Skift Take

The worst time ever to launch a global expansion of an iconic luxury hotel brand? Maybe not, if you are players like Accor and SBE with enough capital and Delano brand awareness.

The South Beach luxury lifestyle is making a hop across the pond.

The Delano brand, made famous by its original hotel in Miami’s South Beach, will expand to Europe with a property in Costa Smeralda on the Italian island of Sardinia.

The Delano Porto Cervo, slated to open in 2023, will be the first in an international expansion that will see the brand grow beyond its U.S. presence in Miami and Las Vegas. SBE plans to eventually grow the brand to properties in Europe, South America, the Middle East, and Asia, the hospitality group announced this week.

“We’re not saying we want 50 Delanos. It’s not a number that we’re looking for,” said Chadi Farhat, SBE’s chief operating officer for the Middle East and Europe, in an exclusive Skift interview. “It’s more about strategic locations that we’d like for Delano to be around the world.”

The 68-room Delano Porto Cervo entails a complete redevelopment of an existing hotel, resulting in what Farhat says is a new-build project complete with a restaurant, lobby and pool bars, beach club, and fitness studio.

The Sardinian property may be a partnership between SBE, private equity firm Quianto Capital, and advisory firm Enma Capital, but a different SBE partner is helping the Delano brand go global.

Accor bought a 50 percent stake in SBE in 2018 for $319 million, an investment the hotel industry viewed at the time as fueling the Paris-based hotel company’s goal of expanding in North America. But Farhat said the Accor partnership is also assisting the SBE development pipeline around the world.

The Delano expansion starts in Europe, first with the Italian property and then a soon-to-be announced project in Switzerland, Farhat said. While Delano conjures images of South Beach, its global portfolio is expected to eventually grow to a mix of beachfront, countryside, and ski resorts.

“The elements of South Beach that make Delano special, like programming and services, will travel with Delano around the world,” Farhat said.

Luxury Expansion in a Pandemic

It may seem like an odd time to take the Delano brand abroad, given the catastrophic impact on travel due to coronavirus — especially to the luxury sector.

But SBE and Accor remain committed to expanding the Delano footprint, saying the brand is less vulnerable in the current travel environment than other upscale brands.

“We are not your traditional luxury or upper upscale hotel,” Farhat said. “We create destinations with our hotels.”

He points to the performance of the Mondrian — another SBE and Accor brand — in Doha, Qatar, as proof there is pent-up demand for luxury accommodations, even in the middle of a global pandemic. The hotel’s July performance was better than that seen in 2019 due to staycations, Farhat said.

Even SBE’s eight Miami properties, which include the Delano South Beach among other luxury brands, saw “healthy numbers” in June before the surge of new coronavirus cases in Florida.

“It tells you the minute restrictions are lifted and with social distancing and health measures in place — which we are seriously doing — there will be demand,” Farhat said. “People will come back and travel.”

The current travel environment could even present further opportunities to build out the Delano brand.

Construction financing is extremely tight due to the uncertain economic climate, especially around hotels. Farhat — like executives at other companies like Hyatt and IHG — said there are still plenty of pent-up capital sources out there to help fuel a brand expansion.

But growth may come at someone else’s expense.

“Not only is there pent-up capital, there are great opportunities,” he said. “There are iconic assets you see in New York, iconic assets being foreclosed on that will create more opportunities for conversions for new brands coming in. The environment itself, yes, it is bad, but where there is capital, there are great opportunities.”

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Tags: accor, coronavirus, coronavirus recovery, luxury, sbe, sbe hotels

Photo credit: SBE and Accor's first European location for the Delano hotel brand is slated to be in Costa Smeralda on the Italian island of Sardinia (pictured). SBE

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