Overnight Success

The oh-so-tony Carlyle hotel at 76th Street and Madison Avenue in Manhattan, is, in fact, not really named the Carlyle Hotel.

Pretty much ever since the art deco landmark opened in 1930, the Carlyle has been just that—The Carlyle. No “hotel” needed. Until now. As the folks who now manage The Carlyle—a property where a nice, 650-square-foot room can run about $950 a night—will tell you, the hotel is, in fact, properly referred to as “The Carlyle, A Rosewood Hotel.”

LOOK SHARP: CEO John Scott keeps everything tip-top at Rosewood Hotels & Resorts, including and especially at The Mansion on Turtle Creek. photography by Elizabeth Lavin

Therein lies just one of the challenges facing John Scott, who took over in 2003 as chief executive officer of Rosewood, er, Rosewood Hotels & Resorts, a private, Dallas-based firm that operates 15 “ultra-luxury” properties around the world. Since it caters to the rich and powerful, Rosewood is well-versed in paying close attention to guests. But now, Scott is hoping to get guests to pay attention to Rosewood.

Specifically he wants guests to notice the name “Rosewood.” Until Scott took over, the company’s name didn’t appear on its properties. That includes the best-known of Rosewood’s hotels, The Mansion on Turtle Creek. Since it was first opened in 1980 by Caroline Rose Hunt, the founder of Rosewood and the daughter of billionaire H.L. Hunt, The Mansion has been just that. The Mansion. Now, when prospective guests call for a reservation, they hear the phone answered with, “The Mansion, A Rosewood Hotel.”

This year, the company will do that one better. The Rosewood Mayakobá in Riveria Maya, Mexico, will be the first to carry the

Rosewood name out front when it opens in late 2007. The first of many, Scott hopes. He is leading an aggressive expansion—actually, he prefers to call it a “selective” expansion—and rebranding of Rosewood that could double the size of Rosewood’s portfolio in the next five years. But the expansion depends on getting those pampered guests to “connect the dots,” as Scott puts it, between hotels like The Carlyle and The Mansion to new properties like the Rosewood Mayakobá. “We want people to know that they’ll get the same great service at other Rosewood properties as they did at The Mansion or The Carlyle,” Scott says.

The Carlyle in New York City.

Expansion. Consistent branding. Same service. That kind of sounds as though Scott is building Rosewood into a high-end hotel and resort chain like, say, Ritz-Carlton or Four Seasons or the W. Except he says that he isn’t. Not exactly. Because, the way Scott sees it, the approach the other guys take, no matter how upscale they are, doesn’t focus enough on what those rich and famous guests really want: something different. “We view ourselves as a collection and not a chain,” Scott says. “Luxury hotel chains with 50, 70, 100 hotels start becoming consistent. In one breath, that’s positive, and in another breath, that’s boring and not very unique. Where we differentiate is that each one of our properties exhibits what we call a sense of place. The Mansion on Turtle Creek is a perfect example of that. The property links very closely culturally, architecturally, service-wise, and experience-wise to the place where it is. We don’t want that approach to change.”

A SENSE OF PLACE®
Look at any official Rosewood reference to “sense of place” and the phrase will be capitalized. A registration mark will follow. It looks pretty official. But even Sense of Place, Registration Mark seems like a touchy-feely thing for a guy like Scott to be selling. After all, he has an economics degree from Dartmouth and a Harvard MBA diploma hanging on his wall. “I’m a very classically educated, Harvard-Business-School kind of strategic thinker,” says Scott, a tall, fit, neatly attired executive with receding black hair who is speaking to me from his office at Rosewood’s headquarters in the Hotel Crescent Court (a Rosewood hotel, natch). “But what we’re trying to do in every property is develop a unique set of experiences. And there’s no manual I can hand somebody to define what that means. We certainly do have minimum standards and technical standards and those sorts of things. But those are just the basics. When you go beyond that—What should the property look like? What should it feel like? What makes it different?—that’s what makes our properties special and what makes growth more challenging for us.”

King Pacific Lodge in British Columbia.

Which is not to say Rosewood isn’t up for the challenge. The company has already added three properties since Scott took over in 2003. Those include the Inn of the Anasazi, a famed Santa Fe, New Mexico, hotel that is arguably that city’s most elegant place to rent a room. In 2007, Rosewood will add its 16th hotel with the Rosewood Mayakobá. And in 2008, it’ll add three more: Rosewood Sand Hill, a hotel in Menlo Park, California; Taunovo Bay, a resort in Fiji; and The Mansion on Peachtree, a hotel in Atlanta’s Buckhead neighborhood. More are planned. In 2009, Rosewood Telluride, a hotel-condo development, is expected to open in Colorado.

These added addresses mark the most rapid expansion in Rosewood’s 27-year history. And it comes at a time when the entire high-end hotel industry is booming. Average occupancy at U.S. hotels neared 70 percent at the end of 2006, according to Smith Travel Research. Some industry experts think luxury properties might be more full than that on average. And, with room rates at luxury locales averaging above $500 a night, that high occupancy means lots of cash is flowing into the luxe end of the market.

No surprise, then, that operating margins are high for big luxury hotel operators. The Four Seasons, a publicly traded, Toronto-based chain with more than 70 properties worldwide under its management, has recently reported hotel operating margins of as much as 27 percent. And the 62-property Ritz-Carlton chain, a division of Chevy Chase, Maryland-based Marriott International, reports similar operating margins. Rosewood, a private firm, doesn’t disclose its financials. But Scott does say that revenue growth has been extremely strong at many of its properties—The Mansion, for one, has posted 20 percent revenue gains in recent years—and says his company is happily riding the “positive cycle for the industry.”

That positive cycle is spurring a building and conversion boom. Ritz-Carltons, Fairmonts, Four Seasons, Ws, and the like are going up all over the world as real estate developers—the people who actually pay to build the hotels and then hire management companies like Rosewood or Orient Express or Park Hyatt to brand and manage them—look to cash in. For the big luxury chains, this presents a dilemma. How do they grow quickly when they’re already in the most lucrative markets in the world? Just how many Ritz-Carltons can, say, Washington, D.C., support?

The Inn of the Anasazi in Santa Fe

Rosewood has quite the opposite problem. “It is pretty easy to define strategically where we need to be,” says Scott, who came to Rosewood after six years at Los Angeles-based Maritz, Wolff & Co., a private investment fund that owns luxury hotels, including The Mansion, and has a 50-percent stake in Rosewood. “I want to be in every key gateway city around the world—Hong Kong, Shanghai, Beijing, Mexico City, London, Paris. The good news for us is that we’re not yet in all of those primary locations. Well, good and bad news. Ritz-Carlton and Four Seasons are already in those gateways. So you see now that they are growing in tertiary markets. And there becomes a risk of getting too big and losing who you are and also of going to locations where a luxury hotel shouldn’t be.”

THE CUSTOMER IS ALWAYS RICH
Rosewood clearly has a long way to go before it gets too big if Ritz-Carlton is any measure. That chain will add more hotels in the next three years—26—than Rosewood has today. Still, the pace of growth for Rosewood presents a serious threat to its Sense of Place, Registration Mark mission. And this is where that classical Harvard education can become a challenge for Scott. He’s well-schooled in economies of scale, in figuring out ways of consolidating costs, in the benefits of a corporate structure that standardizes policies and procedures to make a large, far-flung operation consistent and, in theory, more profitable. But if Rosewood’s new properties look like its old properties, if guests get exactly the same experience at The Mansion in Dallas as they do at The Mansion in Atlanta, well, Scott will have some explaining to do. “Caroline Hunt’s vision was to create ultra-luxury, residential-style, unique, non-chain-like hotels that were smaller, more intimate in feel and more unique in design and character than chain hotels,” Scott says. “Our philosophy is still driven by that.”

Rosewood’s  Hotel Seiyo Ginza in Tokyo’s Ginza District.

Okay, fine. But, the truth is, plenty of Fairmonts and Ritz-Carltons look and feel different. And the burgeoning boutique chains, who are nipping at the lower-priced end of the luxe market, are putting up residential-style properties these days. Just look at Kimpton Hotels, a management company that hails from Scott’s native San Francisco. Its flagship Palomar bears the same name in San Francisco, Dallas, and D.C., but each of the properties has a distinct, if familiar, look. So, ultimately, building a unique hotel is about more than architecture. And building a luxury hotel is about more than 1,000-thread count, Egyptian cotton. It’s about the experience that each guest has and whether that guest thinks the experience was worth $150 a night or $1,500 a night, depending. And when price is not a factor—which it often is not for a typical target guest at a Rosewood property—that experience can make all the difference in earning repeat business.

So how does a guy sitting behind a mahogany desk in an office inside the Hotel Crescent Court, A Rosewood Hotel, manage to make sure that a bellhop at the Al Faisaliah Hotel, A—of course—Rosewood Hotel, in Riyadh, Saudi Arabia, isn’t undermining the company’s whole complicated financial structure by mouthing off to some dandy who is paying $1,875 a night for a junior suite?

Scott explains that the company “hires for attitude” and teaches each new employee a core set of customer service techniques, “The Rosewood Way” at “Rosewood University.” Well, of course they do. Burger King does the same thing.

So, what else does Scott do to make sure that Sense of Place, Registration Mark is not in jeopardy? Really, not much. “After that,it’s up to each property,” Scott says. “The property defines its own set of unique service delivery elements.”

“Service delivery elements,” in non-MBA terms, means the managers at each property decide what, in addition to the basics taught at Rosewood University, they expect from their workers in terms of service and guest interaction. This is where “hiring for attitude” actually means something. “We hire a different profile of a leader, a managing director, than these other hotels do,” Scott says. “We hire entrepreneurs. We hire people who are comfortable running a property on their own and knowing how to manage a unique property that doesn’t come with a manual. They’ve got to have the right presence—the ability to deal with people on a very sophisticated level. And they’ve also got to have unbelievable energy and integrity because they’re operating in environments where we can’t control them day in and day out and in environments that are 24-hour businesses.”

Little Dix Bay in the British Virgin Islands.

Not just “can’t” but “won’t.” Scott does not see Rosewood’s corporate offices as Starfleet Headquarters. He’s not issuing marching orders on a daily basis to the general manager at Little Dix Bay in the British Virgin Islands—a Rosewood resort he and his family (he’s married, three kids) visit every year. “We as a corporate organization are in the business of servicing these properties. We are not the command and control model that Four Seasons, Ritz Carlton, Westin, and Starwood are, where they dictate down to the properties. My philosophy, which drives our culture, which drives our products, is that we are in the business of serving our owners but also of serving our property teams. So, yes, they do answer to us. Yes, we have standards and controls in place. But my view is we have to help them develop what is different about their location.”

That’s not to say you won’t find some of the same things from one Rosewood property to the other. That’s also not to say that you won’t find the same thing in a Rosewood hotel that you’ll find in another high-end hotel. Because when it comes to the basics—the bed, the bathroom, et al—you probably will. “Everyone has got the same marble these days and are building bigger rooms and have high thread counts on the beds,” Scott says. “That’s just not a sustainable advantage because it is replicable.”

So, what’s not replicable? As Rosewood sees it, it’s something called “experiential luxury,” which you most likely cannot get at Burger King. Experiential luxury is stuff like the cultural concierge program at the Hotel Seiyo Ginza in Tokyo, which helps foreign travelers from getting lost in translation or the Hot Type program at Little Dix Bay where guests get copies of new books from bestsellers before they’re even released. “It’s the software as opposed to the hardware,” Scott says. “It’s that ability, when you’re staying in a city hotel or resort to have an experience that you could not have had if you’d stayed somewhere else.”

Those experiences cost an enormous amount of money. But with a booming luxury market and a more prominent brand name, Scott believes that guests will keep paying that money to Rosewood so long as he and his company keep delivering all those big and little experiences that you aren’t going to get at a Motel 6. Or even an Embassy Suites. “We are a luxury brand,” he says. “We are a luxury good and one that is immanently disposable, impulse-purchased. You’ve got to have a lot of money to buy a room with us. You’re not paying $1,000 a night at Las Ventanas al Paraiso [a Rosewood resort in Los Cabos, Mexico] because you want to; you’re paying it because you can and because the money means less to you than the experience you’re going to have. So it’s up to us to keep delivering that experience.”

Rosewood’s rival may be the hotel across the street, but its biggest competition is matching the expectations of its customers. It’s the kind of concern that can keep a CEO up at night.

Thank goodness for 1,000-thread count, Egyptian cotton.

CEO SNAPSHOT    John Scott, CEO, Rosewood Hotels & Resorts
	BIRTHPLACE: Evanston, Illinois MULTIPLE DEGREES: Undergraduate degrees in economics and history from Dartmouth. MBA from Harvard. HE COULD HAVE BEEN: Working on Wall Street. “Out of Dartmouth I had an offer from Goldman Sachs to work in their high-yield department,” Scott says. “To be quite honest, I didn’t even know what high-yield was. But I’m now told it was junk bonds.”	INSTEAD, HE WENT EAST. FAR EAST: Scott worked for Interpacific Group first as a management trainee in Thailand and Micronesia, then as a food and beverage director at a hotel in Guam, then as a general manager at a hotel in Bali before returning to Saipan and ultimately going back to the U.S. to attend Harvard. FAMOUS LAST WORDS: “When I went to Harvard, I swore I’d never get back into hotels,” Scott says. But after graduation he spent two years working for The Walt Disney Company developing theme parks, retail shops, restaurants, and, yes, hotels.	THE ROAD TO ROSEWOOD: In 1996, Scott left Disney for Maritz, Wolff & Co., an investment firm that owns high-end hotel properties  and that has long maintained a large stake in Rosewood. Scott sat on the Rosewood board and, in 2003, left Maritz, Wolff to become Rosewood’s CEO.