As CEO of Small Luxury Hotels of the World (SLH), a branding and marketing company for high-end independent properties, Paul Kerr has led the company's growth from a portfolio of 70 hotels in 1992 to more than 500 today. Kerr recently spoke with hotels editor Danny King about SLH's growth markets and increased competition from major global hoteliers looking to broaden their luxury-hotel offerings.
Q: How small does an SLH property need to be?
A: It should probably be no more than 100 or 120 rooms. There's the 192-room Lanson Place in Hong Kong, but that's still pretty boutique. But the average size is about 50 rooms. Did we design it like that? No. But it's always been that way.
Q: What are the regions of fastest growth for SLH?
A: Twenty years ago, 2% of our hotels were in Asia-Pacific. Today, it's 23%. In China, we've already got 12 to 14 hotels. The Hansar Bangkok is an absolutely brilliant hotel, as is the new one, the Siam. There are a lot of wealthy people over there willing to pay their money and their families' money to invest in these hotels.
Q: How have you managed to grow so steadily throughout the years amid competition from the chains and the travel cycles?
A: We've always been lean and incredibly focused. During the early stages, we concentrated on the GDSs and the very boring type of things, but we managed to deliver business to the hotels. You can blind them with marketing, but at the end of the day, they want hard facts. Hotels get an enormous amount of business from us.
Q: How big of a difference in sales does SLH make on a typical hotel?
A: Our hotels' average occupancy is 65%, or 237 nights a year per room. Marketing expenses should be 10% of a hotel's room revenue, so 10% of room nights should be attributable to SLH -- say, two nights a month. We have hotels that get 45 to 60 room-nights a year from us; the highest is 102. They use the suggestions we make: how to market, what rates to charge, how to display best on the GDS. The whole idea is to look after the independent luxury market and maximize their exposure.
Q: Many global hoteliers have announced plans to expand the number of hotels under their luxury brands. Does that concern you?
A: They're trying, but they won't succeed because they're chains. The other day, I had to stay at one of the chain hotels -- it could've been a Hyatt or a Hilton, it didn't matter. When I arrived, they welcomed me by name. Even the taxi driver knew it because they radioed it in advance: "Good morning, welcome, Mr. Kerr." I thought that was nice. The next day, the very same people didn't have a clue who I was, and I think that sums up the difference. But I am concerned that all these people are building hotels. It's not like there's an international planning commission guy. So there will be more hotels, and the rates will come down, which is great for the consumer, but in the long term, the hotels won't make any money, and there will be a lot of hotels going bust.
Q: At last year's ILTM conference, you brought up the concept of a grown-up "gap year," where wealthier empty-nesters travel around the world staying at your company's hotels. Can you elaborate on that concept?
A: When you're struggling to make ends meet, you don't have that luxury, but there are a lot of grown-ups saying, "We should do that." That's happening with Americans and in the U.K. and Germany. We're doing it like the kids, except we don't want to put our backpacks on. ... We're probably not as fit as we used to be.
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