Luxury lodging

A few years ago, Jacques Chirac and Helmut Kohl met at a Kempinski in Weimar, Germany, and the hotel was completely booked. Reto Wittwer, Kempinski's president and CEO, was there to make sure everything ran smoothly, and he "had to sleep in the presidential suite because Kohl and Chirac slept in regular rooms. Nobody wanted to sleep in the suite because Hitler used to live there for about a month." He continues to explain that the hotel was burned down during the war and was completely renovated, but the headline would still be ‘Chirac sleeps well in Hitler's bed.'

So go the stories of the world's oldest hotelier. Established in 1897 in Berlin, the Hotelbetriebs Aktiengesellschaft Hotel management company was the first of its kind in the world, and immediately built and managed grand hotels in Germany's largest cities at the turn of the century. More than 110 years later, Wittwer, who has been at the helm for 13 years, exudes deep pride in his company's heritage "We are the oldest hotel company in the world. We must have been doing certain things right otherwise we wouldn't be around this long."

Kempinski is also the only independent luxury hotel company in Europe. It had a minor flirtation with the German bourse, but de-listed five years ago, and is now owned by the Crown Property Bureau of Thailand, and the royal family in Bahrain. The company owns one hotel in Munich and leases two others in Germany; the remaining 60 hotels in the portfolio are managed by Kempinski. Contracts for the managed hotels are limited by time, so the company can always re-evaluate its existing portfolio and drop properties that are not in line with its brand identity.

This falls into the overall strategy that Wittwer devised, one of creating "a company of individualistic hotels, each one is one of a kind, rather than having a streamlined portfolio, like American companies, where you see one and you have seen them all," he explains. Creating a collection of individuals is Wittwer's main focus and the strategy for growth, and also fits into the defining characteristics of luxury. Dictionaries define luxury as material objects or services that provide elegance and refinement that are beyond the basics needs of living. This implies that exclusivity and the limited quantity of products or services is a major ingredient in creating luxury, and dictates the strategy of the supplier and the perspective of the customer. Kempinski's competitors, such as Four Seasons and the Ritz Carlton, have aggressively expanded over the years and contributed to the rise of mass affluence in the hospitality sector. Wittwer sees this as antithetical to luxury. "10 years ago, I said that there would be one Ritz Carlton too many," he says.

Limiting the number of hotels is Wittwer's strategy of ensuring that his chain maintains its standards and prestige. He cites the high demand and caché for the extravagant Kelly bag, which has a waiting list of around three years, or certain Ferrari models that also require rich customers to wait for their prize. Controlled scarcity defines luxury and guides Kempinski's expansion.

For any company, it is always difficult to tell the shareholders that growth will be limited. Wittwer says "in luxury hospitality, people do not want to have the same experience everywhere they go, and certainly they don't want a home away from home, they want an experience that is completely different. We have to cap our growth, and grow from within," he adds.

Kempinski will grow significantly over the next three years with 43 openings slated by 2010, but the company will then firmly adhere to a cap that is both manageable and an attractive marketing slogan.

"The magic number is 110, which is the age of our company. Next year it would be 111. We will cap our growth to never have more hotels than the age of our company."

This cap has many benefits, according to Wittwer. It refines the business model, ensures scarcity and pricing supremacy, and allows it to build an elite portfolio that offers unique experiences across the world.

The three criteria that Kempinski looks at before entering any market is whether the hotel will be a market leader, a unique offering, and/or a trophy hotel. Breaking into new markets may require an initial relaxation of this criteria, but in the end the strategy is successful. Wittwer tells of the company's foray into the UAE. "We started very modestly in Ajman. We were invited to Ajman by the rulers, and they said ‘help us to put Ajman on the map'."

The hotel proved to be a success, and while the company was questioned for not targeting Abu Dhabi or Dubai, Kempinski won the contract to run the spectacular Emirates Palace. Wittwer cracks a grin and says, "all the big companies were standing there - Four Seasons had 10 people for three weeks waiting to sign the contract - but we got the contract."

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