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Virgin Group enters the hotel space
September 22 2010

The ubiquitous brand has officially entered the hotel space with the 4-star lifestyle product, Virgin Hotels.

By Patrick Mayock

PHOENIX—After years of rumors and speculation, brand-savvy Virgin Group officially announced the launch of its Virgin Hotels, a new 4-star lifestyle brand.

The company plans to operate and develop up to 25 hotels within seven years, with the first property expected to open within 12 to 28 months.

Anthony Marino, executive director, Virgin Hotels

The group has approximately six projects under active development, executive director Anthony Marino said.

• Read “Blog: Virgin Hotels’ entry signals good times.”

As part of the launch plan, Virgin Group, with entrepreneur Alberto Beeck and hospitality and real estate investor Diego Lowenstein, established a property venture that will acquire US$500 million of Virgin-branded hotel assets in the next three years.

The ownership model will be flexible, Marino said. Virgin will serve as owners and operators, equity partners, or simply operators on a property-by-property basis.

“We’re open for business, we’ve got capital, we’re aggressively seeking properties in major gateway cities … and we’re very excited because we’ve got one of the world’s most exciting brands,” he said.

Virgin Hotels initially will be located in gateway cities in North America and will have 150 to 400 guestrooms. Each property also will feature the customer-focused touches for which the Virgin brand is known.

Marino was mum about those customer-focused touches, hesitating to reveal details until the first property is open.

“We think it will be a very differentiated product. And we’ve got to do that,” he said. “Virgin has 60 million customers around the world, and we have this incredible advantage of putting a brand on the door that people know.” With that brand come huge expectations, however, something Virgin will actively work with its partners to meet.

Familiar faces

Marino, who has run the industry panel and conference circuit for the past few years, isn’t the only familiar face at the helm. Raul Leal, formerly of Desires Hotels, will serve as Virgin Hotels’ president and COO, while Paul Whetsell, founder of the original CapStar Hotel Company, will advise the company on operations and acquisitions and also will serve on the board of directors.

And then, of course, there’s Virgin’s visionary founder and president, Sir Richard Branson.

“Consumers are passionate about—and passionately loyal to—our travel and lifestyle offerings through brands like Virgin Atlantic Airways, Virgin America, Virgin Active gyms, and our luxury retreats portfolio Virgin Limited Edition,” Branson said in a news release. “We’ve been fortunate to have access to opportunities to extend our success in a range of sectors, and we’ve chosen to create a brilliant place for fans of Virgin to extend their stay with us—to eat, sleep, meet, and have fun in the world’s greatest cities.”

Said Marino of Branson’s involvement: “If you think about hotels versus any number of businesses Virgin is in, this is a Virgin business that has a high street presence. It’s those kinds of businesses that have a very big impact on what the brand means in consumers’ minds. So Richard will be very involved and keenly interested. … His commitment is in this venture.”

A crowded lifestyle

The proliferation of the lifestyle brands in recent years already has drawn criticism from many within the industry, though the Virgin Hotels team isn’t concerned.

Yes, the industry has done a phenomenal job segmenting itself and the marketplace, Marino admitted, but consumers often don’t fall into clear-cut segments.

“The consumers weren’t segmenting themselves that way anymore,” he said. “They were segmenting themselves by the experience they wanted. We saw, in the small insight, an opening in the marketplace.”

Raul Leal, president and COO, Virgin Hotels

Virgin Hotels will eschew the old formalities of the status quo in favor of those experiences for which guests truly yearn, Leal said.

“Virgin as a brand has a great legacy of service and innovation, he said. “The hotels aren’t going to be any different than that. … But the Virgin customer is more of a psychographic than a demographic. We’re looking for an experience seeker.”

“We come at the industry as an outsider,” Marino said. “As we design and think about all the contact points with all our customers … we’re focusing on the ones that our customer cares about the most.”

Properties will commit to customer service, and also feature high-tech amenities and many communal settings where guests can gather. Aesthetics will be a focus with some core signature elements and market-specific cultural nuances. The product will be priced along with other 4-star offerings in each market.

“We’re in this for the long haul,” Marino said. “When we think about businesses in general at Virgin, we have a brand whose awareness in people’s minds transcends everything. We’ve got to take a long-term view to build that brand, protect it and deliver to our customers. Economic times will vary, but we want to continue to serve our customers as best as possible to protect the brand and work closely with our partners to make the business as successful as possible.”

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