With the United Kingdom’s Brexit looming, new lifestyle brands making their entry into Europe are debating if London still is the place to be or if their efforts might be better directed at European gateway cities.
LONDON—Hotel development specialists still have questions about Brexit. Will it cause less business travel to London? And will travelers from the United Kingdom require visas to visit mainland Europe, and vice versa?
The answers to both questions might have ramifications for new lifestyle, full-service, celebrity-favored brands entering the U.K., according to sources who spoke on a panel at the recent Boutique & Lifestyle Hotel Summit titled “Brexit and London versus European gateway cities.”
But few of the panelists would bet against London maintaining its lofty status as a tourist destination.
Alex Andjel, VP of development at Virgin Hotels, and Todd Reppert, EVP of global development at Standard Hotels, spoke about what concerns them in an ever-changing European landscape and what their growing companies can add to the mix.
“London will not stop being the financial center of Europe, so things will not change for our little spot in the market,” Andjel said, adding that Virgin Hotels also is researching Manchester as a development target.
“Manchester is not there in terms of rate, but we are looking at it,” he said.
Reppert said Standard Hotels is more concerned about what the U.K.’s exit from the European Union will mean for “freedom of movement.” But, he acknowledged, “the whole issue might create opportunities in some European cities.”
The right mix
For Virgin and Standard, the challenge is to find the right levels of value and sustainability for their premium products, the panelists said.
Standard Hotels, Reppert said, is “on the edge of growing internationally with soon a big push in Europe and Asia and less focus in the U.S., where the development cycle has topped out.”
He added the company is close to a deal in Milan, while Andjel said some of the Nordic countries might stack up for Virgin.
“We’re far advanced in Barcelona, but the political atmosphere is a worry there. Amsterdam has challenges; Rome, too,” Andjel said.
Both brands are building hotels in the U.K., the panelists said.
The first Standard Hotels asset outside of the U.S. will open later this year in London’s Kings Cross area, while Virgin Hotels—a British brand under Virgin head Richard Branson—has signed a deal to make its European debut in Edinburgh, Scotland.
“Our operating platform in Europe will be consistent with that in the U.S., but development in Europe has to take into account building stock, although Edinburgh has the same challenge as did Chicago in that they were listed buildings,” Andjel said.
He added that development in Edinburgh is made a little easier by there being space behind the existing building in which to construct new builds.
“We always look for 100, 150, ideally 200 rooms,” Andjel said.
Reppert said his Kings Cross property will have 270 rooms.
“We hired the GM two years ago, a Brit who knows the market. The biggest problem for us is to have more than 200 keys, as it is hard to make money with fewer,” he said.
Both panelists said Lisbon, Portugal, is one of Europe’s hot markets for 2018, with Eastern European markets such as Prague also piquing interest. But Reppert added that “in places such as Lisbon, it is difficult to find the right properties for a management business.”
“We sit in the lifestyle, full-service space, which comes with a price. In some of these places, however attractive, rates are not touching what we need unless you have the scale,” he said.
From Virgin’s perspective, Andjel said, “there are sufficient submarkets in London and Paris where we’d be a little more flexible with scale, as long as public areas allow for sufficient entertainment.”
Andjel said Virgin also is looking at developing resorts.
“That is a tough market,” he said, adding that Ibiza, Spain, might be a market that would work for Virgin, though “it is seasonal perhaps.”
“We are also looking at pure-branded residential assets in the U.S. We will likely get into that,” Andjel said.
Reppert said such an idea is attractive to Standard.
“We’d love a surf and ski destination,” he said.
Added to the challenge of suitable scale is food and beverage, which in such brands has to be cutting-edge, the panelists said.
“We’ll have five venues at Kings Cross, but we will not replicate the U.S., and that is tough, to get those spaces filled with the right chefs and F&B concepts,” Reppert said.
Andjel advised that with F&B venues it’s important to “be flexible and do not be tied to one model. It is about creating something original, about creating a culture.”
Reppert said Standard considers: “Where can we disrupt? What can we do that stands out and creates loyalty?”
Both brands have been successful in attracting A-listers and celebrities, said panel moderator Bill Barnett, managing director of hospitality consultancy C9 Hotelworks, who warned that such associations don’t always work.
Andjel and Reppert have no qualms about the well-known people behind their chains.
“Richard Branson is an ideas person,” Andjel said. “Yes, he is allowed to be as outspoken as he is, while (hoteliers) have to be as neutral and diplomatic as we can, as we have partners on both sides of the political divide.”
Reppert said the vision and energy of Standard founder André Balazs, who is no longer connected to the brand, still does have an effect on the company.
“He is an artist,” Reppert said, before adding “but artists tend to go over budget and over time.”