Capella Hotel Group's Horst Schulze

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Horst SchulzeTen years after founding West Paces Hotel Group with the goal of creating an ultra-luxury hotel company, former Ritz-Carlton President Horst Schulze is hoping that a recent infusion of capital from private-equity group Stoneleigh Capital helps him expand his vision beyond the 14 hotels under management of what's now Capella Hotel Group. With luxury travel expected to lead the travel-spending rebound from the most recent downturn, Capella, whose brands include Solis Hotels and the destination spa brand Auriga in addition to Capella Hotels and Resorts, is hoping to have as many as 40 hotels under management within two or three years. Schulze recently spoke with hotels editor Danny King about the Stoneleigh deal and how the company differentiates itself from its competitors.

Q: How does your agreement with Stoneleigh Capital benefit you?

A: A lot of people have come to our table, developer-owners and banks that were looking for some kind of financial commitment from the operator. We had a deal in Boston, but the bank said the operator should have a financial commitment, and I couldn't make that commitment. So I believe we lost 80% of our potential deals because of our lack of making financial guarantees and making investments in the hotels. We started talking to Stoneleigh about a year ago. Stoneleigh sees value in those kinds of investments. So we came to an agreement without me giving up the company or becoming an employee.

Q: Will Stoneleigh Capital have any operational control?

A: I bring the deals to them. In the short time [since Stoneleigh has invested in Capella], I've brought five deals to them. The investment is in their hands, but they have no operational involvement whatsoever. They're a minority partner. It's an ideal relationship, especially if we want to grow much faster.

Q: Some would say that your timing in launching an ultraluxury brand could not have been worse, given the travel downturn a few years ago. Do you agree?

A: We have exceptional hotels. Two years after we opened in Singapore, we have the highest occupancy rate there. In Dusseldorf, we're running within the top three in room rates and occupancy in all of Germany. Our New York City occupancy is equal to the top four hotels there. We took over the Ritz-Carlton in Bali, and it had the best year it ever had after 17 years in business. So clearly, it's a success story.

Q: In an interview with Travel Weekly in 2008, you said you thought some of your larger competitors such as Ritz-Carlton and Four Seasons may have compromised some of their luxury standards for the sake of economics. Do you still feel that way?

A: I'm sure everyone's made some compromises. Those hotels have conventions and large groups. To run a 600-room hotel and have 400 people checking in, I don't do that. It's just a different product geared to the individual, one room at a time. For that customer, you can't compromise. They're buying product and not airline points. They want product, and they're willing to pay for it. For big companies, it would be silly to go after that type of specialized product. I have pride in my career of providing individualized and personalized service.

Q: So where do you see Capella Hotel Group differentiating itself from the competition?

A: We call every customer beforehand if we can reach them, and we ask, "What can we do for you?" We have no check-in or checkout time. We will do everything as long as it's legal, moral or ethical. I would be lying if I ran a 300-room hotel and could do that for everyone. But in a 100-room Capella, I can do everything. That's where we differentiate ourselves.

For hotel and hospitality news, follow Danny King on Twitter @dktravelweekly.

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