SBE made headlines this year when Accor-Hotels agreed to acquire a 50% stake in the lifestyle hospitality group, whose brands include SLS, Mondrian and Delano. SBE will operate 25 hotels and more than 170 restaurants and nightclubs worldwide by the end of this year and plans to add around 50 properties by 2020. Hotels editor Christina Jelski spoke to SBE founder and CEO Sam Nazarian about the competitive lifestyle space and how SBE and Accor plan to leverage their partnership.
Q: How has rapid consolidation in the hotel space affected the competitive landscape for companies like SBE? As the lifestyle space grows increasingly crowded, how is SBE staying a step ahead?
A: I think the consolidation by competitors is helping us. As the space is getting crowded, our competitors -- including IHG with Kimpton, Starwood and Marriott, and now Hyatt and Two Roads -- are actually moving away from the forefront. People still want to deal with independent brands. The stage is theoretically more crowded, but at the same time, the lane of lifestyle has doubled or tripled and still has room to expand globally.
Around 75% of our pipeline is now international. Lifestyle continues to resonate with the U.S. market, but international developers and owners want lifestyle, as well.
We're also differentiating ourselves by constantly innovating and committing to our other verticals; whether through our Disruptive Restaurant Group or our innovation lab and incubation lab, we're constantly creating new brands. We create four to five new F&B brands a year, and we're also innovating across our day club, mixology and lounge concepts. We're now also focusing energy on the residential aspect of our business. We've sold a couple billion in branded residences so far. Our recently opened SLS Lux Brickell [a mixed-use, 57-story development with 450 residences and an 84-room hotel] sold out within two weekends. What this property specifically shows is how well we've unlocked the synergies between four different verticals: a bar, restaurant, hotel and residences.
Q: With the SBE and Accor partnership recently finalized, what are some synergies we can expect to see?
A: We've been looking for a partner in distribution. The end-all, be-all in our business is to get to scale, and to get to a point where you can deliver a product anywhere in the world consistently. The best way for us to do that was through a strategic 50/50 partnership.
For us to go from having five development folks to Accor's team, as well as established infrastructure in certain markets, was a no-brainer. We've already seen a very healthy pipeline of projects with Accor in markets where we generally would have had more challenges, like Hong Kong, Thailand and throughout Latin America and the Caribbean. It's also helped our relationships here in the U.S., where developers can be shy about working with an independent company because they need to have the validation of a global distribution arm.
Meanwhile, Accor has more than 4,500 hotels within its network, and some, at one point, may need to be rebranded. And that could mean converting a Novotel to an SLS or a Swissotel to a Mondrian. Another thing is our F&B expansion. Our pipeline includes putting branded F&B and bars and mixology centers in Accor hotels like Raffles, Sofitel, Fairmont, Swissotel, which is a huge differentiator for Accor. Now they can put in a Katsuya [restaurant] instead of having to fight to put in a Zuma or a Nobu. So that part of the business is equally as exciting.
Q: SBE plans to merge with Accor's Le Club loyalty program sometime next year. Why is this such an important move?
A: To me, loyalty is about access, a sense of community, content and exposing our guests to the latest and greatest trends. It's inviting guests to events around the world, from Coachella to New York Fashion Week to the Oscars. And the good news is Accor is also committed to offering rewards that are not just the typical loyalty benefits, which are still important, but that continue to be relevant when a guest goes back home. So it's also about integrating that local restaurant, or going to the nightclub or maybe going to a standalone Katsuya and making loyalty more three-dimensional in your life. I think that's the direction Accor is going when it comes to loyalty, and that's the direction we're built for. We're having real-time integration conversations now, but ultimately, we will be part of one system, and it needs to have robust benefits for our hotel owners, as well. So that's something we're looking to formalize in the third quarter of next year.
Q: What international markets and which specific brands are you targeting as part of your growth strategy?
A: For us, we tend to look for markets that could accommodate several of our hotel brands, like Doha, Dubai and Shanghai, as well as markets like Paris, which is generally an underserved branded lifestyle market. Latin America also seems to be a tremendous opportunity, because we have so many Latin American buyers for our residences in Miami. We also think that focus in Asia has shifted to markets like Seoul and Taipei, which are ripe for this type of luxury lifestyle product and lifestyle F&B offering.
As far as brands go, we're very clear in our four top brands: SLS, Mondrian, Delano and Hyde. They give us a presence in the luxury lifestyle, lifestyle, resort space. A fifth brand is our version of a luxury collection, called the Originals, that we think is going to grow fast. It is an association brand that allows individuals to keep their own autonomy and own brand and in some cases their own management, but they can tie into the world of SBE and get the benefits we can offer, whether that's branded F&B, signature restaurants, a signature bar or help positioning themselves in a global marketplace and within the lifestyle platform that they want to be a part of.