Laurence Geller, the expressive, stylish president and chief executive officer of Chicago-based Strategic Hotels & Resorts, is a favorite of the hotel talk circuit. He wins awards, pontificates with eloquence, and is not afraid to speak his mind. An authority on Winston Churchill, Geller founded Strategic (originally named Strategic Hotel Capital) in 1997 after heading Geller & Co., a gaming, tourism and lodging advisory consultancy. Before that, he was an executive with Hyatt and London’s Metropolitan Hotels. A hotel management graduate, Geller has more than 40 years of experience in lodging. He’s known for his hands-on approach to his properties, high-end hotels and resorts in gateway cities and destinations in the United States, Europe and Central America.
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| Laurence Geller |
In a recent interview, Geller suggested that once the current economic downturn is past, hospitality will prosper—in a leaner, meaner way.
“My immediate fear is—and I don’t think it will happen—that the chains panic and set us back by falling on that old, failed fallacy of rate-cutting that will create incremental demand,” he said. “It doesn’t. All it does is cheapen your pie.
“My fondest hope—and I think it probably will happen—is as we climb out of this we will have had a winnowing of the amateurs, a chastening of the would-be developers, and, as a consequence, diminished supply going forward for certainly the next five years. The inevitable result of that will be an industry richer, stronger and healthier than we’ve seen because of supply constraint.” For the short term, he predicted a gloomy first and second quarter, “signs of positiveness” in GDP at the end of 2009 and “really good demand criteria” from mid-2010 on.
By the end of 2010, hoteliers will be able to view the future “through the prism of optimism, not the prism of pessimism,” Geller said. “I’ve decided that when the history of lodging through this period is written, my prophecies will look really good.
“Shall I tell you how I know? I’m going to write the history.”
Laurence Geller, auteur
About three years ago, Geller published “Do Not Disturb,” a thriller novel about a hotel. He said it’s sold about 20,000 copies and is being considered for film treatment. He’s already finished writing his second novel, “The Last Resort,” which he hopes will be published next year.
Strategic specifics
Strategic has bought land in Mexico for two new luxury properties in Punta Mita to surround its Four Seasons there and for a second Four Seasons in Mexico City, but it hasn’t broken ground. Other plans for Mexico will “sit dormant” for now, he said. In Europe, Strategic “would be looking” for development and acquisition opportunities, but in Asia, Strategic will take its own sweet time, Geller suggested.
“We’ve been very judicious in not allocating resources to Asia at this moment; it was a bull market, so everybody was there. Now, as the years come through, we will be able to leverage our highly qualified and respected asset-management and intellectual capacities into very, very, very profitable transactions—but only with great strategic partners—in Asia.”
‘Defrothing’ the industry
At a recent industry panel (see “Geller gives industry pep talk”), Geller suggested that downturns separate inexperienced wheat from experienced chaff. Does that apply to operators, owners and general managers? Or does it also include brands?
“Those that made their wealth by confusing brains and a bull market are obviously the first to go in this market,” he said. “I’ve always said the winners are the ones that come out strong in a downturn and the losers are the ones that panic. Until you’ve got those wheel tracks on your back, you haven’t won.”
He suggested that many brands that debuted in the past two years will expire soon.
“If you’ve got less than 10 products up, there’s doubt you can exist,” he said. “New construction is going to be very difficult to finance and fund, so their only potential in the immediate future will be by conversions, in which case they’ll have brand obscurity because conversions can’t give you the same brand clarity as a new brand.
“It is—I’m going to invent an English word—‘defrothing’ our industry. The froth comes from easy money and allows people the delusion of omnipotence. As soon as you take that easy money away, all those geniuses don’t look so omnipotent, and it’s the wizened old men like me that survive because we’re 190 years old.” (Geller is 60.)
While he’s a “growth-oriented” person, he concedes a shrinking, global economy. That’s why his approach, which he calls “thoroughly, aggressively and mercilessly competitive,” demands focus and nimbleness.
“We are in a time of diminishing revenues, so if our revenue drops a dollar, my job is to lose less of that dollar than a) I did before and b) my competition … Let’s assume I would have normally lost 60 cents on a dollar in profit (but) because I’ve figured a way to only lose 20 cents on that dollar, I view myself as growing my business by 40 cents.
“Although everyone’s revenue is declining, I want to decline less … It is completely Darwinian. When the growing gets tough, you have to eat your competition.”
A time for leadership
Trying times produce leaders, Geller suggested. “It can’t be coincidental that four dramatic leaders were in World War II: Roosevelt, Churchill, DeGaulle and Stalin. These people come as a result of the times, but they’re either made or broken by the times.
“I’ve often mused with members of the Churchill family (about) what would have happened to Winston Churchill in the days of instant communication and daily opinion polls. I think he would have done what was right despite the barrage of negative publicity he would have suffered under.”
As for President-elect Barack Obama, whom Geller has met several times, Geller has high hopes. “Can he live up to his own good will? If he does, you could have a leader of epic qualities,” Geller said. “I will say history is against him in this country. Jimmy Carter came into office with an incredible wealth of good will behind him in a time when leadership was desperately needed and failed to live up to it. But you could also argue that he created the atmosphere for Ronald Reagan to shine; Ronald Reagan’s leadership skills were hardly mediocre.”
Whether Obama will be decisive or micromanage is the issue, Geller suggested. “My instinct about him is the former, because the latter will be Carteresque. We need dynamic, decisive leadership at a global level to pull everybody through this quicker than it would normally take. These times are such that muddling through is not an alternative.”
