Under Smura, Kempinski sets 100-hotel portfolio goal
 
Under Smura, Kempinski sets 100-hotel portfolio goal
26 FEBRUARY 2020 8:48 AM

After 16 years with its previous CEO, Germany’s Kempinski Hotels selected Martin Smura as its new CEO in July, and his plan is to expand the luxury portfolio to 100 hotels and even add 7Pines, a new, co-developed brand.

BUDAPEST—Martin Smura, chairman and CEO of Kempinski Hotels, has been in his role since July and said he is focused on expanding the Swiss brand’s hotel count to 100 by the end of 2021.

For the first time in its history, Kempinsksi’s growth will include another brand—a joint venture called 7Pines. Its other partnership brand is NUO, a joint development with the Beijing Tourism Group, which has been in place for approximately five years now.

Speaking at the HOTCO conference, Smura said currently he is in charge of 80 hotels in 32 countries and oversees a pipeline of 17 properties, 10 of which are due to open by the end of this year and the remainder are under construction.

“We are aiming at 100, although we used to say we’d have 100 hotels 100 years ago,” Smura said, referring to Kempinski’s origin in 1897.

That second brand, 7Pines, derives from an October 2019 partnership agreement with Düsseldorf, Germany-based owner and developer 12.18. Investment Management that will see approximately 20 7Pines assets opened by the end of 2022.

12.18. plans to raise €500 million ($544 million) to finance the platform.

Not all of these co-venture properties will bear the 7Pines name. Those include Kempinski’s first property in New York City, to open in 2021, and the Schloss Roxburghe Castle in Heiton, Scotland, Smura said, although that is an ongoing discussion.

“We’ll do it that way as (the Roxburghe) fits (Kempinski’s) bill, but others such as the one in Ibiza, where the developer has a property called 7Pines, that will be a 7Pines Kempinski,” he added. “The one in Manhattan is likely to be a straightforward Kempinski, with construction to start (in February 2020), although if it allows something fun such as a rooftop bar then it might be a 7Pines.”

Another asset has been earmarked for 2021 in Sardinia.

Kempinski growth
Kempinksi’s strategy going forward is to be at the top of the pile in whatever market the firm operates in or enters, Smura said.

“We drive quality and have a one-two strategy, leading in (revenue per available room) or at least coming in at number two,” he said. “Havana is one of our latest openings, and that is an absolute leader. As it is in Bali, too.”

He said that the firm does not shy from cutting hotels from the portfolio.

“Most have good fees, but some prove not to do so, and these are the ones we’d rather leave to our competitors, and others come to the ends of their (contracts), some of which we’d love to keep,” he said. “There were 10 last year like that, and we kept six, and there are 10 coming up this year, too. The fees do not go up, but that is the same for all, I suspect.

“We lost two hotels this year, as it would have cost (Kempinski) $50 million. Larger companies are able to drive their stock prices. We do not have quite that power.”

New Kempinski hotels include properties coming to established markets such as Tel Aviv and a second asset in Bangkok, but also to emerging markets such as Almaty, Kazakhstan; Brazzaville, Republic of the Congo; and Tbilisi, Georgia.

“The second property in Bangkok has proven to be a little bit of a headache. Our first is the market leader in RevPAR, and there is a huge competition,” he said.

Smura said Kempinski normally develops one hotel in a city, but that Bangkok is big enough for two.

“It is opening this year,” he said. “The original is group, family, so the new one is more a ‘me’ property, more of a city resort. That is how it will be positioned, and we will see how it will fit into the family.

“Its rate needs to kick in, and if it is in the top six I will be very happy, but there is a lot going up in Bangkok, so it will be difficult,” Smura said.

Kempinski is not afraid of being a pioneer, he added.

“We are opportunistic, and we are good at coming into a new destination and making it work,” Smura said, referring to China but in the weeks before the coronavirus erupted.

“Now we have 30 properties (in China), which may be luck, but we jumped on it, and maybe that has become a behavioral pattern,” he said.

China is also the site where NUO was first developed, and a second one—a rebranding of the Raffles Beijing—is upcoming, Smura said.

“There will be another (NUO) project in Moscow, maybe one in Dubai, and it will be a design brand but an upmarket one. We will move it to major cities,” he said.

Smura added that there are discussions to re-enter India after a former 25-year partnership with India’s Leela Group of Hotels ended in 2013.

“We had a fallout, which was disappointing. It is not easy to operate there, but we are looking at it,” Smura said.

More growth will also come from initiatives concerning sustainability, technology and education strategies to retain staff.

“We are a major shareholder in the (Global Hotel Alliance), which we founded,” Smura said. “Our former COO is its CEO, and for those smaller luxury hotel companies, like us, it is a very good option going forwards, for those who need help in investment in technology. We do not have $300 million to invest, so it is an important to keep up.

Smura knows a thing or two about the hotel industry, having first been a GM at age 27 and later spending 17 years working for InterContinental Hotels Group.

“I ran a hotel in Lhasa (Tibet), and running a hotel there gives you a very different view on what is really a problem,” he said.

He has other advice for running a hotel company reaching toward 100 hotels.

“Do not be owned by an opportunistic fund, and if you are family-owned, make sure the family is very rich,” he said.

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