Born in Germany the Kempinski Group is naturally much involved in the Fifa World Cup, but its ambitions are much greater with an impressive expansion plan, as explains its president. He also talks freely about the evolution of the industry.
Will the FIFA World Cup really benefit Germany? Certainly. The country is located at the centre of Europe and is accessible by automobile. Many tourists will come, eat, drink, sleep, shop. There is a future for Germany in tourism, that is certain, but to say it will become a holiday destination rivalling Spain, France or Italy... it’s too soon to suggest that…HTR: Do you believe Chinese groups will move into foreign markets in the future? _ R. W.: It is in their interest, it is their intention. In ten years we will see the first 100% Chinese hotels. When they travel, the Chinese have problems with food and communicating. They don’t have their newspapers or their television programmes. We will soon see Chinese chains in Berlin, Frankfurt or Paris the same way Holiday Inn expanded beyond the United States and Novotel beyond the confines of France.HTR: Is the German market so difficult? _ R. W.: There is a phenomenon of overcapacity in some places. Unlike France, which centres on Paris, this country is better distributed around its cities, which have their own dynamic, but also differences in performance. Munich works well, Frankfurt is cyclical, and the situation in Berlin is very difficult. Hotels continue to go up. Fortunately, our company has been trying to expand outside Germany for some time now... Kempinski, while it is the oldest hotel company in the world (1897), is relatively young as an international hotel group. In 1987, Lufthansa, our primary shareholder at the time, decided to leave Germany for real. Today 80% of our activities are outside the country.HTR: Aren’t there some advantages to being perceived as a German group? _ R. W.: Germany remains our group’s platform. This has helped us enormously in our international development. Brand awareness is 90% on the German market, which is the biggest supply market in the world. And this facilitates things when we must compete with other hotel chains. Our partners chose us because we bring this clientele with us. We develop at destinations that the majority of our clients go to. In Eastern Europe, more than 35% of tourists are German. We are at an advantage. Destinations where clientele is mostly American are not right for us.HTR: This year, Kempinski reported the biggest expansion it has ever known. What is the critical mass of your group? _ R. W.: There will be 100 Kempinski hotels. There will never be 101. If you buy a Ferrari, you have to wait eighteen months. Technologically, it can be built in a week. So why does it take so long? It is about creating and stimulating demand. The same is true at Hermès. Everywhere in luxury products, there is a number limit. Not so in the hotel industry. Big is beautiful. It is necessary to have 2,000 of one hotel brand, 50,000 hotels belonging to an American chain. I believe they are setting themselves up for their demise. Our strategic goal is to achieve sixty hotels in business centres, thirty leisure hotels and ten that combine the two segments. Hotel-resorts are fed by city hotels. When we reach 100, we will begin to perfect our portfolio to build a unique collection of luxury hotels in ten or twenty years. It has not been easy to convince our shareholders to limit ourselves to 100, but I believe there is enormous potential in this figure. Having such a portfolio will increase the value of Kempinski.HTR: Have your owners received offers to take over Kempinski? _ R. W.: Not a week goes by that we don’t receive unsolicited offers. Some are serious, others are frivolous. By definition, everything is for sale and remains to be bought. It all depends on who your owners are. Goldman Sachs or Morgan Stanley are speculative investors who buy and resell at a profit. For ten years our primary shareholders have been the Thai monarchy through Crown Property Bureau (CPB). Since day one, we have said “They’ll sell as soon as they get a chance.” But their response has always been the same: “We’re not sellers.” They kept Kempinski despite it all and have no need to sell today. The timing isn’t right. The market is flamboyant. And we are in a full growth period. With 30 hotels being developed, they want to achieve this programme, consolidate it, and then evaluate whether or not they will keep this investment. CPB has a five-year evaluation plan for its investments. Until 2010, they don’t even want to hear about selling. But generally speaking, they don’t need to sell. An investment fund would invest to create 500 Kempinski hotels worldwide. This would mean sending our brand down McDonalds Lane.HTR: You don’t seem to appreciate investment funds, which are becoming increasingly active in the hotel industry? _ R. W.: I find they don’t have many ethics. They are there thoroughly for speculation, to generate profit. Companies, brands, people... these are not their major concerns. Suddenly, the hotel industry, which is not interesting, became very appetising. Particularly luxury hotels. These had been considered the best way to lose money. It was enough for two or three brands to start. For lack of opportunities to make acquisitions elsewhere, they split off into the hotel industry and it became quite chic. They buy and resell with no regard for the consequences it bears on the company. The motivation is not healthy and it is not what I would call creating value. The only major chains that have succeeded in maintaining a brand image are Peninsula and Mandarin. They hold their positioning and do not allow themselves to be caught by ravenous investment funds.HTR: The Global Hotel Alliance (GHA) of which Kempinski is one of the cornerstones is a means of fighting the growing competition of hotel leaders? _ R. W.: With it we will improve distribution, have a better presence worldwide in order to rise up among the giants. We invent nothing new. The model is the same as the one for the airline industry, like “Star Alliance”. With GHA, we cover the world with hotels that offer a unique experience. Each group –Kempinski, Omni, Pan Pacific, Rydges – has their own philosophy, own identity, own way of working. But rather than have a sales office in New York that costs us a fortune, we have only a single office that sells each brand individually. We have just named a CEO who will promote and orchestrate this alliance.HTR: Your goal is thus to develop this alliance in the years to come? _ R. W.: We plan to bring small groups into it to complete our network worldwide. Kempinski does not cover all of Europe and this is not our goal. In Spain we have two hotels, but our presence is weak. A group that covers this market would be a logical candidate.HTR: Will the development of this alliance impact Kempinski? _ R. W.: The United States are already perfectly covered by Omni. No need to go there. Particularly since we have always said we didn’t want to go to the United States. We lost a great deal of money there. It is a homogeneous market: in order to have a credible mass you must be present in the 8 or 10 major cities with a uniform product. This is completely against our philosophy. We don’t want to clone our product.HTR: Which is not exactly the case for the Emirates Palace you opened in Abu Dhabi and the other projects you have in the Middle East… _ R. W.: The Emirates Palace is like a modern-day Versailles with three billion dollars in investments behind it... At the end of March we will open The Mall of the Emirates in Dubai with an innovative Ski Dome concept that is unique in the region. Our hotels have two vocations: to be unique or leader on their market. In Dubai, the “market leader” is the Burj Al Arab, but the most original hotel is certainly ours with this ski slope in the middle of the desert. In Berlin, the Adlon is the leader with a RevPAR 50% higher than the others and it is also an original hotel. The Adlon could also have been called the Kempinski Berlin. But we won’t do this because we are not obsessed with brandishing our banner, unlike other hotel groups. In Abu Dhabi, the hotel is called the Emirates Palace. Kempinski is nowhere, and yet we manage it. That’s why they took us. In China, however, our hotels are called Kempinski Chengdu, Kempinski Shenyang. When the Chinese travel in groups, they prefer to stay at a brand they know at home.HTR: You have many projects in China. Why is that? _ R. W.: We are pioneers. In Eastern Europe, in Africa, in China... Sometimes we are smiled at, they don’t understand us, but over time, we see who is right. Fifteen years ago we were the first in China. Today, we are the second-largest luxury group there. It is thanks to this entry, so long ago, that we are able to pursue our foray. Thanks to our joint-venture with our historic partner the Beijing Tourism Group, the largest tour organiser in China. They chose Kempinski as their 5* partner, Nikko for 4*. In the 3* segment, there is so much potential that they want to control themselves. Just as Americans have developed Holiday Inn for Americans, the Chinese have understood that they can create a Chinese Holiday Inn. In the luxury segment, it is different. It’s the same for cars. They know how to make mid-range cars, but not Porsches or Ferraris. It is also a question of perception. Wealthy Chinese people appreciate well-known brands. They drive Mercedes and wear Milanese or Parisian fashions.HTR: Do you believe Chinese groups will move into foreign markets in the future? _ R. W.: It is in their interest, it is their intention. In ten years we will see the first 100% Chinese hotels. When they travel, the Chinese have problems with food and communicating. They don’t have their newspapers or their television programmes. We will soon see Chinese chains in Berlin, Frankfurt or Paris the same way Holiday Inn expanded beyond the United States and Novotel beyond the confines of France.
