Sam Nazarian once built buzzy hotel brands Hyde and SLS. Can Nazarian repeat the trick with the help of unlikely partners Wyndham and musical artist (and investor) Marc Anthony?
Soft brands involve fewer rules, or “standards,” from Wyndham headquarters than so-called hard brands, which dictate details on decor and require more investment.
SBE (which stands for Sammy Boy Entertainment) became LA’s largest nightclub operator in the 2000s. In 2005, it invented the hotel brand SLS, and, later, Hyde. In 2016, it acquired Morgans Hotel Group for about $700 million. In 2018, Accor became a half-owner of SBE and began to market its hotels.
The pandemic hit SBE hard. The company sold a remaining 50% stake in its hotel brands to Accor. It exchanged the marketing value and management control of about 100 hotels for roughly $300 million to pay off debt. SBE retreated to creating buzzy restaurants.
Now, SBE aspires to open 50 hotels with 7,500 rooms over six years. Executives said rates would probably range from $250 to $500 a night. Musical artist Marc Anthony and his company Magnus are providing strategic investment.
Project HQ Hotels
“Project HQ” is the working title of SBE’s new hotels. The notion is that each hotel will be in the heart of its city or university campus and will serve as the “headquarters” for restaurants, nightlife, spas, and fitness for its target Millennial and Gen Z guests.
A celebrity or influencer chef will anchor restaurants at each property.
Food and beverage are key parts of the pitch to owners. SBE expects the overwhelming majority will be conversions of existing properties.
For a hotel owner whose property feels outdated or underperforming, SBE can offer its existing network of celebrity chefs to create spin-off concepts and anchor properties in a cost-effective way.
“We’re looking at [development costs] of $30,000 to $50,000 a [guestroom] key,” Nazarian said.
The hotel projects will also include branded residential, helping to make the economics more appealing to owners. Unlike the pure luxury condos that fancier competitors like Montage and Four Seasons offer, Project HQ will include a mix of upscale student housing and workforce housing. The goal is to ensure a thriving sense of community and to maximize the use of campus amenities.
Executives hinted that adding its hip brand to housing could enable owners to effectively command as much as 20% higher prices for the units than they would otherwise.
What Wyndham Brings
Wyndham said it doesn’t consider Project HQ to be a 25th brand but rather part of its existing Registry Collection. Wyndham doesn’t manage the hotels and will leave it to SBE to handle day-to-day operations.
Here are key things it is providing to hotel owners as part of its strategic alliance with SBE:
- property and revenue management software.
- demand from some of the 105 million members of Wyndham’s loyalty program.
- tools for digitally upselling and cross-selling guests on other services.
- mobile check-in and check-out and mobile keys.
- sales and operational support.
What Wyndham Gets
Wyndham is the world’s largest hotel franchisor. A majority of its 9,100 hotels are mid-tier. Road warriors who rack up points in its loyalty program want more exciting places to stay when it comes time to redeem their rewards.
“This aspirational redemption opportunity we feel right now is exactly like nothing we have,” said Geoff Ballotti, president and CEO. “It’s just completely, completely different.”
Ballotti met Nazarian when Nazarian first tried to create a lifestyle hotel brand. Ballotti was then at Starwood, which had its own comparable brands W and St. Regis. The two stayed connected.
Fast forward to the present. “It was a simple text to Geoff to ask if he was around for a quick call, and Geoff was kind enough to respond,” Nazarian said. “Our teams got together. It shows the ambition of a big company CEO who makes time for innovators like us.”
CORRECTION: This article originally said SBE “built” Mondrian. But Mondrian himself, with later help from Ian Schrager, built the brand in the context of lifestyle hotels in the years following before SBE got involved.
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Photo credit: A photo illustration of the upcoming Katsuya dining area at Westfield Century City in Los Angeles that Sam Nazarian’s SBE is building. Source: SBE.