Following the recent news that 2020 inVOYAGE partner Kempinski Hotels has teamed up with 12.18 Group to create new luxury lifestyle concept, 7Pines Kempinski, we caught up with the group’s CEO Martin Smura on the partnership and Kempinski’s plans to expand to more than 100 luxury properties by 2021…
Tell us more about your growth plans?
We have been growing over the past few years, but we are now leveraging new opportunities available to us to ramp up that growth. The challenge when it comes to growing the number of properties is that every year, we have some management contracts coming up again. There is so much competition and sometimes from a commercial perspective, it doesn’t make sense to renew those contracts. For that reason, you might have a couple of hotels exiting the portfolio each year, which makes the net growth seem less substantial. We might have opened six or seven properties, but if several contracts are not continued, then net growth might only be three or four hotels.
In the luxury market, it is quite an investment to build a luxury hotel and while there are lots of opportunities for new management contracts, the process is lengthy and takes years. We have now widened our approach a bit, which has included investing in real estate, so we are able to drive growth more quickly. We have done this in the past, for example we own our hotel in Munich, but we’re now making this a key part of our growth strategy.
Tell us more about the partnership with 12.18 and 7Pines – why do you feel that it’s a good fit from a brand perspective?
This partnership is another great growth opportunity for Kempinski. 12.18 is a development company that wants to grow in the luxury resort sector in Europe and they are working in partnership with an institutional investor, a pension fund in Germany.
We have an agreement to build up to 20 resorts together with them – we bring the brand and the hotel management expertise, 12.18 brings the real estate and development expertise, and the pension fund brings the long-term commercial interest – so we have all bases covered.
Rather than focus on building new properties – and it’s incredibly difficult to get planning permission to build near the sea – 12.18 is keen to buy existing properties and redevelop them, which is what they did in Ibiza. This is a great model as it enables growth at a much faster pace as the turnaround time for each property is around two years, versus six or more for a new build, so it fits with our strategy perfectly.
7Pines Kempinski properties will be luxurious lifestyle resorts in special locations and will target a slightly younger audience than the traditional Kempinski, which makes it a good brand fit as it broadens our reach to new customer segments.
What are the key destinations you are interested in expanding the Kempinski and 7Pines brands?
To a certain extent, it’s down to the opportunities that are available in the market from a management contract perspective. We are pretty much open to any destination as long as it’s exciting and adds value for our clients.
But there are some strategic locations we are focusing on, for instance New York, where we are opening a property with 12.18. We’ll also be focusing on European resort destinations for the 7Pines brand such as Greece, Tenerife and Italy. But all destinations are possible as part of the partnership. For example, we have quite an expansion going on the Caribbean – we just opened the first luxury resort in Dominica – so that could be a region we look at with 12.18 in future. We have a particularly good track record of being the first to open a luxury property in destinations.
What trends or changes are you seeing in the luxury travel market? Is the definition of luxury itself changing?
To a certain extent, the market is changing or evolving all the time. In the luxury market, it’s about narrowing or shaping your offer to the experience people want to have – be that spa and wellness, or sports and fitness. For us, luxury has to be rare, it has to be felt. We are of German origin, so craftsmanship is important to us.
In today’s world – luxury is not the same thing for everyone. A true luxury company is able to cater to the needs of and satisfy peoples’ individual demands. Time is one of the biggest luxuries people have, so we need to ensure we are not wasting our guests’ time. It’s ironic that the people who have the time might not necessarily have the money for luxury travel, while those with the money probably don’t have the time.
We want to understand the individual needs of our clients and deliver them tailor made experiences. In order to do that, data is becoming a very important part of the game. As a luxury hotel company, you have to understand what clients look for and what they enjoy – if you get this right, people will be excited by your product.
How important is the luxury MICE market to your business?
It very much depends on the destination and property. We have hotels for which events business is very important. For example, the Ciragan Palace Kempinski in Istanbul, the Kempinski Hotel Beijing Lufthansa Center and Hotel Adlon Kempinski in Berlin, are all key properties for us in the MICE market. It’s a business segment that is very important for us as a brand, and for our more urban hotels in particular.
What are the current challenges for luxury hoteliers?
The biggest challenge in the luxury hotel sector is to find the right talent. I am very happy that we are not one of the major operators as it would be even harder. Being on the smaller scale, and with the strong brand we have, it means we have a great retention rate. But finding talent is the greatest difficulty in our business.
What upcoming openings are you most excited by?
I am really excited about opening our second hotel in Bangkok, and our first property in Tel Aviv, which I think has the potential to be a market leader. We’re also opening our second hotel in Havana and on 1 May, our first project with 12.18 – the 7Pines Kempinski Ibiza – reopens for the season. This year we are going to open more than ten hotels so it’s going to be a healthy year of growth for us.