Four Seasons CEO Allen Smith at the hotel’s Toronto location. (Portrait by Thomas Dagg)
There was a time, less than a decade ago, when a clever concierge could impress hotel guests with a bit of foresight—maybe hold a dinner reservation for them on a busy night when their flight gets in late or have a taxi waiting before they’ve requested it. This level of service has always been one of the defining traits of Four Seasons Hotels and Resorts, but even CEO Allen Smith admits it’s no longer enough.
“Guests now expect you’ll be able to anticipate what they want,” he says. He points to services like Apple Music and Amazon, which know what customers will like before they even know it themselves. Consumers have become accustomed to this kind of personalized algorithmic assistance in their lives, Smith says. (Four Seasons has adapted by offering an app that will soon let guests log customized personal preferences, from room temperature to pillow firmness.)
But, that’s not all hotel customers have grown accustomed to. According to a recent report by Skift, a travel industry intelligence firm, today’s luxury travellers are looking for more than rest and relaxation—they want “inspiration, a sense of personalization and a drive toward self-discovery.” Whether it’s a wine tour in California or a manta ray petting safari in Bora Bora, guests want to immerse themselves in new experiences. Back in the day, merely staying at a Four Seasons was a signal to the world that you were fully self-actualized, that you wanted for nothing. Now the chain must offer its guests not just exquisite food and high thread counts but personal fulfillment, too.
And if it doesn’t, someone else will. The five-star hospitality business, once the domain of a few select brands, is teeming with new competitors. What’s more, the sharing economy, with Airbnb as its poster child, is growing fast—and going glam. “There’s long been a sense that the sharing economy is not for the luxury traveller,” says Skift’s Greg Oates. “That’s no longer true. The sharing economy is now a threat to luxury hotels.”
All of which means as Smith prepares to kick-start an ambitious expansion of the chain that’s synonymous with luxury travel, he’ll be facing challenges Four Seasons has never experienced before. In many respects, Smith’s timing is good: His industry is in the midst of an unprecedented boom. Luxury travellers made 46 million trips last year—up 48% from 2009—and hotel occupancy rates have risen to their highest level in three decades.
But, while both the luxury market segment and Four Seasons’ competitors are growing fast, the Toronto-based chain spent much of the past half-decade seemingly stuck in neutral. In 2010, the company had 85 hotels to its name. Since then, it’s grown its portfolio by about two properties per year, to a total of 95. That’s not fast enough for Four Seasons’ majority owners, Bill Gates’s Cascade Investment and Saudi Prince Alwaleed bin Talal’s Kingdom Holdings, both of which are eager to claim a larger slice of this growing luxury travel pie. So is founder Isadore Sharp, who still retains a 5% stake in the company he founded with a single motel more than 50 years ago. Their patience has already worn thin. When Sharp stepped down as CEO in 2010, he gave the job to his hand-groomed successor, Kathleen Taylor. A mere three years later she was dismissed, reportedly for failing to meet the owners’ growth expectations.
After an exhaustive search, Four Seasons plucked Smith from his position as head of Prudential Real Estate Investors—where, as a major investor in hotel properties, Smith learned the ins and outs of the hotel development cycle—to take the helm. Smith has one job: open more hotels. “We have ambitious growth objectives,” he says. “Five years from now, we will be in the range of 120 to 130 properties.”
Forebodingly, he is now entering his third year as CEO. If Taylor’s experience is anything to go by, the year ahead will be the make-or-break one for Smith—and possibly for Four Seasons itself.
Smith is diligently going about the business of opening hotels–four so far in 2015, in Bogotá, Bahrain, Seoul and the French Riviera. He hopes to add a fifth, in Casablanca, Morocco, before the year is out and to top the 100-property mark in 2016.
Four Seasons’ French Riviera location. (Four Seasons)
Smith says the company’s pipeline of active projects, at various stages of development from design to construction, is currently close to 60. That number, however, is full of caveats. The hotel development cycle can last 10 years or more, and can take many unforeseen twists and turns. To get to at least 120 hotels by 2020, Smith will have to more than double the company’s pace of annual growth from the past five years. And while the current boom in luxury travel should help him reach his objective, he also admits the entire industry is waiting for the other shoe to drop. “This has been a pretty extended recovery in the hotel cycle,” says Smith of what is now a six-year upswing. “When you get to unprecedented levels of recovery, people just begin to get nervous. What could change?”
The truth is that a lot has already changed. Four Seasons has long been an industry pioneer, the innovator behind dozens of in-room perks, from custom mattresses to shampoo samples to pillow chocolates. But every self-respecting hotel offers these things now, so whatever competitive advantage they once conferred is long gone. Meanwhile, it’s no longer lonely at the top. The Hong Kong–based Shangri-La chain has reached beyond its original borders, in lockstep with China’s influence, and now counts nearly as many hotels as Four Seasons. Ritz-Carlton, a brand once left for dead, was revived through the ’90s and early 2000s to also become Four Seasons’ equal in terms of global properties.
Yet even as these firms grow, high-end customers are showing a willingness to try smaller, newer brands. The man credited with the Ritz’s revival, Horst Schulze, launched an ultra-luxury hotel brand in 2006, Capella Hotel Group, which now has 13 properties under management and a half-dozen more in development. And independent boutique hotels are surging in popularity because the experiences they offer, by their very nature, are unreplicated anywhere else. “The pendulum has swung completely away from standardization of service and design,” says Chris Fair of Resonance Consultancy, a travel industry research and marketing firm. “Guests want the sense that they are staying at a unique and differentiated place everywhere they go.”
It’s precisely this trend that the sharing economy serves so well. Online services such as Airbnb and VRBO have jolted the entire industry with an explosion of available rooms, no two of which are alike. It took Airbnb four years to reach one million guests; now it serves a million guests a night. “The challenge with the sharing economy is that it’s a less transparent form of supply,” says Smith. “If a competing brand announces a new location down the street, I can see it. I can count the rooms. I can understand what its impact will be.”
The competitive effect of the sharing economy may be harder to quantify, but it’s mutating fast and deliberately moving in on Four Seasons’ territory. For any major international city, Airbnb’s listings feature dozens of available accommodations at Four Seasons price points—tasteful highrise condos for upwards of $600 a night. Other sharing-economy companies have set their sights squarely on the luxury market. Websites such as U.K.-based OneFineStay.com and Montreal’s LuxuryRetreats.com have staff curators who visit every property, selecting only the most exquisitely located, designed and appointed for their listings. And these sites charge Four Seasons prices without any Four Seasons amenities: no pool, no fitness centre, no valet parking.
Four Seasons’ Bahrain location (Four Seasons)
Traditional players in the industry are now hedging their bets against the rise of the sharing economy. Hyatt Hotels purchased a stake in OneFineStay earlier this year. Wyndham Hotels, operator of the Ramada and Travelodge brands, did the same with another U.K.-based site, LoveHomeSwap.com. InterContinental has partnered with Stay.com, which helps travellers plan their urban excursions.
Amid all these changes, Four Seasons risks being perceived as luxury travel’s fusty dowager, its aging lady in pearls. Smith, demonstrating remarkable ice in his veins, perceives just the opposite. “I think, with the passage of time, those types of providers will become more and more adept at providing additional services within their higher-end offerings,” he says coolly. “And when they do, they will compete more clearly with us.” In other words: Everybody’s still trying to ape Four Seasons, and the anybody-can-do-it ethos of the sharing economy will reach its limits soon enough. “What they will have a very hard time replicating is the culture, the quality of the people and the commitment to service at the level we do it. I feel very confident of our competitive position in the marketplace.”
That’s not to say Four Seasons is above the trend. When the Toronto location decided to shut down its Café Boulud restaurant this past summer to overhaul both its design and menu, they opted to make rotisserie chicken—Canada’s second-lowest common denominator of restaurant meals, one step up from a burger and fries—its signature dish. The move is not so much a step down for Four Seasons as a big step up for chickens, which come out tender and succulent, not dry and leathery. But it’s part of Four Seasons’ efforts to offer the kinds of unique, locally flavoured experiences travellers want. In the same vein, as Smith looks to grow the Four Seasons portfolio, he’s also looking to diversify the architecture and design experience for loyal Four Seasons guests by mixing in rebranded historic property acquisitions alongside new builds. Two of its openings this year, the Casa Medina in Bogotá and the Grand-Hôtel du Cap-Ferrat in the French Riviera, are storied hotels with illustrious local and international pedigrees.
And hotels aren’t the only properties Four Seasons is adding to its portfolio. Next year it will reopen the legendary Surf Club near Miami Beach, Fla., a development that will include more than 150 private residences, something that has become an increasingly important part of Four Seasons’ business. Three-quarters of its new projects include residential components, says Smith. Without them, he explains, many property developers cannot make sufficient returns to justify the construction.
As a result, Four Seasons is now not just a hotel manager, but an experienced residential property manager, too. In fact, the company is branching out into purely residential property management without any hotel component, with a standalone residence in Los Angeles under development and others on the horizon in major international cities. It’s a different kind of hedge against the sharing economy: Expand your core hotel management business beyond hotels. When the travel cycle finally takes its downward turn, Four Seasons’ residential business will steady its bottom line, while competitors who invested in sharing-economy sites may find themselves overexposed.
But hotels remain its focus, and a gentrifying China has become the firm’s most crucial growth target—not least because it’s the nation that is most rapidly cranking out new millionaires. Next year Four Seasons will open a hotel in Tianjin, the company’s eighth in China. But Smith says the market for luxury hospitality on the mainland is in its infancy.
“Many of China’s markets currently don’t support the rates that luxury hotels like ours need to charge in order to make sense of our business model.” China doesn’t have the same tradition of luxury service either, so Four Seasons is busy developing and training its workforce in the country to meet the company’s exacting standards. Smith calls it a maturation process—one that, once complete, will result in a massive new market.
Of greater urgency, says Smith, are outbound Chinese travellers, who now make more than 100 million international trips per year. When Four Seasons decided to develop a mobile application, it ended up creating two separate apps: one for China and another for everybody else. “The Chinese app isn’t just a literal translation of the North American or European mobile experience,” says Smith. “The iconography, the design—everything about the mobile experience in Chinese is different.”
Hearing Smith tell the story, you get the impression Four Seasons is building a brand new company, parallel to the one it already has in place, to serve China and the Chinese market. Four Seasons will soon offer Mandarin-language concierge services at every Four Seasons hotel and resort. Menus will expand and adapt to cater to different tastes.
The trick, for Four Seasons, is to find a way to replicate itself for a clientele that didn’t exist 10 years ago, one that’s utterly foreign to the Four Seasons brand—and to do it fast.
A version of this article originally appeared at CanadianBusiness.com.
