President interview: Tom Storey
How is Fairmont going to avoid a potential cannibalism between the brands that will be in the Makkah Tower?
The great thing about Makkah is there is almost a built in source of demand with the visas that are offered by the Saudi government to various countries.
I think there is almost an unlimited demand of potential Muslims coming in to Makkah and between the Haj and Ramadan.
As you know, every Muslim at some point in their life is supposed to go to Makkah for the Haj and so it’s almost a situation where I think high end properties there today – of which there are very few - run in the high 70s at very high average rates and the quality of product is not that good.
So here we are going to have a world class product, arguably in the most unique location possible in Makkah in that it’s overlooking the Mosque and it’s a property with about 800 rooms and 600 residences and a clock on top of it – a prayer clock that can be seen 30 km away.
This isn`t just an ordinary project - projects of this magnitude and of this iconic stature just aren’t built every day.
What’s exciting for us is it really represents almost a beacon for us in the Muslim community.
So overnight, Fairmont is going to be seen as a very important brand in the Muslim community and I think Muslims represent something like 25 % of the world’s population.
Will there be a situation whereby the brands within the company are actively competing with each other or is there going to be product cohesion?
Yes, there will definitely be some cohesion.
One of the things is physical cohesion and these three towers are built on the same podium so we will be sharing various things like receiving, purchasing and security etc so there is integration at that level, but at the customer end our products and brands are quite distinct.
We have Raffles at the high end, which is larger rooms, smaller properties, more residential in feel.
Then you have Fairmont which is a more typical, larger luxury hotel, which can do a lot of group business, has a lot of food and beverage, a very experiential type of product.
And then you have Swiss hotel, which is another great brand, much more orientated around fast, friendly, efficient type service.
So I think the three brands meet different customer needs first of all and then we set up an organisational structure where we have a vice president who will be in Makkah looking after all three properties and the properties are also all owned by one ownership group.
It’s in their best interest and our best interests to maximise the potential of the three combined.
You took over as president in 2008 – an interesting time?
Yes, my timing could have been better! When I think about Fairmont, this is the best of times and this is the worst of times. I don’t think that as an industry, at least in my career, we’ve experienced a downturn of this magnitude this quickly.
And so we’ve all had to work very hard to survive and perform in that environment.
However, at the end of the day, once you’ve built a multi-million dollar hotel, it’s not going to be repurposed into something else very quickly and what it really comes down to is – can we operate these better than any of our competitors.
So as I look at the situation that we’ve found ourselves in for the past 18 months, it’s really what are the things we can do as a brand and as a management company that can continue to try to create value for owners – and that’s managing costs more aggressively, obviously focusing on our mix of business to maximise whatever revenues we can get.
But you can’t step away from the fact that we still need to be growing the brand over time, because that growth and those brands bring in new customers and those customers benefit everybody in the system.
So the reason I say it’s the best of times is because we have a world class brand. We probably have, my feeling is, the best culture in the hotel business for our 30,000 colleagues.
We have great shareholders and the world is our oyster is some ways. We’ve got the opportunity to leverage all those things and go to new emerging markets, whether its here in the Middle east or India, or Asia or Eastern Europe.
There’s so many opportunities for our brand to grow it really becomes a function of do we have the leadership talent to actually, effectively take advantage of that so I spend at least 50% of my time thinking about ‘are we putting the pieces in place?’- do we have the support, the international growth that will be available to us over the next 5-10 years?
How do you split your time between focusing on the short-term and the long-term story?
We spend a lot of time internally recognising the fact that yes we have to develop the strategy for today, but 30,000 colleagues are not going to go away.
US $4 billion of hotel real estate is not going to go away, we’ve got commitments and responsibilities to owners who are just opening hotels.
But what’s interesting about Fairmont – even thought it’s a 100 year old brand, by 2013, 40% of the inventory in Fairmont will be less than 10 years old. So we have these great iconic assets – the Savoy, the Plaza, the Peace Hotel, the Fairmont Banff springs, but then you turn it around and we’ve got this brand new hotel in Abu Dhabi, we’ve got this hotel here, we’ve got a fantastic hotel we’ve just opened in Cairo, the Nile and these properties are truly outstanding hotels and so we’ve got both the history and some amazing new products.
Some hotel chains say ‘we’re going to be all about old properties’ and like you say you’ve got the mix now, so how are you capturing the customer who says ‘when I go travelling I stay Fairmont’?
What do we stand for? We have three things we stand for – properties that are authentically local, that have unrivalled presence and that offer engaging service and those three things are put together and what we attempt to do is turn memories into moments for our guests.
So we’re all about creating a personal memorable experience for our guests. So that can happen just as easily in this brand new hotel in Abu Dhabi as it can in an historic asset like the Banff Springs Hotel.
You mentioned your amazing shareholders – is it harder for a company that’s publicly listed, especially when the economy becomes an issue. Is it another thing that detracts from the issue of running the hotels or does it make choices easier?
There are some weaknesses in both models – I think that in a public company it’s very difficult to hold real estate because it’s an inefficient model for holding real estate.
In a private company when you have access to capital you can hold access to real estate, but sometimes it’s more difficult to raise capital efficiently. So at different stages of the revolution I think companies would probably be better in one format or another.
Fairmont has been a public company - we went public in 2001 three weeks after September 11 and we had a very successful period in terms of a public company then we were taken private in 2006 and what we’ve been doing since we’ve taken the company private is selling off all our real estate, and turning the company into a high growth brand and management company with the expectation that at sometime in the future we’ll take the company public again.
As the president of the company are you saying ‘we need to be going in this direction’ – do all those decisions land on you?
We have a very interesting company structure - the senior leadership of Fairmont, Raffles hotels has been together for on average about 12 years now and so we’ve all worked together through al these various iterations of the company and so while each of us has a particular skill set and an area of responsibility.
We really do act as a team and so each of us is encouraged to have our point of view on what do you think needs to be happening with the strategy, does it impact in your area of responsibility?
But at the end of the day we get all those points of view on the table, we synthesise it and say ok this is the direction we want to go in.
What is the one thing that Fairmont is doing absolutely right at the moment and the one thing it needs to focus on more.
I think that the thing we are doing right is continuing to hire, motivate and empower the best possible colleagues we can find. I think we’re quite good and that and we’ve been doing that for a long period of time.
I think the thing that we can focus more on is creating a greater level of functional consistency across our portfolio without sacrificing the unique experience that each of our properties are.
How does a company go about implementing that, especially when you’re going down the management route and there are property owners to answer too? How do you start that challenge of cutting back, but at the same time keeping service levels?
Well, you know it’s interesting – it’s a great question. There’s not one thing that you can do - there’s no silver bullet, but I think it’s a combination of things.
First of all, you’ve got to clearly understand what you’re about, what makes you different, how do you think you’re going to win and how do you set the priorities on that.
I think the second thing you’ve got to do is create a compelling, motivating vision – not just for your colleagues, but for your owners and your guest so that collectively people can say ‘you know what, I’m willing to take the risk to go down the road to try to accomplish that vision’ whatever that vision is.
And then the third thing you’ve got to do is take risks – you’ve got to be willing to put yourself out there and say ‘in order for us to get there, we’ve got to make this change’.
As owners you have to make this investment, we as managers must be willing to commit to a certain kind of return or a certain kind of performance so it’s all about taking the right kinds of risk.
If you don’t take risks, you’re never going to change, you’re never going to improve and you’re never going to grow.
On the real estate side of the hotel business, the money is made when you buy the hotel, not when you sell it and our industry runs on about a seven to nine year cycle.
We may not have exactly hit the bottom, but within six months before and six months after right now, we’re at the bottom.
So the people who have access to capital who are willing to step up right now are really going to be acquiring at the ideal time and what they need to do is ride it up for five or six years and sell it off at the peak.
It has been said that that 2010 is going to be a vintage year for hotel acquisition. Do you agree?
But the problem is that it’s hard to get financing right now. And it’s also very hard for people to have the clarity on the performing side, the operation side to know how they’re going to perform.
So if you go out and you get a loan, and you think you need a certain amount of cash to support the loan and it doesn’t materialise, you may end up losing the asset. So that’s the art of the game.
Where do you see the hospitality industry in 20 years time and where would you like to be in that industry?
Well, they say that the hotel business is the second oldest profession in the world and you can guess what the first one is.
So I don’t think it’s going away, that’s for sure. I think for Fairmont, what we’re all about over the course of the next 10-20 years, is bringing our unique kind of hospitality to as many markets around the world as we can.
I really think unique hospitality is this notion of warm engaging service, its having colleagues who feel great about themselves and having them interact with guests who also feel great about themselves.
My dream vision right now would be we get to the point where people think about Fairmont as an experience they want to have, whether they’re a colleague or a guest and they’re not thinking about ‘you’re a colleague, we’re a guest’ and they’re not even thinking about us being a hotel company, they’re really thinking about I want a Fairmont experience and that’s a very warm personal engaging experience.
If we get that kind of emotional attachment in our brand we will be unstoppable. The trick is how do you appeal to the emotion, but provide them with the rationale to keep reinforcing themselves.
One of our former vice president of operations used to say ‘in a Fairmont, the colleagues don’t look up to the guest, they don’t look down on the guest, they look the guest right in the eye.’
And there’s something very real about that and they have to be confident in themselves, in their knowledge of their job and their community and their knowledge of how they’re going to be supported by management to have that direct interaction with the guests.
The guests also have to be comfortable enough with who they are to be able to interact like that with the colleagues. That doesn’t work for everybody, we’re not ladies and gentlemen serving ladies and gentlemen – we’re real people helping real people get something done, hopefully in a memorable exciting way.
What is it that you love about being involved in the hospitality industry and being the president of Fairmont?
What I love most about the industry is that it is a very complex and dynamic business – there are so many different aspects to this, food and beverage, golf, retail, spa – you’ve got the real estate, the operations, the pricing, you’ve got all this electronic distribution you’ve got technology – its is a fascinating complex business – you don’t get bored.
What do I like most about Fairmont? Our people – we have a value system that’s all about respect, integrity, teamwork and empowerment and when you have 30,000 people thinking the same way – I can go to a Fairmont I’ve never been to before and I can walk in and can get a feeling from the colleagues – I’ll stand in front of 300, 400 colleagues and feel like I’ve come home.
I’ve never met these people before and they’ve never met me and that is a very unique thing. You just don’t find that in companies anymore.
In many ways, I’d like to believe we’re transcending the service. At our level of hotel quality, people shouldn’t be wondering ‘can I get a fax that works?’, ‘will the coffee be hot?’, you know – that should be assumed as a given.
And yes, mistakes happen, we’re dealing with humans and we’re dealing with circumstances, but really when people write to me and they talk about what they love about Fairmont is that one of their colleagues surprised them — they went out of their way to make that guest feel that they were unique and special and its not always the huge thing, something it’s the simplest little thing that they did.
I keep trying to get our colleagues to recognise the real job we all have is making the guests feel special.
The secondary job is – your job is president and your job is housekeeper or F&B attendant.
They become empowered in a different way they really try to anticipate what does the guest want, what does the guest need, not just well I can’t worry about what you need cause I got to make the bed.
And that’s a different way, believe me, the only way you can implement this kind of a strategy is by hiring, training and motivating people. You can’t do it with rules. There is no rule to empower somebody.
Staff have to be protected enough to be able to respond to situations. Because if they make a decision to help a guest, whatever it is, giving you your meal for free or doing this or doing that they’ve got to have a manager over them that pats them on the back and says good job as opposed to a manger who says well you know ‘you’re hurting our margin, you didn’t say their name in the right way’ — if that’s the attitude, you’re going to get a very different type of experience.
What is on your agenda for your visit?
Well, the first thing I did when I came here to the Middle East is did a welcome to the family at the Fairmont Bab Al Bahr.
Myself, the head of human resources in this case, our vice president of sales, our vice president of marketing and our regional vice president all met with our 500 colleagues and welcomed them into Fairmont and showed them about our other properties, thanked them for doing such a great job opening another hotel..really welcomed them into the family, so that was a critical part of the trip.
We’ve spent the past two days with about 50 people from around the world working on our opening plan for the Makkah property and all the details of that from across the different disciplines.
Think about how hard this is, we’re going to be opening a multi brand integrated hotel, one of the largest in the world in a place that only Muslims can go to and we have to source about 2600 employees over the course of the next nine months, they all have to be Muslim, they all have to understand hospitality, they have to fit our culture and we have to do it without ever going to the site.
Only Muslims can go to Makkah. So we’re actually operating and running this whole thing out of Jeddah. If you think about the complexity of pulling this off, it’s unbelievable.
Have you got someone in the know with a video camera and live link-up?
What we’ve done is we’ve hired a vice president – Mohammed Arkobi who is our man on the ground who’s actually acting as the conduit for everything he knows about the Muslim community and everything he’s done in the past.
So it is a major coordination and undertaking, but very exciting
Is there not an element of regret that you’re working on this incredible project and you’re never going to step foot inside it?
As I understand it, and we’ll see how this happens, but you can get a special dispensation from the king to go there.
You have to apply and it’s a whole big deal and you can only be there for three to four hours.
You can’t spend the night there, you go in, you have a very specific agenda, there are places you can go and things you can do and then you go out, so our hope is that once we get all these things open we’ll at least get to go there once.
And the reason is not so much to pat myself on my back, but so that I can have a frame of reference so I can try to manage this going forward.
You can have all the picture you want but until you see the scale of it and until you drive the roads to go there and until you see the logistics of its is very hard to understand how to manage it.
The only projects of this magnitude that are going on around the world right now are gaming projects and all those gaming projects have a totally different agenda, they all been driven by gaming and that’s the fundamental underpinning – here what we have is a religious icon.
They couldn’t be more diametrically opposed. If you think about for us the challenge and the fun of it all you’re opening the Savoy in London, you’re opening Makkah and then we’re also opening the Peace hotel in shanghai, arguably the single most famous hotel in all of Asia, so put the Raffles in there and they’re our hotels.
So I sit there and look at that and to be able to pull that off, being as small as we are, really has to put a premium on the quality of the people and that’s what I like – it’s a bit of a David and Goliath.
How do you unwind when you are responsible for so many properties in such a challenging time?
I guess I deal with stress very well. Honestly in this company I don’t worry about a lot of things because I know there’s a lot of people constantly trying to do the right thing and its one of the reasons why I find it hard to imagine working for another hotel company.
I’ve worked for Marriott, Hilton and Carlson companies and what makes this company different is everybody believes it’s their job to try to solve whatever problems they’re encountering.
There are not a lot of politics – that is unique, not just in the hotel business, but in any industry.