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Four Seasons CEO Allen Smith (Anthony Jenkins for The Globe and Mail)
Four Seasons CEO Allen Smith (Anthony Jenkins for The Globe and Mail)

The Lunch

Five-star general: Four Seasons' new CEO and the era of peak hotel luxury Add to ...

In the industry nowadays, there are few luxury frills left to offer guests, he observes. It’s all been done before. His pronouncement of peak hotel luxury is defensible, but nonetheless disappointing to hear from a Four Seasons CEO. Early in its history, the company’s founder, Isadore Sharp, was churning out amenities you see to this day, even at your local Days Inn: non-smoking floors, premium mattresses, neck-pummeling shower heads. Mr. Sharp also invented the idea of shifting the financial risk of ownership, which remains an industry standard. Developers would own the most of the building, allowing the company to focus on what it did best: manage everything inside of its walls.

Mr. Smith’s pedigree in the complicated world of real-estate investment trusts has led to speculation that Four Seasons is returning to property ownership. “It’s really not,” he says. “The asset-light model that Issy Sharp developed for the company is frankly one that many in the industry are trying to migrate to. I can understand why people would conjecture that, but at the end of the day it’s not part of some grand strategic shift on the part of the shareholders.”

As our lobster salads arrive with two glasses of crisp Stratus white wine, I restrain myself from digging in. (I also wonder if those samosas are really mine. They look suspiciously tidier than when I left them). Before we lift our forks, I’m eager to know more about that IPO. It feels like a reversal, given that Prince Alwaleed and the other principle stakeholder, Bill Gates’ Cascade Investment, took the company private seven years ago in a deal valued at $3.8-billion.

Mr. Smith predictably doesn’t bite, neither on the food nor the question, cautiously telling me that his job is simply to make the company grow and work with shareholders, employees, and property owners to achieve strong results. Okay, but would a public offering be helpful to his company? “I’m not speaking on behalf of the shareholders, and just as the CEO of the company, but I don’t believe that my task changes dramatically whether the company is public or private,” he says. “My focus is simply advancing our growth.”

Part of Mr. Smith’s growth strategy is to “reflag” existing properties that belong to other operators and convert them. Recently it entered the South African market by reflagging Johannesburg’s Westcliff Hotel, perched on a cliff-side garden estate. It will open this year, along with other properties in Orlando, Dubai and Moscow. All told, the company has 60 projects in the works, two of which have been announced since Mr. Smith’s installation. The Ritz-Carlton has 85 hotels, with two opening this year and eight others under way.

One of the keys to his company’s growth, Mr. Smith explains, is nurturing relationships with developers. In recent years, there has been tension with some owners who were struggling through a real-estate meltdown and wanted to cut room rates and forego luxuries such as fresh flowers to bring down costs. In 2010, the owners of its Carlsbad, Calif., hotel replaced Four Season’s management with Park Hyatt.

One aspect of keeping owners happy is offering more value to guests, and also being more sensitive to owners’ concerns. He speaks their language, he intimates. “Owners are fundamental to our strategy,” he said. “They need to feel we are exceptional stewards of the assets we manage. That means understanding their investment objectives, thinking long-term and really engaging them as asset manager in addition to being extraordinary hoteliers.”

One potential deterrent in landing new partners, however, is a no-disturbance clause, which means that even if an owner goes bankrupt, the management company (The Four Seasons in this case) cannot be removed. That proviso, says Mr. Smith, isn’t going anywhere.

Mr. Smith’s other important constituency, of course, is its guests, and the strategy is to offer them more customization, not amenities. For example, he mentions a new program where you can pick your own mattress topping. “We’re in the process of introducing a new bed that allows guests to specify the level of firmness they want,” he says. “Not everyone wants the same thing.”

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Globe and Mail Update Feb. 21 2014, 5:36 PM EST

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