(Corrected on Feb. 18 to say when Virgin Hotels' Miami property is expected to open.)
With four hotel openings over the past few years and another three set to open this year, Virgin Hotels CEO James Bermingham said it’s an exciting time for the company.
Bermingham, who stepped into his leadership role one year ago, said Virgin Hotels has been enjoying an elevated profile thanks to its parent company, Virgin Group, and its founder, Richard Branson, particularly his reaching the edge of space on his Virgin Galactic flight in 2021.
It was both the best time and worst time to join the company as CEO, Bermingham said. What impressed him about Virgin Hotels was how it navigated the first year of the pandemic and how its ownership groups mitigated its effects while maximizing cash flow. There’s always tension between brand operators and owners of real estate, but both sides were sensitive to cash flow and maintained a strong relationship, he said.
“We just built on that as business started to recover,” he said.
The company is equally focused on the guest experience, Bermingham said. Guests were tolerant of reduced service and amenities at the start of the pandemic, but that has changed as more places reopened.
“They are so done with that,” he said, adding guests want hotel experiences like they used to have.
It’s a delicate balancing act now to make sure the hotels are generating cash and staying profitable while meeting and exceeding guests’ expectations, he said.
Recent Growth
Virgin Hotels has opened four hotels over the past two years, Bermingham said. The company opened properties in Dallas in December 2019, Nashville in July 2020 and then both Las Vegas and New Orleans in 2021, the former in March and the latter in August.
“Those hotels have been incredibly well-received, and it's really elevating the interest in the development standpoint with Virgin Hotels,” he said. “From a consumer standpoint, it's rapidly advancing the awareness and brand loyalty amongst consumers. It has been a very exciting couple of years.”
The company has three projects in its pipeline scheduled to open this year and another to open in 2023, he said. Scotland will see Virgin hotels open in Edinburgh in May and then in Glasgow in June. The New York City property is scheduled to open this summer. Virgin expects to open its Miami property in the Brickell neighborhood in winter 2025.
Virgin has several other properties in various stages of its pipeline that it is “aggressively pursuing,” he said.
Supply-chain issues have been a challenge during development, Bermingham said. Its Las Vegas property had several shipping containers go missing in the Pacific Ocean, resulting in a couple hundred rooms being put out of inventory when it opened because of the lack of furniture, fixtures and equipment. Supply-chain issues also delayed the opening of the New Orleans property by a couple months.
As the company nears the openings of its Edinburgh, Glasgow and New York properties, the supply-chain issues should improve somewhat, he said. The company has adapted its schedules to adjust to these issues when projecting their opening dates.
Development Plans
In between its new-build projects, Virgin Hotels is “laser-focused” on conversion opportunities, Bermingham said. Las Vegas was its first conversion project, a rebranding of the former Hard Rock property. The hotel in Las Vegas has resonated strongly with consumers and is making great traction in the market, he said.
“We’re big fans of conversions, and I think it is going to be the opportunity for us over the next couple of years,” he said.
The company will focus primarily on North America, looking at possible locations in the U.S., Canada and Mexico, as well as in Europe, he said. The company will also opportunistically consider deals in South America and other parts of the world.
Where Virgin Hotels decides to pursue another project will be market-driven, he said. The company is primarily looking at urban locations, particularly in gateway markets, as well as locations that should have similar success to its hotels in Nashville and New Orleans.
The other primary focus is resorts, Bermingham said. Up until now, the company has developed in urban gateway markets, but it's now considering entering the resort space in beach, mountain and desert locations in North America and Europe.
Though other large hotel brand companies have been entering and expanding their presence in the all-inclusive space, this segment isn’t a strategic focus for Virgin Hotels, Bermingham said. That’s not to say the company would rule them out, however. It would depend on the market and the consumer base, he said.
There’s no real all-inclusive market in the U.S., but there are in other locations, such as Latin and South America, he said. If there’s a conversion opportunity for an existing all-inclusive resort, that could be a possibility.
Guest Demand
Virgin launched its rewards program, Virgin Red, last year for customers of all of Virgin’s companies, Bermingham said. That helps Virgin Hotels tap into Virgin’s 53 million customers around the world by marrying the reward program with the hotel company’s loyalty program, The Know.
The hotels have seen most of their business come in through the brand.com channel or directly to the hotels, he said. Percentage-wise, online travel agency business amounts to the low teens since so much of the portfolio is new. Once those properties stabilize, he expects OTA business to make up less than 10% of its distribution mix.
Virgin Hotels enjoys strong leisure demand, Bermingham said. The Virgin lifestyle brand has been around for 50 years, and that translates easily into the hotel space.
The hotels have their fair share of group and business transient demand, but the pandemic cut significantly into both segments, he said. Leisure demand grew stronger, and Virgin Hotels’ properties performed “incredibly well” relative to their markets, growing their market share, he said.
As business transient and group demand return, Virgin Hotels is prepared, he said. The company had strong group base on the books for the end of 2021 and the first quarter of 2022, but the delta and omicron variants of COVID-19 led to a drop.
Big corporate groups are still nervous about traveling at the moment, but leisure remains strong and small groups are coming back, he said.
“They love the entertainment focus, they love the food-and-beverage focus that we've become so well-known for, so small meetings are really good,” he said. “We're seeing an increase in that.”