Experience counts
Orient-Express president Simon Sherwood explains why he dislikes branding. Jenny Webster reports.
Imagine a small room. In this room, there are bunk beds and a hand basin. There is no en suite toilet or shower, as there are shared facilities at the end of the corridor. Imagine, too, that this room commands an average achieved rate of $2,000 (£1,300), based on two people sharing, inclusive of all meals (but not drinks). Impossible? Not for Orient-Express Hotels and rooms on board the world-famous Orient-Express train.
"People pay for the experience," says Orient-Express Hotels president Simon Sherwood. It is this experience that sets Orient-Express apart from its competitors and shapes its policy on branding. With the exception of the train, where the brand is dominant, individual properties are more important than the Orient-Express umbrella.
"We believe that every hotel should have its own personality and position in the local market," says Sherwood. "All our properties come under the Orient-Express banner, but this is almost subliminal. We don't push it."
Individuality also dictates a dearth of central rules. There is no Orient-Express handbook, nothing to say that chocolates have to be put on pillows at turndown. Instead, general managers are empowered to make their own decisions in accordance with local market conditions.
Another factor differentiating Orient-Express from its rivals is its policy on owned versus managed properties. In recent years, the trend in the USA has been towards management contracts, as, when the market is booming, these can lead to quick returns. On the minus side, management contracts are often hotel start-ups, viewed as four times as risky as taking over an operating property.
Orient-Express opts for a happy medium. With one or two exceptions, such as establishing joint ventures in developing countries, the hotels are 100% owned, but they are not new. The policy is to acquire existing properties and thus avoid the risks associated with start-ups. "I would not want to be involved in ownership and new-builds," says Sherwood.
Ownership also fuels expansion for Orient-Express Hotels. The theory is that equity returns are greater than simply management fee income. Increases in property values allow the company to increase borrowings against these assets, and thus expand the portfolio.
Currently, there are plans to spend about $80m (£52.4m) on acquisitions. That's about three or four new properties a year. Wherever possible, it favours expanding existing properties to take advantage of fixed costs and a potential high return on investment.
But there's no rush, and Sherwood says he will take his time finding the right properties. "We've no mad desire to rule the world," he concludes. "We'll just do what seems sensible at the time."
Orient-Express
Interests: Orient-Express Hotels, Trains & Cruises owns or part-owns and manages 41 leisure properties in 16 countries. Thirty are hotels and these include the Cipriani in Venice; Reid's Palace in Madeira; the Windsor Court hotel in New Orleans; Mount Nelson in Cape Town; and the Copacabana Palace hotel in Rio de Janeiro.
President: Simon Sherwood
Trading: in 2001 Orient-Express Hotels had net earnings of $30m (£19.68m) on revenue of $261m (£171.2m). It claims to have suffered relatively less from the 11 September terrorist attacks than its chain-brand competitors.
- History: the company was started in 1976 as the leisure division of Sea Containers, and was later incorporated as Orient-Express Hotels. This was floated on the New York Stock Exchange in August 2000.
Year of change
Among the biggest developments in 2002 for Orient-Express were the acquisitions from Virgin boss Richard Branson of La Residencia, in Mallorca, and Raymond Blanc's Le Manoir aux Quat'Saisons, in Great Milton, Oxfordshire. Included in the transaction was a 50% shareholding in four-strong brasserie chain Le Petit Blanc.
The purchase price was about $40m (£26.2m) and these interests generated about $6m (£3.9m) in earnings before interest, tax, depreciation and amortisation.
