LOS ANGELES—It might have taken longer to get out of the starting gates than they would have liked, but executives at Virgin Hotels say the new brand is beginning to hit its stride.
The first property will open in Chicago during the first quarter of 2014, and the group will announce a second project—this one in California—shortly, said Raul Leal, CEO of North America for Virgin Hotels.*
The brick-and-mortar launch falls after executives’ 12-to-28 month projection when Virgin Hotels was first introduced in September 2010. Progress was slowed by their meticulous product-development process as much as it was by the crippling global recession, Leal said during a break at last month’s Americas Lodging Investment Summit.
“Once we launched and as we got to understand what the product was going to be and what the technology was going to be … I think we slowed down the process a little bit purposely,” he said.
They wanted to get the concept right the first time—especially given the high level of anticipation in the hotel industry as well as from Virgin’s millions of brand advocates around the globe, Leal said.
“Launching a new brand is difficult, and the expectations for the consumers are very, very high for this thing,” he said.
And still little, if anything, is known about Virgin Hotels.
“We just haven’t let anybody else know about it right now. We’re just keeping it under wraps,” Leal said. “There’s nothing better than creating a little bit of anticipation. And there are some things in there that we want to roll out that currently aren’t in the hotel space”
What Leal was willing to share:
The hotel brand will closely mirror the innovative and user-friendly profile of parent company Virgin’s other offerings. “We will have translated very nicely the Virgin tone of voice into the hotel business at a time when consumers are looking for something just a little bit different.”
It will be highly tech-oriented. “The general proposition is going to be to put the customer in control through their devices.”
While each hotel will feature standout design elements, “the focus is really, really on comfort,” he said.
Another key point of differentiation—and perhaps one of Virgin Hotel’s biggest competitive advantages—is the brand’s existing network of 65 million global customers, Leal said. He anticipates most business to come organically, which gives executives a lot of flexibility in terms of marketing and distribution.
“These are all lifestyle consumers. The demographics are pretty astounding. (They are) strong on Facebook, social media. … A lot of our distribution will be fairly organic,” he said, adding Virgin had more than 1 billion organic social media mentions during 2012 alone.
“We think we’re going to drive tremendous direct results to the websites without too much utilization of the third parties,” he said.
A fluid direction
Though momentum has been slow for Virgin Hotels, the brand is still on pace to reach executives’ original goal of 20 hotels in 10 years, Leal said, adding that the next seven years should bring two to three new hotels every 12 months.
“We’re close. We’re pretty much on track,” he said.
The wild card is global expansion.
“It could come (into play) any time,” Leal said. Executives are scouting locations in London, Paris and throughout Spain, he added.
The majority of growth will come from conversions, although ground up construction is still in the picture. Leal said the team is evaluating several new-build opportunities in New York, for example.
“It depends on what’s available,” he said. “Does it fit the brand? We’re wide open in different cities to either conversion of hotel assets or conversion of existing buildings that can be converted to a hotel or ground-up development.”
The company is taking a similar approach to financing. To get the ball rolling, Leal said Virgin is willing to form joint ventures, contribute sliver equity or own projects outright—as was the case with its Chicago project.
“We’re really fluid about the direction of the brand. A lot of that is dictated by the market,” Leal said.
The one area executives are far more rigid? Management. Virgin Hotels will not be managed by third parties, he said.
“It’s about setting the tone at the very beginning and wanting to make sure we get the things right at the very beginning,” he explained.
And Leal is excited about how that beginning is taking shape.
“We’ve been very deliberate about identifying what the consumer needs are, what the product is going to be,” he said. “They’re so excited about rolling this brand out, that you just can’t help but be excited.”
Correction, 11 February 2013: An earlier version of this article stated the Chicago property would open during Q1 2013.