Expanding a luxury icon

Fairmont president Thomas Storey is set to make the luxury hotel's expansion blueprint a reality.
Expanding a luxury icon
By Claire Ferris-Lay
Sat 17 May 2008 04:00 AM

Claire Ferris-Lay meets Fairmont president Thomas Storey, the man set to make the luxury hotel's expansion blueprint a reality.

Sitting in the penthouse suite at the Fairmont Dubai, surrounded by some of the best views of the city and overlooking a private indoor swimming pool, Thomas Storey looks at ease in his surroundings.

The newly appointed president of Fairmont Raffles Hotels International (FRHI) should be; he claims to never stay anywhere other than a Fairmont, preferring to stay in a "residential operation" if the luxury hotel isn't an option.

It won't be long before Storey has more options when on holiday though. Storey, who has been with FRHI for more than seven years, has already been instrumental in growing the hotel brand.

As executive vice president, development, for all three FRHI brands, the company gained over 100 new projects, including 50 new Fairmont projects - the most robust growth in the company's history.

In his new role Storey plans to continue to grow the luxury hotel chain even further. "As much as anything I'll be focusing on the growth of the company going forward and positioning the brand as a luxury one.

Despite having its roots firmly planted in North America, the "Storey/Fairmont Expansion Plan" is expected to focus on the MENA region and emerging markets rather than the US. "We have 55 hotels now and an additional 20 projects under development.

If you look at that pipeline about 30% of our growth is in this region so clearly the focal point for us [is here].

Last week Fairmont announced its first hotel in Makkah, Saudi Arabia, a joint project with the Saudi Binladin Group.

The Makkah Clock Royal Tower, so-called because of its giant 40-metre clock at the top of the building to indicate Muslim prayer times up to 17 km away, will house 1005 guest rooms and suites as well as 600-plus residential units in what is set to be one of the tallest buildings in the kingdom.

"It is quite a significant and iconic asset," says Storey. "If you think about the Middle East and Makkah being a beacon in the Muslim world, it will really do a lot in positioning Fairmont truly as a global brand.

The project, due to be competed in September in time for the hundreds of thousands of pilgrims on Hajj, cannot be finished quickly enough. Demand is high, says Storey.

"The hotel will be filled as soon as we can get it finished. The demand is so great in that region that it actually spills over into Jeddah and other locations," he adds.

FRHI is already in discussions with developers for further hotels in other cities in the kingdom.

For those that know Fairmont, the announcement of the project in Saudi Arabia came as no surprise. Undoubtedly Makkah represents one of the largest markets for tourists in the region, however, Fairmont's position as one of the first international hotel chains in the city is somewhat helped by its associations with HRH Saudi Prince Alwaleed Bin Talal Al Saud.

In 2001 the prince, the world's fifth richest man, and investment group Colony Capital paid US$3.9bn for the Fairmont Group, then simply known as Fairmont Hotels & Resorts.

Under the deal, the Fairmont brand combined with Raffles hotels, a portfolio of 33 properties in Asia and Europe, bringing the total number of hotels to 120 in 24 countries.Fairmont, which also owns Swissotel, is now currently one of the largest luxury hotel management companies in North America. No longer a public company, revenues for Fairmont are undisclosed to the public, however Storey notes a "good growth in revenues" year-on-year.

Fairmont's flagship hotel in the UAE is its 34-storey property at Trade Centre, Dubai which houses 394 guest rooms, residential apartments and offices as well as 10 food and beverage outlets, built in 2002.

Further projects in Dubai include The Fairmont Palm Hotel & Resort, a 402-room hotel, and the Fairmont Palm Residences, two apartment developments. Both are in partnership with IFA Hotels & Resorts.

In Dubai, the number of hotels is expected to increase to 488 by 2010 up from 452 in 2007. Storey doesn't, however, think the region is in danger of becoming saturated with new hotels. "We are just filling demand," he says.

The biggest challenge for Fairmont - just one of the many hotel chains with projects under development in the region - is differentiation.

"[For guests] it is the Fairmont experience versus an independent hotel experience, so our focus is on the right developments with the right customer service.

Storey says the group's existing hotel in Dubai is a good example of how the company could have grown the brand quickly but chose not to.

Fairmont Dubai opened in 2002 and was one of the first luxury hotels in the region [but] we didn't go out and do another two hotels in two years, largely because they need to be the right hotels with the right partners.

Maintaining a high level of standards also means that Fairmont won't be adding any budget accommodation to its portfolio any time soon.

I think Fairmont will always be about larger, more complex projects similar to Fairmont Dubai which has 10 food and beverage outlets as well as a spa.

It is very difficult to find a brand which can operate a large complex asset in the luxury tier of the market.

Brand expansion may be top priority, but like its decision to preserve a high level of standards, choosing the correct partner and its next location is important. "We want to grow but we want to grow in the right destinations and with the right partners and projects.

IFA Hotels & Resorts and the Abu Dhabi Investment Authority are two of the main developers Fairmont teams up with on a regular basis. "They build iconic assets that fit the positioning of the brand," Storey adds.

Although Fairmont favours long-term developers for its projects around the world, Storey is not afraid to choose new partners depending on the region.

For its hotel in Shanghai, Fairmont is working with the Jing Jiang International Group, one of the largest tourist operators in China and in Beijing it is working with the Beijing Tourism Authority, largely to preserve the history behind its latest Chinese offering.

Other than sourcing the correct partner, one of Fairmont's biggest challenges is finding the iconic and historic buildings it has now become synonymous with.

In Africa, for example, it's a little different because we don't have so many large iconic and historical properties so there our focus is on smaller, almost boutique properties. Even in Africa though, virtually all of our projects have been with IFA and Kingdom Hotels.Fairmont currently has 55 hotels and 20 announced deals around the world, with another 30 properties under consideration. New areas of expansion for the brand outside of the Middle East include Africa as well as Russia and India.

"10 years ago there was a real focus on Western economies, but the focus is now on the Asian rim.

Other areas of expansion for Fairmont include the residential market. Demand for branded hotel residential developments are high in the UAE, and Fairmont currently has around 35 projects in various stages of development around the world which are mixed-use.

The Fairmont residences, however, are more branding exercises rather than a strategic shift into the real estate market, according to Storey.

He notes that while Fairmont's projects on the Palm Jumeirah extend the brand further than its traditional hotel chain roots, the exercise is more of an extension for its partners who note that demand per square feet is maximised through its association with a luxury hotel chain.

"Our projects on the Palm Jumeirah with IFA, by and by create value for IFA as our partner as opposed to Fairmont the operating company.

Storey's emphasis on emerging markets doesn't mean, however, that he is forgetting about the company's history. He is keen to stress the American market is not being left out with two projects currently under development.

Fairmont, says Storey, is still happy in its native North America. "We have operated in North America for more than 100 years and we are pretty comfortable with that shift in dynamics.

Its comfortable position in the US market is largely helped by the fact that Storey claims to be unaffected by the current US credit crunch despite the obvious knock-on effect on disposable incomes.

"We really haven't seen that yet to the degree that I think other people are taking about.

Storey is a firm believer that current expectations in North America are too high and despite the low number of developments taking place, demand is still there.

I think it's a function of expectation and over the past few years people have got very comfortable with the North American market growing.

"North American GDP this year is expected to be less than 1%, compared to 6.5% in the UAE. It's a big difference but people don't reflect on is the size of the economy; it's still generating significant amounts of new opportunities."

He doesn't believe it will be long before the US hotel industry finds itself back on track. Then there will be a greater turnover of assets rather than development.

"I think you are likely to see as much growth coming from conversion as you would see from new hotels.

For now, however, it's fair to say that Storey will be spending more time in the penthouse suite at the Fairmont Dubai than in the US.

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