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Mon 27 Aug 2007 12:00 AM

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Luxury has its limits

Kempinski president and CEO, Reto Wittwer, explains why managing a small portfolio of luxury hotels requires restraint, and how he plans to ensure his company remains one-of-a-kind.

Kempinski president and CEO, Reto Wittwer, explains why managing a small portfolio of luxury hotels requires restraint, and how he plans to ensure his company remains one-of-a-kind.

What is the Kempinski story so far?

You have to sell uniqueness or the trophy aspect to drive the market.

We have been around since 1897, which means we must have been doing certain things right, otherwise we wouldn't be here still. We're also the only independent luxury hotel company left in Europe, which is why every two weeks we have offers from buyers, but our shareholders do not want to sell at this point in time. We are a company of individualistic hotels - each is one-of-a-kind - rather than having a streamlined portfolio like the American companies, where if you have seen one, you have seen them all.

What sets Kempinski apart from other five-star brands?

If you give a black American Express card to three people on a sabbatical year and tell them to go and visit different five-star hotels, the one who tours the Ritz-Carltons will come back after three months and say "I've been around a lot but it's pretty much always the same"; the Four Seasons guy comes back after six months and says the same and the Kempinski guy comes back after a year and asks, "are there no more projects?" because each hotel is one-of-a-kind.

The company image comes from Europe; the money comes from the Middle East; the pioneering spirit is in Africa; and future investment is in China. All our new young managers have to go for one to two years to China. The fact is that Chinese guests will become a definite. We want them to be aware of what is going to hit them.

What is your current growth strategy?

We have 43 openings planned in the next three years, which is an enormous stress on the company. If our business is individualistic, then there has to be a cap. It is very difficult to convince your shareholders to cap your growth, but if you look at anything associated with luxury, it is limited in numbers. We asked ourselves what would be the magic number of hotels. We came up with 110, which is the age of the company, so we said we would never have more hotels than the age of our company, which is also a good marketing gimmick.

How will you implement this?

We are in the management business - all our management contracts are limited in time by definition, so some will run out and some hopefully some will be renewed, while others we are squeezing out.

We have 60 hotels in operation now, so we will start cleaning out what we think are non-fits and we really need to discipline ourselves for each deal that we bring in now, especially in this part of the world where the opportunities are plentiful. That's why we were a long time staying away from Saudi Arabia and Qatar - we have had plenty of opportunities to go in, but we don't need just another hotel to be one among many in Qatar. We want to wait for the right thing.

What do you look for in new destinations or properties?

We have identified where we want to be geographically and where we want to be in terms of what kind of hotels we have. We want to have about 60% city hotels 30% resort properties and 10% that are a little bit odd - neither here nor there. The resort hotels have to appeal to the same clients as our lead city hotels. If the guests from the Çiragan Palace Kempinski Istanbul or from the Adlon in Berlin go on vacation, it is likely to be in Courchevel or St. Moritz. In terms of probable destinations, St Moritz is a fit, but we have some hotels in places such as Varna [Bulgaria], which is a total non-fit because not one of our base clients goes there.

So what does luxury mean to guests these days?

Luxury travellers do not want to have the same experience wherever they go and they certainly don't want to have a home away from home because they are going away to have an experience away from home. We said wherever we are we want to be market leader in measurable terms.

We want to be unique or it has to be a trophy hotel. We do have quite a series of trophy hotels in our portfolio, including Kempinski Mall of the Emirates. Although it is not the market leader, it is the most unique because of the ski dome. You have to sell uniqueness or the trophy aspect to drive the market. If you are at the top of the market through uniqueness or market leadership, you can leverage your pricing within the market dynamic totally differently than if you are number two. If you are number two you can never [charge] higher [room rates] than number one.

What markets have you identified as the strongest in terms of future growth?

People see some controversy in our decision to go to Africa, to Djibouti, but we believe that we have to find a certain balance. We also believe that in Africa, people are shying away and saying it is not ready yet, but if you wait to be ready, you will never be ready. We see opportunities - there are lodges in Botswana that sell for EUR 1000/2000 (US $1383-2765) per night. Tell me anywhere else where you can charge these rates?

There is luxury in Africa; you just have to be in the right places. We have never regretted our pioneering efforts. We were the first company that went to Russia when it was still communist and we were the first company to enter a joint venture in China. It has given us a platform for growth and a standing in these markets, which is now paying dividends.

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