Perhaps distracted by BlackBerry’s messy implosion, Canadians could be forgiven for missing the more discreet disruptions within another iconic global company: Four Seasons Hotels and Resorts.
Last year its principal stakeholders ousted CEO Kathleen Taylor, the protégée of the company’s legendary founder Isadore Sharp, and replaced her with Allen Smith in the fall. An American who ran $53-billion in real estate assets for Prudential Real Estate Investors, Mr. Smith seemed an unlikely choice for a hospitality company that’s hoping to remain king of its worldly domain.
Luxury hotel chains such as Four Seasons are vertical empires, five-star familiarity for the homesick plutocrat. For this company, which manages 92 hotels and resorts across 38 countries, it’s about expansionism, putting up their signature leafy imprimatur in as many desirous locations as possible. The prevailing wisdom is that the stakeholders removed Ms. Taylor because she wasn’t able to grow the company fast enough, no small feat during a worldwide recession when many potential developers or partners are either pinched or tapped out.
On top of the economic challenges, industry insiders say the Toronto-based hotel management company could be more innovative, that it is ceding ground to the rival imperial power, the Ritz-Carlton. Last December Prince Alwaleed bin Talal added another wrinkle, telling Bloomberg that he wanted an IPO within two to three years.
In the kitchen of Café Boulud in the company’s Toronto hotel, the heat doesn’t bother Allen Smith, an approachable 56-year-old cooking aficionado with a wry sense of humour. We’re asking him to do a video and he asks the staff to turn off the fans so we can be heard while we make our own lobster salad. Sleeves rolled, apron tied, he inspects a long kitchen knife and soon grinds through the romaine lettuce with snapping, staccato chops. Less deftly, I try to ask him poignant questions for this interview – his first full discussion with the media since taking over – while folding pastry skins into triangles for the lobster salad samosas that will accompany it.
A light touch, Mr. Smith has a tone that can imperceptibly bounce from warm banter to a knowing archness to press-statement dry. Or sometimes he piles it on all at once. “One of the challenges in this business is that it’s not one that lends itself to immediate gratification,” he said, pausing on the last word with a slight twitch of the eyebrow.
I tell him that his appointment raised some eyebrows, stemming from the fact that he’s from the world of real-estate finance and Four Seasons doesn’t actually own its buildings, except its Vancouver property. Though it retains a small percentage of equity, the company instead focuses on managing everything inside – from setting the cost of the rooms, to staffing decisions, to what bed linens they use. At first blush, his CV and his new job description don’t seem like boon companions.
It’s not as surprising as one might think, he said. Quoting Steve Jobs, he says that you can’t connect the dots looking forward. “You can only connect them looking backwards.”
In his earlier days, the dots are a little inscrutable. The son of a Cornell professor who grew up in Ithaca, N.Y., Mr. Smith took an early interest in hospitality. A graduate of the Cornell School of Hotel Administration, he tells me in the drawn-out vowels of a Western New Yorker that he studied French cooking at L'Academie de Cuisine outside of Washington and apprenticed at Ledoyen, one of Paris’s oldest and most stately restaurants. He also ran a catering business in Washington and worked as a legislative assistant to the Republican congressman from Virginia, M. Caldwell Butler, before taking a job at Prudential, which for a while was one of the country’s major players in hotel properties.
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.”
But later I ask him however if the luxury hotel model in some ways needs blowing up. For example, why do guests need to schlep up to a check-in desk? It’s inconvenient and stodgy. If tourists can choose an airplane seat – a convenience offered even by the cheapest of airlines – why not a room at the Four Seasons? Mr. Smith stresses that it’s a people-driven business, and he feels that guests expect one-on-one attention and Four Seasons give them that long before the journey begins with concierges to help them plan.
It occurs to me about halfway through the meal that Mr. Smith is more at ease standing up than sitting down. The answers are growing stiff. Perhaps he’s just tired of this formality. Or perhaps the man has been on a non-stop tour of his properties for the past few months and it’s all finally catching up to him.
Consequently, when the conversation turns to his family, he starts opening up again. He hasn’t moved to Canada yet. His family is still in suburban New Jersey, where two of his four kids go to arts school, and once the second-youngest finishes high school next year, he and his wife will settle here.
He is no stranger to Canada: He tells me about his mother’s family from Ottawa. As a kid, he used to vacation at her family farm near Aylmer, Que., and sold apples at a roadside stand. “We did it by providing outstanding service,” he said archly.
As we end the interview, I ask him about a gold ring he is wearing, an old family heirloom he tells me, given to him by a close aunt. “There is a date inscribed on the inside: 2014,” he says, then correcting himself. “I mean, 1914.” It’s a sign, I tell him. It’s your year.
His salad is half-started, his wine glass half-drunk, and after sitting for an hour and half to go over what he needs to keep his famous stakeholders happy, he probably didn’t need any reminding about what this year means.
Time to stand up.
TRAVELS WITH ALLEN
Most impressive tourist site: Grand Canyon. “The scale certainly puts you in the larger scheme of say, um, geologic time. There’s not much else that does it more profoundly than that.”
Vacation home: None.
Hobbies: Flyfishing, cycling, cooking. “But frankly all of my my time now is spent with my family and the activities and interests that my kids have and trying to be present for all of those.”
College major: Sociology. “I can’t say there was a single [sociologist] who stood out for me as being my absolute favourite whom I have revered since.”
Serious car guy? “On the spectrum of car guys, I’m probably not ultra-serious. I have gone through many phases, and one of those phases is still parked in my garage and hasn’t been driven for quite some time. It’s a 1988 Porsche Targa.”
Books most recently read: In fiction, The Orphan Master’s Son: A Novel by Adam Johnson; non-fiction, A History of Future Cities by Daniel Brook.
Best business book: From Good to Great by Jim Collins. “What I thought was most important is what it said about building teams, or what it called ‘getting people the right seat on the bus.’”
What could you have been, other than a chef or a CEO? A doctor. Or an author.
Do you speak to Isadore Sharp? “Relatively frequently. When he’s in town and I’m in town, we try to get togethe r to have coffee at his house once a week or something like that ... my relationship with him is very important to me.”
As a tourist, what do you look for first in a hotel room? An electrical outlet.
Poison of choice: Wine, and Stella Artois