Behind a temporary gate of corrugated metal, dozens of men scurry around a 2.5-acre building site. This place, sun beaten and dusty, could be any construction site in North America, except for a couple of things. One, almost nobody has a hard hat or steel-toed boots; even workers whose job is to sling heavy hand-chiselled cobblestones wear sandals. Two, if you step past the gate and turn your head to the left, you
see-well, what you see everywhere you go in Mumbai, India's largest city: crazy-making traffic and heartbreaking poverty. Perhaps 200 metres
down the road from the glass-clad building that's
shooting up, a slum of tightly packed tin-and-plastic shanties is home to thousands of people who live on as little as a dollar a day.
Looking at this neighbourhood of Worli-about a kilometre from the Arabian Sea, in the centre of the city-it's hard to believe that it will soon be home to one of the finest hotels in India, if not all of Asia. The Four Seasons Mumbai will charge American prices (an average of $400 [U.S.]a night), while paying Indian wages (about $200 [U.S.]per month at entry level, plus tips, if any).
But when it finally opens, the most disbelieving person of all may be the man who conceived the project in the first place. For Isadore Sharp, the founder and chief executive officer of Four Seasons Hotels Inc., the opening of the Mumbai location marks the end of a tortuous two-decade endeavour to break into the world's second-most-populous country. Three different deals involving 22 prospective hotels fell apart in the latter half of the epic. All this before Four Seasons got an introduction to the congealing bureaucracy and inefficiency that inspired the World Bank to declare India one of the most difficult large economies in which to do business.
If they can make it here, Sharp and his executive cohort of global citizens know they can make it anywhere. In the next few years, Four Seasons plans new properties in Istanbul, Beijing, Beirut, Kuwait and Moscow, to name just a few. Sharp's team has doubled the size of the chain in the past 10 years, to 74 hotels, and might well double it again in the next decade. Not bad for a guy who started with one motor hotel on Toronto's Jarvis Street. "This is a truly great company on a global scale," says Michael Smith, a real estate and hospitality analyst for National Bank Financial.
Great and global, yes-but not Canadian-owned, or at least not for much longer. At midyear, around the same time as Four Seasons' housekeepers are sweeping up the last bit of construction dust at the new Indian flagship, the world's richest and 13th-richest men, an American and a Saudi, are expected to close their $4-billion deal to take over the luxury chain. Sharp will remain CEO and 10% shareholder, and the headquarters will remain in Toronto. But with Sharp now 75 years old, and with none of his children in line to be his successor, it's anyone's guess where the company will call home in the long run. The best argument for having the head office in Canada rather than in the U.S. might be that the former will be a more simpatico fit with the company's extensive ambitions in places like the Middle East.
To hear Sharp tell it, the company's identity is ironclad. "I think we've made it quite clear that this company is Canadian-based, we fly the Canadian flag," he says. The new owners, he adds, "really have a complete understanding of what makes this company tick, and therefore there's no reason to ever want to do anything other than what the company's been doing. What I've done is create a new ownership that would really preserve the legacy of Four Seasons."
That legacy is the creation of one of the most powerful luxury brands in the world, one that confers plenty of prestige on those who control it. But Bill Gates and Prince al-Waleed bin Talal of Saudi Arabia already have all the prestige they need. They're paying $4 billion strictly to make more billions. Considering the steep price-about 60 times Four Seasons' operating profit for 2006-the company will have to continue its rapid growth to make its new owners' investment pay off.
Sharp, naturally, has just such a plan, one that will see Four Seasons open dozens of hotels and resorts in Asia, Eastern Europe and South America. But he will succeed only if the company can make all of those new properties work as well as the old ones do, and the Four Seasons brand retains its platinum-plated reputation.
"It's the consistency," says Toronto investor Ira Gluskin. "That's the difference between them and the average product, the average hotel. You can to a Hilton or a Sheraton and you might get a majority of good experience and some bad experience. Whereas with Four Seasons, it's like 98 to 2-a terrific ratio. You cannot keep that image up without reality."
Gluskin should know-he has followed Four Seasons' evolution for nearly 40 years (he owns shares on behalf of clients of his firm, Gluskin Sheff + Associates Inc.).
A five-star reputation demands five-star staff, no matter what you are paying them and where you're hiring them. So if there's one thing Sharp emphasizes in every new hotel, more than a good location or great restaurants or fancy bedsheets, it's finding the staff who can replicate the Four Seasons way. Easy to say. Not so easy to do.
It starts in places like Hyderabad, in central India, where a trio of Four Seasons managers have flown on a January day to look for prospects at the Institute of Hotel Management, one of nearly two dozen such colleges around India. There's Armando Kraenzlin, the amiable Swiss who is the general manager in Mumbai; Uday Rao, Kraenzlin's No. 2, who has come back to his native country after 20 years of globetrotting, mostly on behalf of Four Seasons; and Grace Moore, an amusing Irish human-resources type who has a habit of punctuating her sentences with "ya?"
More than 100 third-year students file into an assembly hall, most of them male, each one in a suit. They look like a million dollars; their school is most definitely a two-star facility. Opened in 1972, it looks as if it hasn't seen a coat of paint since. The pumpkin-coloured carpet in the auditorium is ripped down the middle, and only five of the 14 ceiling fans appear to be functioning on this warm, sunny morning.
Part one of the presentation belongs to Rao. After a few pleasantries, he cuts to the chase. "How many of you have signed with the Oberoi?" (That's Oberoi Hotels and Resorts, one of two domestic luxury hotel chains in India.) Several students raise their hands.
"Who has heard of Four Seasons?" Half of the people in the room put up a hand.
Rao launches into a brief profile of the company. "We're just about luxury," he says. He talks about the chain's reputation, not only among the business elite but also the company's 29,000 employees-Four Seasons is one of only two hotel chains on Fortune's list of the 100 best companies to work for. Next, Sharp appears by video. "You are now part of an elite group," intones the executive, "chosen for your potential and, just as important, your attitude."
That last word is picked deliberately, for it's one you will hear ad nauseam from the company brass. Nobody sets out to hire employees with a bad attitude, of course, but at Four Seasons, managers worship every Sunday at the Holy Church of Good Attitude. Little else matters. For many entry-level jobs, experience counts for almost nothing. When it opened up a new resort in Maui, the company was less than thrilled with the quality of the candidates who'd worked in the local hotel industry. So management went scouting in the sugar cane fields as well.
Nor do grades mean much to Kraenzlin's group, which is why they won't bother looking at report cards; instead, every student in Hyderabad who wants an interview will get one. How else can you judge someone's attitude except face-to-face? The obsession with finding good attitude also explains why Rao's good-cop spiel is followed by Moore's bad-cop routine. Which, boiled down to its essence, is this: If you don't buy the Four Seasons philosophy, don't waste our time.
She tells the students about how, as a young woman out of Dublin, she decided she wanted to be a hotel manager and spent weeks living in a hostel in London looking for just the right position until, nearly out of money, she accepted a job as a room-service waitress. Check that: an overnight room-service waitress. Her message is unmistakable: You, too, can expect to start as a lowly drudge if you want to work for us. "We're not all going to walk into our dream jobs," she warns them.
The recruiting scheme for Mumbai is designed to weed out those with an inflated sense of their own worth. Unlike some competing chains in India that promise certain students a fast-track into management training, Four Seasons offers permanent jobs only to those willing to start out hauling vacuums or scrubbing pots. Those who think they're too good for that can opt to apply for an 18-month internship, during which they will still do a lot of grunt work, but without any guarantees of a permanent job.
There's a reason for the catch. Although discrimination by caste is against the law in India now, there remains a strong sense of division of labour-that's your job, not my job. "The mentality is, once you're a manager, you don't do the work," says Rao. But the Four Seasons model is too lean for that. Even the most senior guy in the hotel, Kraenzlin, is expected to drop everything and become a front-desk clerk if there's a backlog of guests waiting in the lobby. "That concept is very new in India, at least in the hospitality industry," says Rao. So: Pick the people willing to start at the bottom, the thinking goes, and you may have already found the best candidates to become managers later on.
Kraenzlin comes in and hammers the point home to the kids. Join this company, and if you're good, you can see the world, just like he has. But don't expect to be flying business class before you're 35. "We are not very fast at promotions." Before the group wraps up, they put one final PowerPoint slide on the projector. "Wanna be a manager in five minutes?" it says. The punchline rolls across the screen: "Don't join this company."
The system works. While Four Seasons is small compared with industry giants like Starwood Hotels & Resorts Worldwide Inc., it has 17 of the world's top 100 hotels as ranked by Institutional Investor magazine-as good a measure as any of Four Seasons' cachet with the international business set.
And in March, BusinessWeek put Four Seasons second in an all-industry "Customer Service Elite" ranking (the next hotelier was Ritz-Carlton, at No. 11). Yet Sharp didn't set out to be the king of the luxury inn. An architect with no formal hotel training, he opened the Four Seasons Motor Hotel in 1961 in a downtown Toronto neighbourhood that Peter C. Newman described as "the sweaty HQ of the city's hooker row." By 1972, he had opened three more: the higher-quality Inn on the Park in Toronto; a towering 1,500-room hotel in the same city that's now called the Sheraton Centre; and Inn on the Park in London, his first experiment in the five-star segment. It didn't take long for him to figure out which concept he liked best. The Sheraton property was "a money machine," but building giant mediocre hotels for convention-goers "was something I couldn't relate to. I had no feelings for it," Sharp says. "I liked the idea of doing something a bit better. Can we make this the best?" It took another seven years to open his first U.S. luxury location: a Four Seasons in Washington, D.C. Even then, he expanded cautiously, opening or buying one or two hotels a year-New York in 1981, Boston in '85 and Dallas in '86, the same year he took the company public.
It wasn't until the early '90s that Sharp made a serious foray into continental Europe and Asia. He purchased management contracts for a bunch of Regent hotels for $122 million (U.S.). The timing was gutsy; the U.S. economy was still crawling out of a deep recession that had reduced the ranks of the solvent in the travel industry. And before long, Sharp found himself under siege-from the press, from a credit agency that assessed the company's debt as junk, and from shareholders who felt much the same way about their investment. The shares, at $20 when the Regent deal was struck, fell to less than $11 in early 1994.
"It was the most stressful period of my business life," says Sharp. Having entered his 60s, he was also starting to worry about succession. The natural scion, his son Christopher, died of melanoma when he was 17. ("He had what you need. He had flair and just a natural charm," his father says.) None of Sharp's other three sons showed a desire to take over. Virtually all of the family's net worth was tied up in Four Seasons-which was fine, but not exactly liquid.
Sharp mused publicly about selling out, but deep down he didn't want to. "Nobody read the small print, but I only really wanted to sell 25%," he says. Sharp went looking for a silent partner who would put some money in, yet be willing to leave his empire-and his control-intact. During the Regent deal, Sharp had met an investment banker named Chuck Henry, who, by 1994, was working with the not-yet-famous Prince al-Waleed. Henry arranged for the Jewish hotelier and the Arab investor to meet on the latter's yacht near Cannes.
Sharp took along two of his executives and some bankers from Goldman Sachs. "We were sitting on his yacht talking and he said, 'Let's make a deal right now,' " Sharp remembers. "And I said, 'Well, it's not necessary to do that; we'd rather know what you're prepared to do.' " Before he left, Sharp sought to clear up one other thing. "I said, 'Look, I, as you know, am committed to Israel and support of Jewish causes. And the politics between Saudi Arabia and Israel, how does that enter into your business?' He said, 'Nothing. It's got nothing to do with it.' "
On his way from Cannes to meetings in London (flying on one of the Prince's private planes), Sharp sought to absorb what he'd just heard. "I asked everybody, 'Where do you think he stands on this?' And they said, 'Aw, look, he clearly wants to buy the [whole]company.' But I didn't think he did. He wasn't a person who wanted to run companies. He wanted to invest in companies." Accordingly, they worked out a deal, completed in late 1994, that saw Prince al-Waleed pay $22 a share-a 54% premium to the prevailing price at the time and more than anyone had ever paid for the stock in the open market. It amounted to a partial takeover: Instantly, al-Waleed became Four Seasons' largest shareholder, with a 25% stake. But he left voting control in Sharp's hands, making no demands that the founder give up his multiple voting shares.
In most respects, that looks like a good deal for everyone. Sharp got to keep his company and shareholders watched the stock go up sixfold in the ensuing years. But in return for playing the benevolent saviour, al-Waleed got something else: the right of first refusal to buy Sharp's control block, should the founder ever decide to sell.
Today, that seems like a valuable clause, giving the Prince added lev-erage in the current takeover. Sharp says he always knew the company would have to be sold some day-if not to al-Waleed, then to somebody else. And he knew his children's financial liberty depended on his controlling block being liquidated and the fortune divided. "I told [my family] 'Eventually, you can't all be bound together by controlling this company,' " he says. "But I figured it would happen after I'm gone."
Sharp began to think more seriously about selling when, in the fall of 2005, he was approached about taking the company private by Martin Zieff, an associate in business and an adviser to Harvard University's endowment fund. The more Sharp thought about it, the more he liked the idea. "This way, I could control the process" of planning for the company's future after his death, he says. In March, 2006, he flew to Paris to present the idea to the Prince. By April, al-Waleed had made a preliminary offer-$88.50 (U.S.) per share.
Soon after, the Harvard fund dropped out, citing "a change to its investment parameters" that occurred after its CEO, Jack Meyer, left to start his own hedge fund. Al-Waleed went looking for other potential investors and hit pay dirt with Michael Larson, chief of Cascade Investment LLC, the firm that handles Bill Gates's fortune and already one of Four Seasons' largest shareholders. Discussions about the deal continued throughout the late spring and early summer. The stock market never picked up the scent. Quite the opposite: By late July, Four Seasons' share price had drifted below $53 (U.S.), down from its all-time high of $84.50 near the end of 2004.
In mid-August, al-Waleed sent a new proposal to Sharp at a significantly lower price-$75 to $80 a share. Sharp flew to Paris again to negotiate. "I said, 'Look, it's just not going to sell at a price that is not reasonable.' They could show all the business reasons [for the lower offer]mdash;look at the earnings, look at the multiple. I said, 'You know, you're right. I'm not suggesting that our earnings today can justify it.' But I wasn't looking at our earnings today. I was looking at the potential for the company 10 years from today. I've always been an optimist."
It took another two months before they shook hands on a deal that, at $82, fell between the Prince's two bids. While Sharp will remain a shareholder, CEO "for at least three years," and chairman for life if he wants to, the deal still allows him to take a lot of cash off the table: $289 million (U.S.), money that's been accumulating in an incentive plan since 1989 on the provision that Sharp would receive it if the company was sold.
The coziness of the whole arrangement-Sharp's friend buying the company at a lower price after pulling back on a higher offer, Sharp getting all that money yet keeping his job-might raise a few eyebrows among the corporate-governance Puritans. "Is that a conflict [of interest] It's the way to make the deal work," says Sharp unapologetically.
So far, though, there have been few complaints from shareholders, partly because the final price is almost 30% higher than where the stock was trading, and partly because their faith in Sharp is almost cultlike. But why did the new owners offer that kind of premium? Some observers believe it's because the moguls are willing to take on more risk than are public shareholders.
Starting in the late 1980s, Sharp began to divest the company's real estate. He sold all but one of his hotels to investors and turned Four Seasons into a pure hotel-management company that relied on others to put up the money for new locations. The idea, says Sharp, was to reduce the company's need for new capital and its exposure to the cyclical nature of the real estate business. It was the plan of a man with limited cash, and for the most part, investors loved it. "The [market]bought in to Four Seasons as a management company and not as a real-estate ownership company," says Gluskin. "That's the concept people bought and it would be very difficult to change."
But Bill Gates and al-Waleed have almost unlimited cash, and they have no problem with the nature of real estate. Indeed, the Prince is one of the people who took Sharp's real estate off his hands. One of al-Waleed's companies, Kingdom Hotel Investments, has interests in the Four Seasons in each of Cairo, Paris, the Syrian and Jordanian capitals of Damascus and Amman, and Sharm el Sheikh, Egypt. The Prince even personally owns the Four Seasons flagship in Toronto, which he bought from a U.S. investment firm in 2005. (Kingdom also has 13 other high-end hotels that aren't connected to Four Seasons.) In the new era, no longer will Four Seasons have to balk at building for want of investors' patience.
Some observers, including Gluskin and National Bank analyst Michael Smith, think the comfort level with bricks and mortar points to a grand plan that al-Waleed and Gates have hatched. In future, the Four Seasons brand could be used to increase the value of massive mixed-use developments that the partners would mount. Just as shopping-mall owners used to bring in a big department store as an anchor tenant, knowing that other name retailers would follow, the Four Seasons cachet could be used to attract tenants to new shopping malls, luxury condos and office towers. Think about the logic of it, says Smith. Compared to the old model, "Now you get to control it a little bit better. You have this very valuable brand, and if you are a real-estate investor-like, say, Bill Gates and Kingdom-you could be doing billions of dollars of developments around the globe."
Sharp concedes that such transformation of the Four Seasons model by his partners is possible. "They'll be able to look at the economics of any deal by looking at what the investment in real estate will be, plus what the investment gives Four Seasons," he says. But he recoils at the suggestion that his baby will somehow become just another expansion-hungry chain, throwing up hotels everywhere and losing its essence in the process. Money and property will take you only so far. "A culture cannot be copied, it cannot be imitated," says Sharp. "It has to grow from within over a very long time, based upon the consistent action of senior management. That is the barrier to entry for other hotels trying to compete against us. It isn't just having a fine building."
In Hyderabad, Sharp's shock troops-Kraenzlin, Rao and Moore-are settling in for a gruelling day. Over the next seven hours, they will conduct more than 100 one-on-one interviews with some 80 students-the best prospects are interviewed twice-with barely a break.
This is just one step in a marathon process. Ten months after Kraenzlin opened the office, and with six months to go before opening, the hotel's senior staff have gone to a dozen hotel schools, sorted through 10,500 resumés, conducted 4,200 interviews and found 214 suitable employees, about half of what they will need. In other words, for every 50 candidates who apply, Four Seasons hires one.
And this is the easy part compared to getting a toehold in India in the first place. How long was it? Ulysses' journey didn't last as long. So long that identifying the start date tests the memory of even the most senior executives. "When I arrived at the company 18 years ago, our guys were already working on development opportunities," says Kathleen Taylor, Sharp's indefatigable second-in-command. She has found India the most frustrating new market she has ever encountered.
Sharp knew that India was large enough to sustain at least a half-dozen new luxury hotels-one each in Delhi, Bangalore and Chennai, probably two in Mumbai, plus a resort in Goa. But he needed more than locations. With one exception, in Vancouver, every Four Seasons hotel is a partnership between the company and a real-estate player. The developer buys or leases the land, puts up the buildings and owns the property (with Four Seasons sometimes kicking in some money for an equity stake). Four Seasons runs the place and takes a portion of revenue, plus an incentive fee generally based on the operating profit of the hotel. The company demands total control over who gets hired and a long-term contract for itself-60 years on average, but sometimes as long as 100. Four Seasons can make this demand because it has the leverage to do so: Partners know that no other chain can get away with charging its customers so much.
But those kinds of agreements were unheard-of in the Indian hotel business at the time. India was mired in its own peculiar brand of socialism-insular, protective and highly suspicious of foreign capitalists. But in 1991, it started to institute economic reforms aimed at drawing more foreign money.
In 1995, Sharp and Taylor struck a partnership for five hotels with Leela Group. They then got a classic lesson for Western companies on the capriciousness of dealmaking in India. Getting a contract in place isn't the last word; it's usually the first.
With renovations already under way on a proposed Four Seasons in Goa, the whole deal began to unravel. Leela said it couldn't secure the land for a new Mumbai hotel. The deal in Delhi was also falling apart. Says Sharp: "I think they never intended for us to run it. I think they just got us caught up in the euphoria of finally getting to India. And just before we were going to open the hotel [in Goa] they just kicked us out."
Four Seasons found a new match in the Morepen Group, whose controlling Suri family had made its money in pharmaceuticals but was eager to diversify. "That was going along swimmingly," Kathleen Taylor says, until the group's founder died suddenly at age 38 and the family's real-estate plans died with him. Undeterred, she tried joining forces with the Oberoi group on the most ambitious plan yet, for 11 hotels. But the two rivals couldn't find common ground, and the idea was abandoned.
Then some of the company's senior managers in Asia had what Taylor calls "the great idea": "We'd tried five, we'd tried six, we'd tried 11. What about trying one?" Through Chris Wong, a Four Seasons development executive, the company started talking to the Jatia family, owners of several Hyatts in India. On Oct. 24, 2003, with a touring Prime Minister Jean Chrétien looking on, Sharp signed a deal to manage the Jatias' newest hotel, the future Four Seasons Mumbai.
It is that kind of patience that is the hallmark of Sharp's management style, and probably the biggest reason Four Seasons has succeeded in global expansion where so many other Canadian businesses have failed. For the right deal in a new market, "I think they'll wait 25 years," says Gluskin. "That's really unique. [Sharp's]got that tremendous long-term view. That's really key."
By the time construction is finished, later this spring, it might be the finest hotel in all of Mumbai-33 storeys, 202 rooms, eight spa rooms and what Kraenzlin promises will be one of the best pan-Asian restaurants in the city (there will also be an Italian restaurant). The site will be first-rate in every respect.
The surrounding neighbourhood is not. Jason Stinson, the irrepressibly cheery Aussie who heads the hotel's sales and marketing group, calls it "an emerging district." This is the equivalent of your real estate agent telling you that a dodgy street is "gentrifying." Still, he's not wrong: Big international companies like Goldman Sachs and Deloitte & Touche are setting up in the area because there's little office space farther south, in Mumbai's old financial district. But even if the immediate area improves, it will still be cheek-by-jowl with slums. A 2001 census pegged Mumbai's slum population at 5.8 million. Inside the Four Seasons Mumbai, the smallest room is 388 square feet, much larger than many poor Indians' homes. Each Four Seasons room comes equipped with a separate shower stall and bathtub; but across the road, many residents are lucky if they have running water for two hours a day, and flush toilets are, in many places, a frill. Social inequality confronts you everywhere you go in Mumbai, but rarely does it smack you in the face like this.
It's something the hotel's managers are aware of, even if they're not quite sure what to do about it. It makes the Mumbai project different from the ones in other emerging cities like, say, Shanghai, where there's plenty of poverty, but where it's less visible in the business districts. Even a veteran like Kraenzlin was bowled over when he first came to visit the site a year ago. "I have been in Asia for 20 years, and I worked in Malaysia, in Thailand, and I travelled extensively in Vietnam and Cambodia, Laos, Burma and then the Maldives," he says. "I assumed that Mumbai was a city like any other in India. And this contrast of poverty hitting megawealth on the same block, on the same street, is something that I just-I didn't expect it. I was flabbergasted at my own unpreparedness."
The shocking reality of India is not just something for managers to cope with. It's a business concern. What does a driver tell a guest who is picked up at the airport and then greeted by a barefoot six-year-old beggar rapping on the window the first time the car stops at an intersection? How can you make the visitor feel good about paying $400 a night to stay opposite a slum? "We feel that many of our guests will feel a certain amount of guilt by coming here," says Kraenzlin. "That's something we're talking about. Hiding the problem is not the way out."
The purely practical considerations wouldn't exist for a hotel manager in most other parts of the world. Suppose a guest is a jogging enthusiast. It would be irresponsible to let him go for his daily run in Worli, unless the manager is prepared to see him get flattened by one of the ancient Fiat taxis that careen all over the road. (Possible solution: Shuttle the guest to the horse track, one of the few large green spaces in the neighbourhood.)
By far the biggest issue at the moment, though, is finding 200 more staff and overcoming some of the cultural issues that make India a maddening place to do business. In Hindi, there's an expression-"chalta hai"-that encapsulates the Indian complacency about inefficiency. Roughly translated, the phrase means "That's the way it is." Chalta hai is the reason it can take 10 minutes to do a simple currency exchange at even a good hotel, or why things that ought to be easy-figuring out the train schedule, for example-are laughably complicated.
It's not for nothing that India, in the heyday of state interventionism, was known as "the licence raj." You needed government permission to do anything, and despite 15 years of deregulation, it sometimes seems like not much has changed. Want to serve wine with lunch in a private dining room? Get a licence. Want to serve wine with dinner in that same dining room? That's a separate licence. Rao pulls out the list of paperwork and starts to laugh. It's 70 items long: "permission for gardening…[licence for]construction of a five-star hotel…[licence for]setting up of a five-star hotel."
Government meddling wouldn't be so annoying if the private sector operated with a North American sense of urgency. But while it's very easy to get someone to promise to do something, it's much harder to get them to actually do it. Four Seasons wants to bring in foodstuffs from Europe for its restaurants, so Kraenzlin met with a customs broker. Would there be a delay getting the goods, he asked.
"No, no, it's not difficult," he was told.
"You sure?"
"Yes, we know what we're doing. Next Wednesday, you will have the answer [on cost]"
Kraenzlin called every week for the next six weeks and never got a response.
Chalta hai-"That's the way it is"-does not exactly fit the Four Seasons philosophy, so there's all the more reason to be rigorous in scrutinizing job candidates.
But with 400 positions to fill, Kraenzlin's team doesn't have the luxury of trying out people on the job. Getting an accurate read on attitude in interviews is critical.
In this, the undisputed champion is Grace Moore, the Dublin-born former room-service waitress. Her title is "learning manager," but when she's searching for staff, it ought to be inquisitor-in-chief. At the hotel school in Hyderabad, she is putting her no-bullshit style to work.
Moore, Rao and Kraenzlin have taken separate corners of an empty classroom to conduct interviews. Each has a two-page form with a series of boxes: "Highly recommend," the less-enthusiastic "recommend for hire," and "TBNT"-thanks but no thanks.
A timid young man named Dheeraj is ushered to Moore's desk. He says he wants to be a cook. Great, says Moore. You say you love cooking? "Tell me about a special meal you cooked for your family." He's stumped. TBNT.
Another student, named Vikas, comes in. He did a training program at a Sheraton hotel. Very well, says Moore. Tell me about a time when you were under pressure and how you dealt with it. Well, there was this Japanese guest who was flustered because he'd lost his cellphone-"a ridiculous reason" to get upset. Wrong answer. The guest's feelings are never ridiculous. TBNT.
A slight woman named Roslin is up, applying for a housekeeper position. She, too, had a brief taste of the job at another hotel. "Tell me something special you did for one of your guests," Moore demands. Roslin can't find a good answer. TBNT.
Nothing bothers Moore more in these interviews than hearing platitudes. At one point, after hearing the umpteenth student describe himself as a hard worker, an exasperated Moore shoots back, "Everyone tells me they're a hard worker. Tell me something different!" All she wants to know is what candidates have done, and her questions are designed to force them into giving examples of how they react under pressure (there's a name for this technique: behaviour-based interviewing).
Finally, at 5:30 p.m., the interviewers leave the hotel school and head to a local restaurant to decompress. On balance, they're not impressed with the students, but there are more than 20 who showed enough potential to at least warrant another interview by telephone the following week. (No one-not even a dishwasher-gets a job without at least four interviews, and for more senior jobs it's not unheard of for candidates to face seven cross-examinations.) Then the trio head back to the airport for the late-evening return flight to Mumbai, which is delayed by about an hour for reasons that no one explains or understands. Chalta hai.
"India is difficult. India is unique."
So says Neil Jacobs, Four Seasons' top operations man in Asia. One reason is the unions, weaker today than during the heyday of socialism but still a powerful political force. They have been turning up the rhetorical heat about organizing the Four Seasons Mumbai, a move the chain is resisting. Aside from the potential for higher costs, it might be harder to inculcate a sense of team play if a collective agreement forbids front-desk clerks from handling bags, or chefs from washing a frying pan. Or so Jacobs believes.
He anticipates the pressure will increase as opening day nears. "It's very easy to round up a couple of thousand people in India and have them sit down at your front door, start chanting and banging and doing things. You give out a few rupees, and you can organize as many people as you like," says Jacobs. "Currently, we're digging in. We need to do it our way. If we don't do what they want, I'm not sure what will happen, to tell you the truth. We may get sit-ins. I don't know."
India's economy is so red-hot that unionization might not matter. An old India hand, Sun Life's Gary Comerford, marvels at how things have changed as he sits in the lobby of the Oberoi Hotel, one of Mumbai's most popular business hotels. In the 1990s, when the nuclear arms race between India and Pakistan was heating up, "you could shoot a cannon off in these hotels," he says, and not hit a guest from the West. But now room prices are rising at double-digit rates. Adds Jacobs, "Our projections today for levels of business [in 2008]are probably 30% to 35% higher than they were a year ago."
One of Jacobs's current preoccupations is the next deal in India. Four Seasons would like to be in Delhi, Goa and Bangalore. The potential exists for several more locations. "How many can India support-how many Four Seasons with 1.1 billion people?" asks Michael Smith, the real-estate analyst. "You've probably got a dozen opportunities, easy."
All of that expansion will, the theory goes, be easier to realize as a private company. Though Four Seasons has been a good long-term investment-shareholders earned 12.5% annual returns over the 20-year period ending Feb. 28, 2007-it often wasn't a smooth ride. The company was punished in the stock market any time its small real-estate investments led to writeoffs, or when new hotels didn't inflate the bottom line as quickly as hoped, or when the travel industry came under stress. The share price fell by half in the 18 months after the Sept. 11 attacks. In 2005, with the stock in the $90 range, Sharp boasted that "it will never be cheaper." He then watched it tumble to $55 after some weak results and the London tube bombings, which shook the market's confidence.
Bay Street also complained about poor disclosure. For years, the company put some of its corporate overhead under the few hotels that it still owned, which left some analysts and investors confused about the profitability of the main operation.
Even if Sharp won't say it explicitly, it's fairly clear that he and others got tired of being a public company-in particular with being whipsawed by market mood swings. In the 21st century, a company with extraordinary patience might simply be a non-starter for the satisfy-me-now mentality of hedge funds and mutual fund managers.
Sharp expects that, unlike most other private-equity plays, Four Seasons won't end up back in the public realm. "They never have to sell. And more than likely, they'll never want to sell, because they'll never be able to replace it," he says. "I call it, with Cascade, Kingdom and my company, a marriage for life."
Sharp's saviour Buffetted by fortune
Around the Saudi capital of Riyadh, he's known as the Desert Prince. In business circles, they call him the Arabian Warren Buffett. Charles and Camilla have deemed him "a jolly good egg." To most, though, Prince al-Waleed bin Talal is known simply as al-Waleed.
From the futuristic Kingdom Tower-a 303-metre-tall glass-and-chrome structure that looms over Riyadh-the Prince controls an empire worth more than $20 billion (currency in U.S. dollars except as noted), putting him at No. 13 on Forbes's list of the world's richest people. His holdings include stakes in Motorola, News Corp., Apple Inc., Saks Fifth Avenue and Time Warner. In Canada, the Prince is best known as the Saudi royal with a penchant for Canadian hotels: He headed a $3.9-billion buyout of Fairmont Hotels and Resorts Inc. in early 2006, and recently led the $4-billion (Canadian) privatization of Four Seasons Hotels Inc.
Al-Waleed is one of hundreds of grandsons of Abdulaziz Alsaud, the founding king of Saudi Arabia. In 1962, the seven-year-old Prince's parents separated.
Al-Waleed went to live with his mother in Beirut, where he was insulated from
the extreme indulgence and wild ways of the 6,000 other Saudi princes. For fun,
he played a daily game of Monopoly with his cousin-and invariably won, according to the glowing 2005 biography Alwaleed, by journalist Riz Khan.
At 19, while attending Menlo College, near San Francisco, al-Waleed married his cousin, Princess Dalal. Two years later, in 1978, the Princess gave birth to a son, Prince Khaled. Meanwhile, Al-Waleed sped through his business-administration degree and arrived back in Riyadh just in time for the oil boom, in 1979.
That's when the al-Waleed legend begins. Using a $30,000 loan from his father, Prince Talal, al-Waleed started Kingdom Establishment, a real-estate development company. He quickly ran out of cash and took out a $300,000 mortgage on his "small cabin"-another gift from his father-to keep going. To build capital, he used his royal connections to help foreign companies sign deals with local partners, then plowed his commissions into real estate. Soon he branched out into banking (via Saudi Arabia's first hostile takeover, in 1986), grocery stores and media. In between, he had a daughter, Princess Reem, and returned to America to get a master's degree in social science at Syracuse University. By 1989, he'd amassed his first billion. (Domestically, however, there were problems; al-Waleed has married three times since splitting with Princess Dalal.)
The Prince's entrée into the North American business scene came in 1991, when he famously bailed out Citicorp to the tune of $800 million. Though al-Waleed thinks of himself as a Buffett-style value investor-he spends years researching a company or industry, waiting for the right price to buy in-he's made some spectacular missteps. Between 1997 and 1999, he invested $112 million in Planet Hollywood, only to see the restaurant chain file for bankruptcy a few months after his final cash infusion. He still insists his $345-million investment in Euro Disney will pay off-he owns 24% of the notoriously under-attended Paris theme park. But by far his biggest miscalculation came in 2000, when the Prince caught high-tech fever. He shovelled $200 million into WorldCom, $50 million into Priceline.com and millions more into other dot-coms just before the market collapsed.
He has fared much better in the luxury-hotel business. "I believe in brand names, and I believe in number one," al-Waleed told Khan. When it comes to his hotels, no detail is too small, from the wallpaper to the colour of the toilet seats. "I like things to be over-organized…and I get tired of seeing things that are not right," he says in the biography. "I really have very good staff that supports me. They have all that's going on in my mind implemented on the ground." For his entourage of 30-odd people, that means sticking to al-Waleed's schedule-he starts work at noon and goes until 4 a.m. or later-and planning his frequent round-the-world jaunts down to the last second. There is, of course, a tradeoff: The Prince has been known to hand over bonuses worth a year's salary for a job well done. -Dawn Calleja
Derek DeCloet