Kempinski Hotels CEO, Reto Wittwer, an exclusive interview

How has your company performed this year? Have you experienced any decrease in demand due to the European debt crisis? If yes, which regions have been most affected

The travel and tourism industry has been greatly impacted by the global economic downturn, and in spite of what had been believed previously, the luxury hotel industry was no exception. Although Kempinski also felt this impact, I think we fared better than many others due to our diversified portfolio; our geographical spread and the balance between business and leisure hotels reduced the impact significantly. Over the past three years, we were able to see signs of recovery within the industry, and we expect 2012 to be amongst the group’s best in terms of financial performance. We’ve continued to pursue business opportunities in target markets: Europe, Asia, Africa and the Middle East. We have eight openings planned for 2013, in Europe, Asia and the Middle East. Because of Kempinski’s business model of managing hotels, as opposed to owning real estate, and seeing as Kempinski’s portfolio is deeply diverse, with business and leisure property throughout Europe, Middle East, Africa and China, the company managed to limit its exposure.

How has the profile of the luxury traveller changed in the past 3 years?

We have seen considerable change in luxury travel over the past few years; there was a temporary shift similar to the one witnessed after 9/11 – people were hesitant to travel because of cost. This had an impact especially on individual business travel and MICE. Leisure travel hasn’t been as impacted, because high net worth individuals continue to travel, and we have also seen the opening of new markets for luxury travellers, such as the BRIC countries. Additionally, because of Kempinski’s positioning, we enjoy brand recognition amongst national and international travellers from Russia, India and China.

The profile of the individual luxury traveller has changed in response to societal changes, rather than seeking gratification through ‘mass luxury’ and sometimes anonymous experiences, travellers, whether luxury or not, seek individual meaningfulness and mindfulness, an authentic experience of their destination and the chance to travel far off the beaten track.

Trends which are affecting people are impacting their travel preferences, people are looking for meaningful experiences and life-changing moments. For luxury travel this means it’s not enough to just offer luxury, we need to offer an authentic experience of the destination, access for example to a local artists to discuss how they interpret the city, or the possibility to visit a community which the hotel is supporting. People are also interested in being adventurous and heading off the beaten track, so they can boast an experience which few others can claim. This is something we’re obviously interested in, as Kempinski has been the pioneer in so many destinations, and we’re excited about offering new destinations to our guests who are keen to discover the world through Kempinski.

People also expect to have instant access to travel, flights and hotels should be able to be really rapidly booked via their mobile phone for example, and while at their destination they want to interact with their environment and share their experiences instantaneously.

Which are the latest innovations in terms of facilities and services at Kempinski hotels worldwide?

Of course, it all begins with excellence in service, which we believe is achieved through attention to the little things; we’re constantly learning from our guests and sharing best practices across the group, because it’s our attention to detail that makes the difference between a nice stay and an exceptional experience. The Kempinski brand has a “red line” running through all of its hotels. No matter which hotel a guest decides to visit, the Kempinski guest experience is consistent, while the individual property is utterly unique. We ensure that this “red line” of our Remarkable European Flair is present, while respecting and incorporate different cultures to our hotels according to the destination. The Lady in Red is the ‘ambassadrice par excellence’ of the hotel – instead of a red button to push on the phone, you can speak directly to a Lady in Red to receive personalised service within the hotel – she accompanies the guest throughout the check-in; as the guest settles in, there is a range of gastronomic options on offer waiting to be discovered: be it a quick business lunch, a three course dinner, or simply an afternoon tea. Kempinski The Spa, a spa brand custom designed for Kempinski hotels and operated by Resense Spa SA which offers treatments exclusively designed for Kempinski Hotels, is another element that makes a Kempinski hotel recognisable and memorable to guests. We’re showcasing a brand new open kitchen concept, dubbed The Chef’s Table, at the Palais Hansen Kempinski in Vienna which opens early 2013. This concept is very exciting and stems from Kempinski’s heritage firstly as restaurateurs and epicureans, and showcases our chef’s savoir-faire.

Which are the challenges of management agreements with third party owners/developers? What is Kempinski’s competitive edge in relation to property owners?

When signing a management agreement with an owner, we ensure that the management services we provide during each stage of a hotel’s lifecycle are clearly explained. It is important to us that owners understand what we aim to deliver and our criteria, as once a hotel is branded “Kempinski”, we have a responsibility to our guests, and it’s our reputation and our brand on the line if the hotel is not up to our operational standards. We have also had to say to owners that their hotels no longer suited our criteria, or that their priorities were actually conflicting with the service we aim to deliver.

Communication between the two parties is crucial in the running of the hotel; regardless of a contract, it is important that we understand each other. A large part of Corporate Operations at Kempinski is dedicated to owners’ relations and ensuring owners understand our strategy as a group and for their specific hotel.

Standard management agreement terms with Kempinski are a minimum of 20 years from formal opening, but we understand the importance of flexibility: we understand and respect owners’ priorities, especially in light of changing market realities. We expect the same flexibility of owners. Owners’ priorities are normally to maximise ROI as rapidly as possible, and this aligns with Kempinski’s interests when sufficient resources are available to us as operators, and when the product is maintained to our standards.

Kempinski’s competitive edge lies in our deep understanding of managing luxury hotels and a lean management structure which allows us to make decisions rapidly.

With a growing competitiveness in many markets around the world, have you noticed a need to renovate properties sooner that in the early 2000?

Renovation to stay competitive remains an important financial burden and investment decision for the owner of a property we manage. While our preference is naturally to provision funds on an annual basis to ensure the optimum upkeep and maintenance of the hotel product, to ensure produce excellence on a continuous basis, Kempinski can also advise on the specifications and manage the process of a full renovation or refurbishment. We have the know-how to advise an owner on a renovation both before a hotel’s formal opening, and while the hotel is under operation. The Palais Hansen Kempinski in Vienna, which will open next year, is a very good example of what we can achieve through close cooperation with the owner. The building has gone through an extensive renovation process, which was heavily supported by the owning company, and the result is an absolutely stunning high quality property whose opening is highly anticipated.

A renovation done on the cheap still requires a lot of management, time and business interruption, so when quality standards aren’t respected, a hotel product will look tired and in need of renovation sooner than 10 or 15 years.  We prefer to ensure that renovations or refurbishments are only needed once every ten or 15 years, which is perhaps a larger CAP investment, but higher ROI long term.

So provided a renovation is done accurately and effectively, respecting a 10 to 15 year term for the investment, there is no real need to renovate more frequently than in the noughties. As a hotel management company, Kempinski will focus on introducing new services and programmes to hotels.

Kempinski is the leading luxury hotel operator in Africa. How has your company been performing in Africa and which have been the key motivations for your expansion and long term perspectives?
Kempinski has been performing well in Africa, it’s a continent we are committed to and we’re excited about expanding into new destinations. There’s been impressive economic growth and we expect increased travel within the continent as well as increased international business travel, especially long-stay expatriates, to result in a corresponding demand for very high end, secure, five-star luxury hotels. We’re often interested in mixed-use developments which combine hotels with a residential component, with convenient access to hotel services and facilities, business offices and shopping. In 2013, we’re opening properties in Nairobi in Kenya, and Accra in Ghana, both are key cities and highly important destinations for Kempinski to be present in.

Kempinski recently launched a partnership with a local hotelier to develop NUO, the first luxury Chinese hotel, for the Chinese and inspired by China. Tell us more.

Kempinski’s joint venture partners in China are the Beijing Toursim Group (BTG), which is simply China’s largest tourism and travel conglomerate: our joint venture is Key International Hotels Management Co. Ltd. Having BTG as partners is vital to our success in this important market. Together, we saw the potential for a high-end Chinese hospitality brand: there was a gap in the market for China’s first domestic five-star luxury hospitality brand. We developed this novel lifestyle brand which reflects the attitudes and aspirations of a new generation of Chinese, whether hip socialites, business travellers or government leaders who are proud of their culture and busy building the future of China. NUO is a high-end, trendy, art-lifestyle brand based on four pillars: Chinese heritage, luxury, a contemporary feel and a green approach. The flagship hotel will open in Beijing in 2015, with another planned in Shanghai. NUO plans to open landmark properties in first- and second-tier cities in China as well as in major cities around the world.

Do you consider launching such a concept in major markets such as India?

Creating new concepts for major markets is an important investment in terms of finances and resources, so while worthwhile for China, where the Kempinski brand will soon reach saturation and where there is still potential, it’s not necessarily the best business solution for all major markets.

In India, you are operating through a partnership with the Leela but also with the distinct Kempinski brand. Tell us more.
Yes, Kempinski has been in partnership with The Leela Palaces, Hotels and Resorts for going on 25 years, this has been important for Kempinski to offer its guests a luxury experience in India, while working on gaining our own foothold on the highly important Indian sub-continent. We’re now looking forward to the opening of Kempinski Ambience Hotel Delhi, our first directly managed property in India.

What is your approach to social media and the internet, especially review websites such as Tripadvisor?
One of Kempinski’s cultural values is creating traditions – we innovate, test and if it works, share best practices which become new traditions – this is very much part of our heritage and explains why our brand has been successful for so long. Our tradition if you like, is to try and stay ahead of the competition, adopting innovation to our purposes. Take social media, where Kempinski was among the first hotel companies to integrate user reviews directly in our brand website – this was pretty brave and now everyone is copying us. Apart from important review websites such as Tripadvisor, which aren’t necessarily available in all geographic markets, we also tap into other social media sources which support our reputation management efforts for the Kempinski brand. We’re working on a pioneering concept, which no-one else has done so far, to measure the ROI of social media and will launch this in 2013. On one side this is in response to questions about the value of social media to business but also to help drive our commercial activities through Facebook and Twitter in a more targeted manner. Or take ‘the Cloud’ –this isn’t social media but the internet – by mid-2013 we expect to have moved all our corporate IT systems, services and applications into the Cloud and we’ll look at how the hotels can benefit from cloud-based solutions.

To what extent Kempinski relates to luxury lifestyle?
Our guests buy in to the Kempinski experience because we believe not only in continuously adapting to our guests’ needs, but in contributing to and influencing the definition of a luxury lifestyle.

Reto Wittwer, President CEO, Kempinski Hotels