Brand extensions that drive profitability

With consumer demand for experiences having moved far beyond traditional hotel stays, a panel at ALIS DESIGN+ on January 24 talked about how they work to mix passion for hospitality with profit.

Moderator Raj Chandani from WATG | Wimberly Interiors started the conversation by prompting the panelist with a question about one of the hottest trends of the day – how they are using the great outdoors to drive design, experiences and profitability.

Jason Cruce, vice president and head of Hotel Development, Starwood Capital Group, talked about its slow-moving joint venture with AJ Capital to develop the Field & Stream brand, a long-standing, very popular outdoor sports enthusiast magazine similar to what Sports Illustrated has done for ball games. He said development is going slow due to the brand's unique positioning, which can lend itself to issues with entitlement approvals in smaller communities, access to the real estate, etc.

“Barry [Sternlicht] purchased the IP (intellectual property) for a steal, recognizing the resonance of the brand,” Cruce explained, adding that the idea is to acquire distressed or other outdoor assets around national parks like Yellowstone and create a unique branded experience.

The partners have created a fund and have four hotels in the works (Santa Fe, New Mexico; Durango, Colorado; Bozeman, Montana; and Twin Falls, Idaho) with one new-build property. They are also looking at additional glamping opportunities, according to Cruce.

Because of the seasonality of these resorts, Cruce said owners have to collapse operations back into something more manageable and profitable for the rest of the year – but at the same time make sure that everyone has their ideal experience. They are working through that profitability model right now.

Cruce called the concept “sort of utilitarian and design driven at the same time. There are places to store outdoor gear, laundry rooms and “all the things that you need after you’ve gone out on a full day of mountain biking or fly fishing."

These types of mashups are really successful as long as both brands elevate each other. We have a team focused on nothing but partnerships, looking at elevating brands through partnerships.

Larry Traxler

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He said the partners are also taking their time on the operating side to curate local partners (hiking guides, for example) and control the overall experience and packaging.

One panelist who has already had success outdoors and is likely planning more is Homi Vazifdar, founder and executive director of The Canyon Group in Larkspur, California, which owns the ultraluxury Amangiri in Canyon Point, Utah, where he said the EBITDA per key is the highest of any property in the U.S.

Not one to rest of their laurels and avoid any chance of getting stale, Canyon Group created an adjacent tented camp called Camp Sarika where Vazifdar said development costs are traditionally about 60% of the bricks and mortar hotel.

“Stupid us, we opened in the middle of a pandemic,” Vazifdar joked. “Dumb luck – we ran close to 100% occupancy and our one-bedrooms ran at $5,000-plus ADR and our two-bedrooms at $7,000-plus ADR, which is higher than the bricks and mortar ran at $3,800 ADR. Camp Sarika ran at $5,700 ADR.”

So, Vazifdar said the now have proof of concept and are ready to move on to develop more.

You’re literally creating a business by picking your slowest weeks, filling the hotel, creating F&B demand, and a rate premium.

Jason Cruce

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At Hilton, Larry Traxler, global head of architecture and design, talked about the impact of co-branding – in their case a deal with Peloton bikes. He said Hilton bought 5,000 bikes at once and shipped them to all of their properties, where people are paying anywhere from a $60 to $100 premium for a room with a bike.

“These types of mashups are really successful as long as both brands elevate each other,” Traxler said. “We have a team focused on nothing but partnerships, looking at elevating brands through partnerships.”

Another way to create experiences that drive profits is through to food and beverage. Cruce talked about how Starwood Capital’s SH Hotels & Resorts has worked with celebrity chef Nancy Silverton, pairing her with a winemaker or a local spirits company. They teach guests how to make some of the chef’s signature dishes, make cocktails, and generally create a lot of small group opportunities to provide a lot of personal attention surrounding their F&B offerings.

“You’re literally creating a business by picking your slowest weeks, filling the hotel, creating F&B demand, and a rate premium,” Cruce said. “It checks all the boxes… When it’s done well, you’re also creating lifetime customers that will engage annually with these events.”