Insider

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SLH Emphasizes Value for Money

By: Paul Kerr

As was the case with most companies, 2008 started out very well for Small Luxury Hotels of the World™ - in fact, reservations revenue was up 9 per cent year-on-year at the end of the third quarter.

However, the economic crisis took firm hold in the fourth quarter of 2008, and as a result growth across the entire industry has slowed. Other world events also compounded the situation; with the prolonged protests in Bangkok resulting in significant cancellations for our hotels in Thailand; the tragic events in Mumbai affecting people’s decision to travel to India; and the civil unrest in Athens impacting on travel to Greece, where once again SLH has a considerable number of hotels. Regrettably there are no immediate signs of an economic recovery and so 2009 is undoubtedly going to be an interesting year for all of us. But our systems work brilliantly in down times, picking up extra inventory that hotels release - even so, I must confess that we have 24,000 rooms to sell every night, and with an average occupancy on any one night of around 60 percent, it is a tough call in these challenging times to maintain a decent occupancy. It is essential to be realistic.

Despite the challenging times, Small Luxury Hotels of the World has recently added more than 70 properties to its already impressive portfolio of hotels, bringing the total to over 480 hotels. This represents a net growth of 10 percent compared to last year, which I think in the current economic climate is a notable achievement. Interestingly, one positive trend that we are seeing at the moment is a marked increase in the number of applications from hotels wanting to become part of the Small Luxury Hotels of the World brand. In tough economic times small, independent hotels realize the true value of being part of a global brand like SLH, which is why demand tends to increase despite the global recession.

I also believe that in the current economic climate, travel will continue to be an important part of many people’s lives – if nothing else, to provide an escape from the doom and gloom that surrounds us. Over the course of the next 12 months we may well see a change in travel patterns, with people cutting back on the number of holidays that they take or perhaps opting for a number of short-haul breaks rather than one or two long-haul holidays. ‘Value for money’ will become even more important as people seek out the best deals – and by this I don’t mean ‘cheap’. The challenge for all us will be to ensure that our offering is even more attractive. SLH has met this head on with the recent launch of a number of ‘value’ packages including two-night city breaks, two-night Mediterranean escapes, three and five night retreats to Mexico & the Caribbean, India & the Indian Ocean and Thailand, as well as a range of gourmet experiences. All of these are proving to be incredibly popular and we expect demand to continue into 2009.

In 1992, my business partner, Brian Mills, and I founded Hill Goodridge & Associates Ltd (called after our mothers' maiden name) and we took over the management of SLH, which at that time had no money. Today we both devise SLH’s strategy, which is then executed by a global team of over 60 employees. Small Luxury Hotels of the World is non-profit, and right now we have over 480 properties in 70 countries. Quality control is core to SLH’s success, thanks to around 175 ‘mystery inspectors’ who help inspect each SLH property every 18-24 months. I believe in sticking to the knitting - Small Luxury Hotels of the World has not, like competitors, diversified into a range of operator benefits. We have, however, just launched a dedicated website

for travel agents, who are definitely here to stay, and even more so. Average consumers can manage a simple air ticket but they need consultants to make a whole trip work.

Why should a hotel owner join Small Luxury Hotels of the World? Small Luxury Hotels of the World is more like a ‘family organisation’ with 95 percent of the hotels being independently owned, many of which are family owned and run. The very nature of this independence means that they do not have access to a central reservation system or have any marketing leverage with likeminded luxury brands. It is also difficult for them to be recognized by the travel agent community. Being part of SLH gives them recognition. This symbiotic network meets every two years - next in May 2009 in Paris. If owners need help financially, say after any natural tragedy, Small Luxury Hotels of the World can help, as it can with operations (HGAL is a serious investor in the management company Luxury Hotel Partners). On the distribution side, account managers, who come from the travel business, each handle 30-40 hotels in a given area, to help maximise channels and rates.

SLH properties also have access to 70,000 high-spending members of the complimentary Club of Small Luxury Hotels of the World, where Gold level in key cities includes a complimentary concierge system run by Global Guest List. We also have a members' wine club which is run by Berry Bros & Rudd in London. Small Luxury Hotels of the World also has partnerships with likeminded luxury brands such as Aston Martin, Bentley, Mercedes and Porsche - and with the Financial Times and Mastercard. It also supports many global charities: each hotel donates at least ten room nights a year, which when auctioned in 2008 helped to raise close to £500,000 for charity.

Looking ahead, I want more properties in South America, as well as certain parts of Asia where we don’t have a presence yet. I also want to formalise more 'experience packages' to meet the increasing demand from sophisticated travellers. There is no exit strategy. I believe that if you want to be successful in any company you do not think about getting out until you actually walk through the door.

THE AUTHOR

Paul Kerr is Chief Executive Officer, Small Luxury Hotels of the World www.slh.com.