Hard Rock cranks up hotel expansion goals
11 FEBRUARY 2015 7:40 AM
Educating investors and developers is at the top of the to-do list for Hard Rock Hotels & Casinos as brand executives plan to add 80 properties during the next five years.
LOS ANGELES—Hard Rock Hotels & Casinos is anything but stuck between a rock and a hard place. The way Marco Roca sees it, the brand is well on its way to increasing its portfolio size five-fold during the next five years.
“That brand is your promise; that’s what you need to deliver on,” said Roca, Hard Rock International’s chief development officer, during a break at the recent Americas Lodging Investment Summit. “We have very strict brand standards from the ‘Sleep Like a Rock’ bed to the spa amenity packages. It’s all about experiences. People are not looking to just stay in a hotel anymore.”
Owned by the Seminole Tribe of Florida, the Hard Rock name is associated with rock-n-roll music around the world. Therefore, its hotel growth naturally is focused on music-oriented areas such as Austin, Texas; Nashville, Tennessee; Seattle; and Cleveland, where the company last year opened its first “Rocksino” at a horse racing track.
Other targeted markets include New York City, Los Angeles and London.
The average room count for the 20 open hotels in the Hard Rock system is 630 rooms, but Roca said there’s a wide range of possibilities for that number.
“It has to be the right size for the right market,” Roca said.
Eight of the brand’s open properties are in the United States. It has 18 signed letters of intent to develop hotels.
“Our pipeline is over 100 hotels,” Roca said. “My personal goal is to have 100 (open) by 2020.”
Roca, whose career stops have included jobs at companies such as Wyndham Worldwide, Starwood Hotels & Resorts Worldwide and Forte Hotels, said the Hard Rock brand “has pixie dust” because of its global appeal and lack of hotel development impact issues.
“We’ve got a wide open global footprint,” Roca said. “The U.S. is always going to have predominance over deals. The brand originated in London, but we’re more well-known in the U.S. You will see a lot of deals in the U.S.”
Hard Rock will allow conversions and new builds into the system.
“Because of what we’re creating, 60% to 65% is new construction, but we are looking at re-adaptations and conversions under the right circumstances,” Roca said.
Development costs per key vary widely depending on the location. Roca said the brand ranges from $1 million per key in Abu Dhabi to $100,000 per room in certain regions of Asia.
“If you are in a traditional type of market, $250,000 to $300,000 is common,” Roca said.
The brand last year opened a property in trendy Ibiza, Spain, and is scheduled to open one in Dubai, United Arab Emirates, later this year.
Roca said the Latin America and Caribbean region are hot development markets with 10 signed letters of intent—including a just-announced 1,800-room all-inclusive property in Cancún, Mexico.
The all-inclusive collection includes open properties in Mexico: Riviera Maya, Cancún and Puerto Vallarta as well as one in Punta Cana, Dominican Republic. The company also has an agreement to develop an all-inclusive property in Cabo San Lucas.
“It’s a great model that doesn’t work everywhere, but in primary vacation spots developers and consumers are very interested in all-inclusives,” Roca said.
Targeting institutional investors
Todd Hricko, Hard Rock Hotels’ head of hotel development for the U.S. and Canada, said the primary developers thus far have been wealthy individuals located in the regions they are developing the property.
“The key is getting in front of institutional investors—they just don’t know us yet,” Hricko said.
Signing a dozen hotels each year is Roca’s goal.
“We don’t look at deals for cookie-cutter properties,” Roca said. “We like iconic; we like properties that will be Hard Rock-brand centric.”
The brand will get involved in hotel development when a casino is involved; other than that the concept is to franchise/license and manage the properties.
“The biggest job is getting the public educated about what Hard Rock is and what we do,” Roca said. “Development is nothing more than an education process.
“I don’t think we’ve done the brand justice in the past,” he added. “A year ago most people didn’t know we franchised or did management contracts.”
That education process includes indoctrinating developers into a hotel brand that appeals to most consumers from ages 8 to 80—“from bald to bald,” Roca said. “Because we all like music.”
Operating a Hard Rock property is different than managing a typical hotel, right down to specific titles, Roca said.
“If you need to ask ‘what’s a vibe manager?’ you’re probably not the right developer,” Roca said. “When it’s time to crank up the party, they know how to crank up the party.”
That doesn’t mean the company goes over the top when it comes to operations. Like most operators, Hard Rock is always looking for better, more efficient ways to do things, Roca said.
Lifestyle to the max
Roca said the brand falls into the upper-upscale segment, where it outperforms its lifestyle-oriented competitive set. For consumers, that means Hard Rock is in the 4-star and 4-diamond categories.
“We want tremendous ambiance in the rooms,” Roca said. “When it comes time to go upstairs and sleep, even a rock star needs his rest.”
But, Roca said there’s a line the brand doesn’t want to cross and become “cheesy.”
“We truly are a rock museum with rooms,” Roca said, adding that the brand requires a developer to sign a 10-year lease for the artifacts on display throughout a property.