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Interview With Capella Hotels CEO: Crunching the Numbers to Create a New Luxury Hotel Brand

@denschaal

Feb 25, 2014 9:00 am

Skift Take

Can Capella Hotel Group make a sustainable business model out of providing highly individualized service to guests who think that run-of-the-mill 5-star properties are too cookie-cutter?

— Dennis Schaal

Free Report: The Changing Business of Extended-Stay Hotels

Capella Hotel Group

Capella Pedregal in Cabo San Lucas, Mexico. Capella Hotel Group


In 2001 at age 62, Horst Schulze wasn’t done yet.

A renowned hotelier who helped set the bar for luxury service standards, first as vice president of operations at Ritz-Carlton beginning in 1983, and then starting in 1988 as the luxury brand’s president and chief operating officer, Schulze remembers his wife Sheri and kids picking him up on the Friday that he retired, and feeling unsetled about the whole thing.

“I gave birth to this baby,” Schulze recalls. “It was emotional.”

But, at a time when a lot of people would be thinking about figuratively kicking back on the front porch, hitting the links at the country club, or traveling, Schulze was restless and had some misgivings about his track record at Ritz-Carlton.

After nearly two decades at Ritz-Carlton, maintaining the brand’s standards and mundane tasks such as employee scheduling had become routine.

“Frankly, there’s no magic in that,” Schulze told Skift last week. “The painting had been painted.”

But, then, he felt there were things that could have gone better, such as finding ways to avoid sacrificing luxury and standards to short-term financial mandates.

“I should have done a better job,” Schulze told Skift last week, referring to his tenure at Ritz-Carlton.

Luxury versus Ultra-Luxury

It was 2001 and during the first weekend of what would turn out to be his short-lived “retirement,” an obsessed, newly ex-Ritz-Carlton president was mulling how he could best get involved in the transformation of the hotel luxury market into the ultra-luxury market, a difference he likens to some people being enamored with a Mercedes while others are coveting Bentleys.

“If I wouldn’t pursue what I was thinking over that first weekend, going after the [evolving] luxury business, I would be contemplating it my whole life,” Schulze says.

Horst Schulze’s wife Sheri understood, and within five years the Capella Hotel Group was born.

Horst Schulze, chairman and CEO of Capella Hotel Group.

Horst Schulze, chairman and CEO of Capella Hotel Group.

The five-star properties include two brands, Capella Hotels and Solis Hotels, and the group also manages independent hotels, and operates Auriga Spas.

The Capella Hotels brand consists of properties in Mexico, Germany, St. Lucia, Singapore, and Washington, D.C., while Solis Hotels currently has one property in County Donegal, Ireland, with upcoming properties in Qatar, Russia and China.

Schulze, 75, who is chairman and CEO of Capella Hotel Group, founded in 2006, has created what he considers to be a new, ultra-luxury model, and he didn’t develop the concept in haste.

What Do Ultra-Luxury Guests Want?

He commissioned studies of what guests want from a super-luxury hotel, and then he conducted extensive analysis to see if a viable business model could be created around those needs.

“It was a very difficult, very scientific analysis that took over two years,” Schulze says.

Some of the things he discovered is that these target guests don’t necessarily need “lots of chandeliers and marble and art,” Schulze says.

Yes, they want nice-looking surroundings, but most of all they want highly personalized service, he says.

“When I am there on a business trip, I want to be taken care of they way I want, and not the way you [the hotel] wants,” Schulze says.

No Groups, Please

These guests also don’t want to be surrounded by groups and conventions, but they want to have the ability to interact with other guests, and to have a restaurant, bar, spa and health club, Schulze says.

Capella Hotel Group’s answer was to create 50- to 100-room properties — no larger — with highly individualized service. In fact, the guests receive a poll before their stay asking them to detail their needs, including diets, allergies, what time they want to get picked up from the airport, and whether they want to visit a museum, for example.

About half of guests fill out these surveys before arrival, and the information is then passed along to other properties for their next stay.

“If I arrive, I want to have six boxes of tissues in the room,” a guest might request, Schulze says. “Most of all they want individualization,” and the hotel will carry out their requests “as long as it is legal, moral and ethical.”

He jokes that they can stay elsewhere if their requests don’t align with that framework.

Check-Ins, Checkouts Are So Yesterday

When guests do arrive, they don’t have to worry about checking-in at the front desk, and there is no need for mobile check-ins, either.

At Capella and Solis hotels, there is no check-in and no formal checkout process, Schulze says.

Guests arrive at a property and identify themselves to staff, and go right to their rooms, Schulze says, where there is Wi-Fi at no extra charge, and an honor bar. Of course, rooms may go for $1,000 per night, although the Capella Washington DC Georgetown was offering rooms this week in early March for $559 per night on Expedia.

On the way out of the hotel, guests are asked to show a credit card, and there is no need to stop by a check-out desk, Schulze says.

“My scheduling is not for me, it’s for the guest,” he adds.

Boutique Hotels Are Not For Us

These ultra luxury guests generally don’t want a boutique hotel. “They want a hotel with a full infrastructure,” Schulze says.

Some 40% of guests are what Schulze characterizes as “up buyers,” travelers who don’t normally stay at such luxury occasions, but are there for a special occasion.

For all of the properties, Schulze’s credo is to “think local and act global.”

The Capella Marigot Bay Resort & Marina Saint Lucia offers fine dining at the Boudreau restaurant, for example.

“The chef’s passion for incorporating St. Lucian ingredients into the menu brings him to market regularly to choose the best fruits, roots, and greens to blend with fresh seafood and prime meats — or to create a vegetarian dish that’s both filling and full of flavor,” reads a Fodor’s review.

But, providing a taste of local culture isn’t enough for the ultra-luxury set.

Local Only Goes So Far

“No matter what local is, they want air-conditioning, they want TV,” Schulze says. “The right shower with the right water pressure. Wi-Fi, I still have to have it there, even though I’m in a unique location.”

Can Schulze and the Capella Hotel Group make this kind of highly individualized service work as a business model in a sustainable way?

How does he handle scheduling, for instance, if guests can check in and check out according to their own whims?

Schulze says the hotels look at check-in and checkouts statistically. “There’s always someone who checks in early or checks out late.”

Each hotel learns from its mistakes, taking an analytical approach to correcting shortcomings, Schulze says, adding “I know my hotels are much better this year than last year. We eliminate mistakes.”

100 Rooms, No More Than That

Whether these corrections in operations happen to the extent that Schulze says they do or not, he says that this individualized service can only work with smaller hotels, and that’s why the maximum number of rooms per property is 100.

And, there are lots of such properties in the pipeline, including Riviera Maya and Riviera Nayarit, Mexico; Bangkok; and Niseko, Japan, for Capella Hotels, and Doha, Qatar; Guangzhou, Nanching and Suzhou, China.

Capella Hotel Group is banking on the fact that the ultra luxury traveler wants similar things despite their origin countries.

“To our amazement, there was no difference,” says Schulze of the research he had conducted before launching the Capella Hotel Group into the hotel wish lists of “Europeans, Americans and Asians.”

“Do it my way,” is what these guests want,” Schulze says. “Create the product the way I want it.”

Schulze has made a post-retirement career out of it all, building a business model on doing it their way.

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