The ‘Brando’ opportunity

ARUE, French Polynesia – The ESG movement isn’t exactly receiving a lot of support these days, but small luxury developers like Richard Bailey still see it as a road to greater profitability – not to mention doing the right thing for the environment and staying on trend as Millennials, Gen Z and Gen Alpha prioritize intentional transformative travel that creates a positive environmental and social impact.

Take Bailey’s approach to providing air conditioning at The Brando in Arue, French Polynesia. Built on the private island of Tetiaroa now owned by actor Marlon Brando’s family trust, the 36-key ultra-luxury resort was designed to be uber-sustainable. But traditional cooling of The Brando would prove to be too expensive and not very sustainable. In fact, when still alive, Brando said no fossil fuels will be allowed on the island or at the resort because he had another idea. Brando discovered through a scientist in Hawaii that they could use pipes to bring up the coldest deep ocean water, extract the cold and circulate it into a system to cool the property.

Aerial view of the Brando

First used at one of Bailey’s resorts in Bora Bora as opposed to the local grid, the seawater air conditioning system at The Brando helps hold the resort’s annual energy bill to $700,000, or less than half of their competitors, according to Bailey. The system paid for itself by 2013 and now the resort has free air conditioning energy, which is normally accounts for three-quarters of all the resort’s energy costs.

In fact, The Brando is powered entirely by solar and coconut oil biofuel and has a zero-carbon impact. In addition, through Tetiaroa Society—the resort's long-term conservation partner and the nonprofit organization for all the sustainability initiatives—an on-site Ecostation is used as a research facility where scientists monitor local marine and birdlife and where many guests flock to learn more from the scientists on site.

The resort also funds cultural preservation projects and supports local employment and education programs.

Of the eight resorts Bailey’s Pacific Beachcomber group owns or manages in French Polynesia, they have first and foremost built their reputation by caring for their teams, said the Stanford and Harvard Business School graduate who was working at CitiBank in New York before meeting a woman in Tahiti who became his wife and changed the course of his life.

“Normally, we say, ‘take care of the guests and the P&L will take care of itself,’ right? But we say, ‘take care of your staff and your P&L will take care of itself.’”

Normally, we say, ‘take care of the guests and the P&L will take care of itself,’ right? But we say, ‘take care of your staff and your P&L will take care of itself.’

Richard Bailey

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So, it’s simple to Bailey: if you care enough about the environment and your team, you overcome obstacles.

The key word here, Bailey told Hotel Investment Today, is “caring.” Unfortunately, he said, especially in the corporate world, sustainability beyond reusing towels, removing plastic utensils, LED lighting and low flow showerhead is enough caring in most instance. While there are exceptions, there are not enough. There isn’t enough passion, he said, “and passion doesn’t always make money.”

But in Bailey’s case his passion does pay. He said his group that includes The Brando, three InterContinental-branded properties and four mid-market Maitai resorts is very profitable, and its sustainability quotient is part of the reason why.

He has the proof to show revenue teams that nature and cultural investments represent the intersection of business excellence and environmental responsibility.

“I refute the idea that that sustainability isn’t profitable,” he said. “I run a very profitable company, and my profitability depends on it. If I wasn’t running a sustainable operation and created a community around it, I wouldn’t have the things that they’re coming to see. It’s as simple as that.”

Three-bedroom villa at The Brando

Admittedly, his approach at The Brando is applicable to small luxury eco-resorts in unique locations where environmental sensitivity is high and there is some prospect of interest by the scientific community. “Our model [at The Brando] includes a resort and a non-profit conservation/research field station that work in hand in hand.  This separation gives the Field Station legitimacy and authority, while not placing the burden of conservation on the for-profit resort,” Bailey explained.

But he also knows where there’s a will there’s a way for any owner and operator who wants to invest as the ROI on sustainability initiatives is reachable in a shorter timeframe every year.

Expanding the concept

Looking ahead, Bailey has explored expanding the brand but to date has not found the right location with all the right traits, or the right investment partner.

What he might consider is creating a collection with like-minded owners and operators like his contemporary Mike Freed, founder of the Post Ranch Inn in Big Sur, California. They are already cross-market and if Bailey does expand, he sees working with Freed as a start.

I run a very profitable company, and my profitability depends on it. If I wasn’t running a sustainable operation and created a community around it, I wouldn’t have the things that they’re coming to see. It’s as simple as that.

Richard Bailey

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“His [Freed’s] entire business model is based on some sacred assets [like The Brando], which includes the California coast,” Bailey said. “It’s about the resort, but it’s also about the location and what the resort is doing to be a part of that community, which is very environmentally sensitive. Everything that happens on that coast is carefully planned and Mike is fully on board with that.”

But evidently, not every developer feels the same and, in fact, Bailey thought for years that so many would jump on board his bandwagon without him having to export his model. “It just seems so obvious to me, but I haven’t really seen that happen,” he lamented. “I believe that there is a space that has not been occupied brand wise. Six Senses comes to mind, but it is mainly about wellness. Singita does amazing work on the African continent, but there’s no brand that come to stand for exactly what we are doing. I think there is potential demand there.”

Bailey thinks of places like the Red Sea, Galapagos and the Coral Triangle – places with very high biodiversity, environmentally fragile, susceptible to the dangers of overtourism and environmental degradation. “These are the natural points of entry for our business model. Costa Rica comes to mind where there is a higher level of sensitivity, and great things are happening. But bigger picture, the concept needs to be organized under a brand. So, yeah, I’ve been thinking about that.”

When asked about creating a collection with existing assets that pass an intensive review process, Bailey nodded affirmatively, but added he is not ready to discuss anything definitively.

Finding like-minded developers is his biggest challenge, perhaps.

“A project like this would be bottom up rather than top down. The people that do this kind of thing want to be part of a moral part of a cooperative rather than then pay for a brand. They want to share insights. They want to feel like they’re part of the part of the program, rather than just subscribing to set of principles.”

Think twice

When asked why more hoteliers don’t have his mindset and don’t as easily equate sustainability to profitability, Bailey said they have to really lean into the mindset, even in a middle American business market.

Let’s talk about what matters to our guests, and what provides financial returns to our P&L. Guests come to our resort because we do this, and if we don’t do that, we have less occupancy, or we have a lower ADR, and we have degraded RevPAR.

Richard Bailey

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“It starts with the spread of sustainable technologies and innovation starts in places where there’s a clear benefit of protecting those things which without we don’t have a business model,” Bailey said. “But then there are so many advances in construction technology with new types of concrete, cross laminated timber, and LEED quality construction has become compelling from an economic standpoint.”

However, Bailey added that most developers are not educating themselves about these technologies and frustratingly admitted it’s not trendy right now. “It’s almost trendy to be anti-ESG. Even capital providers look askance when you talk about things like that.”

But Bailey said developers should think twice because he is a businessperson and also needs to know if green systems will help make money. “We’re getting financially adequate returns on sustainable technologies,” he said. “Granted, we’re doing it in a very remote location where the alternative cost of energy is very high due to transportation and distance and isolation. But the technologies are promising and definitely possible of being employed elsewhere.”

“Everybody should do something,” Bailey said, and he suggest not to use the words ‘sustainability’ or ‘ESG.’

“Let’s talk about what matters to our guests, and what provides financial returns to our P&L,” he said.  “Guests come to our resort because we do this, and if we don’t do that, we have less occupancy, or we have a lower ADR, and we have degraded RevPAR.”

For example, Bailey has worked diligently with a nonprofit to develop a system to eradicate mosquitoes at The Brando and it is now being explored in Singapore, Hawaii and Florida.

“Did we do this for the world? No. We did it for our guests,” Bailey explained.

Also at The Brando, conservation measures have resulted in increased nesting on the hotel’s island for sea turtles with some 1,400 laying eggs today versus maybe a dozen when they started developing the hotel.

“Guests flock to the resort to see them. The two are connected,” said Bailey, who added, “Travel, especially leisure travel, is the most natural point of penetration for sustainable innovations because that’s the only thing we have to sell.”