest venture—two new hotel brands under his new private hotel company, Schrager Hotels—comes as a direct result of his optimism for the hospitality industry during the next five years.
In an interview today, Schrager said he’s been through three bad cycles and that the market always recovers to a higher level than its previous peak. He’s banking on consumers’ confidence and their willingness to travel as a driver to add more supply in the marketplace.
“Pricing might not come as fast as it has in the past, but people are feeling more confident and its beginning to happen,” Schrager said, adding 2011, 2012 and 2013 will be prime years for the industry.
Of his two new brands, one will be luxury lifestyle aimed at the 4/4.5-star market and the other a stylish, 3/3.5-star brand priced for both smaller hotels and hotels with 1,000 rooms or more.
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Ian Schrager |
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He said globally there are hundreds—potentially an oversupply—of spinoffs of the 4-star boutique hotel he created during the mid-1980s, but he sees potential just below and just above that space in the market.
“It’s the same opportunity in the market that I saw 25 years ago,” Schrager said. “Back then, all the hotels looked alike; there was nothing offering a unique experience. I sort of see the same opportunity right now to create a heightened experience a little bit below and a little bit above that space.”
Schrager said names for the two brands have been chosen, but he won’t release them until the first property opens in Chicago in September. That first property will be a re-branding of The Ambassador East, which Schrager owns and operates.
As far as short-term goals for the brands, he has his eyes set on three different pieces of property in New York City on which he plans to build hotels with 800 rooms or more. His five-year plan, he said, is to have at least 10 or 15 of these new-brand hotels open, and then either “go public with them or sell them.”
Schrager said he will roll out his two new brands in international gateway cities, such as Los Angeles, Miami, London and Paris. He will build most of the hotels, but will consider adaptive reuse and managing for other owners “provided that we can add some sort of signature” to the hotel.
“I wouldn’t manage something unless it’s special,” he said.
Constructing a small hotel from the ground up in today’s market isn’t feasible, he said, but he does see potential in building larger hotels where he can “spread the cost over a lot of rooms and get the room cost down.”
In New York, Schrager sees the potential for oversupply, especially in the boutique segment, but that he has experience in getting a good portion of travelers to come to his hotels.
“It’s just a question of getting them to your hotels,” he said. “If your product is unique, then you’re going to get that business. What that means is the pricing elasticity is going to be impacted. We won’t have the double-digit (revenue per available room) increases we had after the last downturns.”
As far as his ongoing partnership with Marriott Hotels and Resorts on Edition hotels, Schrager said he will continue moving forward as planned. He’s still enthusiastic about that brand, which will open its second hotel in February in Istanbul, he said.
“The Marriott guys are the best and brightest,” Schrager said. “It’s the only franchisor run by operators, not by financial people. My role will be the same in the future as it was in the past.”
Schrager is not concerned with his new brands competing with Edition. They will be a step above and a step below in what Edition has to offer, he said.
“Even if that weren’t the case, I’ve had hotels that were two blocks from each other and didn’t cannibalize from each other,” Schrager said. “People gravitate for different reasons.”