News for the Hospitality Executive
by Jason Q. Freed
MIAMI—October 21, 2011 - As much as Marriott International will preach otherwise, this summer’s Waikiki Edition fiasco seems to have left a lasting imprint on the brand and has caused the hotel chain to rethink its ramp-up and development strategy moving forward.
Speaking Thursday at the Lifestyle/Boutique Hotel Investors Conference in Miami Beach, recently appointed senior VP and managing director of Edition Tim Miller said Marriott’s initial strategy has “been sidelined” and the three Edition properties under development will now be funded by Marriott exclusively.
“We are relaunching the brand on the company’s dime,” he said.
Marriott has bought property to develop Editions in London, New York and Miami Beach, and the company has letters of intent for Edition developments in Abu Dhabi, Mexico City and Bangkok. After owners of the former Waikiki Edition declared bankruptcy so it could oust Marriott as the brand and operator, there remains one Edition open in Istanbul.
Miller, who worked with brand co-founder Ian Schrager for seven years at Morgans Hotel Group Company, said Schrager “remains a very big part” of Edition. “Ian and his whole shop are a big component of where we’re going,” he said.
Schrager opened his own chain, Public, in Chicago earlier this month and has subsequently announced plans for Public hotels in Los Angeles, Paris and New York.
Miller said Marriott providing equity for development is uncommon but not unheard of, and he stressed the fact that Waikiki was simply an “unfortunate lawful situation that happened that we will vigorously defend.”
“Hawaii was in no way a game-changer for us,” he said. “Our goals are still the same.”
Rather, it was the stalled economy and financial-market collapse that caused Marriott to shift its strategy, he contended.
“When we launched the brand there was excitement in the industry and money out there. Within less than 30 days we had 18 signed (letters of intent) from people who wanted to do these deals,” he said. “Initially Marriott was going to buy and fund these opportunities, but when the announcement was made and all these LOIs were coming in, they said, ‘Why would we throw our own money out there? Why not let these others throw money at us?’
“Of the 18, nine months later only five of them were left because of the financial market’s collapse.”
An unusual partnership
He said Edition’s conception was meant to take the Ritz-Carlton chassis, known for consistency of service, and layer all the things Schrager brought to the table. When in doubt, the brand would always fall back to the Ritz-Carlton model, he said.
“We didn’t want to out-Ritz-Carlton Ritz-Carlton,” he said. “It was to take that core essence and modify it; strip it of the, ‘How may I assist you?’ and the ‘My Pleasures’ without giving up any service.”
He said Schrager and his team will continue to participate in layout of the public spaces, and that design will be integrated with Marriott’s operations.
“It’s always fun to be woken up after a hurricane at 8 a.m., five days after an earthquake, and get a phone call that your hotel is being taken over. I suggest that no one ever go through that,” he joked. “The biggest takeaway from the experience is that it’s about education—that there is a cost of doing development, and at any given time in the process it’s about being informed.
“We did a deal with some developers who were very eager to be the first Edition,” he continued. “They were first-time owners, first-time developers, and they went in with the best of intentions. They wanted the property to be the best it could be ... in a market that is difficult to do business in. They went through a tremendous amount of over-runs in the development stage, postponed the opening eight times, a general contractor was ousted from the process—all things that were out of the brand’s control but they were obviously nervous to get ahead of the 8 ball.
“With any hotel in any market there is always going to be ramp-up,” he said. “No matter how successful the opening party was, you’re not going to get the occupancy and rate you want, especially in this world. The owners became very impatient.”
Once Marriott learned that M Waikiki had filed bankruptcy,
everything else went out the window, Miller said.
Litigation between Marriott and M Wiakiki continues, and
Miller called it a “heartbreaking and unfortunate experience that we’ll
never go through again.”
By Jason Q. Freed
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