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Evening Standard ES Magazine

The Hippest Hotel Guy

You can deal with rumours, gossip and innuendo in one of two ways: you can crawl into a hole and hope they will go away, or you can face them head on. Rumours of the demise of Ian Schrager's hotel group (St Martins Lane and Sanderson are up for sale) have been circulating across the pages of international newspapers for some time now. Well, sitting in front of me at St Martins Lane, having just flown in on his private plane, is the man himself. We requested an interview, he flew in to give it to us. There were no terms and conditions, no 'off-limit' questions, no grooming requested for photography (now standard among high-profile business magnates). I just pitched up and he answered every question honestly and directly which, in my experience, is not how people on the brink of disaster behave. Ian Schrager single-handedly invented the boutique hotel. Before he came along, hotels were luxurious but staid affairs or part of impersonal chains. Schrager, with help from Philippe Starck, turned hotel lobbies, restaurants and bars into destination places heaving with celebrities. But they were only his second venture - Schrager had previously opened the famous discotheque Studio 54 in New York in 1977. Like his hotels, it became a tourist attraction. Wannabes stood behind the ropes to watch the celebrities saunter past. Schrager's colourful debut was short-lived. In 1979, he and his partner Steve Rubell were charged with embezzlement after bags containing $6 million in cash and drugs were discovered on the premises. They spent 13 months in a federal prison. Sitting at a table in Asia de Cuba, a single light bulb suspended above us, Ian looked anything but the troubled man he's supposed to be. I expected to be intimidated. Admittedly, he does sound like a character in The Sopranos. Physically, he is a mixture of Robert De Niro and Ralph Lauren (a fellow Jew from Brooklyn, where Schrager grew up). 'He was my camp counsellor at summer camp when I was a boy,' says Schrager. These days he lives in the East Village in New York and has a house in Southampton next door to his friend Calvin Klein. He looks much younger than his 58 years. Dressed in jeans, a T-shirt and a leather jacket, he fits in with the guests in this hotel. The waitress brings us coffee without much fanfare, but then again, the staff at Ian Schrager's eight hotels have notoriously always been cooler than the customers.

I get straight to business. Why is he selling up in London? 'Well,' he replies, 'there's nothing I wouldn't sell, except for my wife and kids.' St Martins Lane and Sanderson are officially for sale (by the Burford Group which owns 50 per cent of them) for around #150 million. 'It's a great moment to sell and a good opportunity,' he says. 'I'm in two distinct businesses: one for creating and developing hotels and another for owning property. Though I am selling the London properties, , I will retain the management.' In other words, you and I and the lady at the reception will never know the difference. The fact that Ian Schrager qualified as a lawyer and specialized in property becomes obvious. Everyone I spoke to - property developers, bankers, analysts - said that the whys of a deal are unknown to everyone other than the person doing them. One property analyst who recently met with Schrager said he thought the bank that owned Burford may have wanted the cash. All agreed that Schrager was a shrewd businessman who could pull more than one rabbit out of a hat. 'He's colourful all right,' one property banker told me, 'but what he really is is a serial entrepreneur.'

The hotel business is very complicated. Most hotels are managed by one group and owned or leased by others. There's usually a bank involved. Schrager's recently renamed Morgans Hotel Group is privately held by Schrager and a group of investors, so everything other than what is reported in Companies House is pure speculation. 'You sell a hotel if you're doing really well or really badly,' said the marketing director of one of London's five-star hotels. But minutes after I spoke to her, I heard from a property developer that her hotel was also up for sale, a fact she hadn't disclosed. 'Never believe anything anyone tells you,' said the developer, adding that the Lanesborough and the Savoy Group were also on sale via agents Jones Lang LaSalle. Business has definitely suffered since 9/11 (Schrager's group posted a loss of #2.4 million in 2002) but Schrager explains this away as part of the downward cycle that affected the industry as a whole. There were stories in the press this summer claiming that Schrager's group has debts of $400 million in the US. 'We all have debts in business,' he countered. 'To put it in context, we were valued at #2 billion before 9/11.' During the first half of 2003, occupancy rates in London hotels dropped to an average of 69 per cent - the worst since 1996. 'Now,' says Schrager, 'we're 35 per cent up over last year with an 80 per cent occupancy rate.' (75 per cent upwards is considered very high.) The industry is judged by revenue per available room, something the industry calls RevPAR. It's how many rooms you sell that matters (but even this is dodgy as rooms can be discounted). To test his theory, I called Sanderson and St Martins Lane, pretending to be a secretary booking rooms for a group of American businessmen. The standard rooms were all taken, though there were superior and deluxe rooms available at St Martins Lane. An upgrade was mentioned. The Metropolitan was wide open, as was the Four Seasons. The only hotel with limited capacity was Claridge's. What started the rumours was that Schrager's Clift Hotel in San Francisco filed for Chapter 11 bankruptcy protection in August. There were debts of #36 million. 'It should never have happened,' he says. 'I should have been more involved.' But with his famous tenacity he managed to pay back the debt and the hotel is now out of Chapter 11 (it never stopped trading). Schrager's companies have been restructured many times. Debt is helpful in this business. 'Real estate in particular is used for leverage,' said an analyst, who adds that there is no way of knowing how much Schrager profited personally since, as with everything around Schrager, 'it depends how he structured the deals.' No one doubts that he is extremely wealthy. The small print, creative financing and tax loopholes are Schrager's specialities (he both owns and manages hotels, which is unusual in the business; most companies only manage, which is far less profitable).

What hurts Schrager is that in the feeding frenzy that has followed the Clift incident, his accomplishments have almost been forgotten. It was Schrager who invented the boutique hotel. Morgans, which opened in 1988 in New York, was in his own words 'a stylish American version of a European hotel'. Hoteliers at that time would no sooner have hired the eccentric French designer Andree Putman than shot off their own foot. But that's Schrager: he loves taking risks. Morgans Hotel revolutionized the business. I was in New York when the rumpus started. Morgans, and shortly afterwards the Paramount and the Royalton (both designed by Philippe Starck), were destinations as much for their design as for the people-watching. They were stage sets, full of gags such as glass toilet stalls. People rented rooms at The Hudson just to get access to the bar. Schrager made hotel restaurants hip: Morgans' Asia de Cuba with its communal table was, and is, painfully trendy. The Mondrian in LA and the Delano in MiamI brought much-needed hipness to their towns. You couldn't escape Schrager: if you weren't having drinks at the bars or eating in the restaurants you were looking at them in fashion shoots or reading about premiere parties in the lobby. The hotels had the same resonance as his earlier nightclubs, Studio 54 and the Palladium. No one in New York could feign indifference to Soho House now (there are similarities between Schrager and Nick Jones, owner of Soho House, principally their determination and social awkwardness). Still, comparing Schrager's empire to Jones's is like comparing skyscrapers to huts. Schrager is as much a legend in New York as Donald Trump. 'We invented the boutique hotel,' he said. Other groups such as the Thistle Hotel Chain are now trying to do a cheaper version. 'The only failure in my life,' he told me, 'was my marriage. I blame work - I never had enough time for my wife.' He had a painful divorce from Rita Norona, a retired Cuban ballet dancer, from whom he separated five years ago but to whom is still close. The couple have two daughters, Sophia, ten, and Ava, seven. He doesn't put a happy spin on his life (he's far too honest for that). But bitterness is not Schrager's thing (or he would never have survived 13 months in prison). 'As you get a little bit older and a little wiser, you learn to take things in your stride,' he says. Schrager's life has never been easy. His parents (his father was in real estate) died when he was young - 19 in his father's case, 24 in his mother's. His sister died of cancer. His former partner and best friend Steve Rubell died in 1989. The press reported that it was AIDS. This is the only time Schrager clammed up: 'It's private business,' he said. 'He was my friend. It's undignified to talk about how he died.'

Business hasn't been easy either. Schrager's first brush with disaster was when Studio 54 was raided. As with his hotels, he had tapped into the zeitgeist (these were the days when people stayed out all night sniffing cocaine, then sold commodities on the stock exchange the next morning). Studio 54 was the most famous club of all: where Bianca Jagger made an entrance on a horse and where Warhol and Truman Capote held court. I was too young for Studio 54 but spent many evenings at Schrager's second club, the Palladium. There had been nothing like it before. Studio 54 was raided in 1979, and Schrager and Rubell were convicted of embezzlement and tax fraud. 'Surely you knew this would happen?' I suggested. 'The by-product of great success is that you think you can get away with things,' he replied. Some would say he really did get away with it. 'Remember my conviction was for $70,000 of unpaid taxes,' he says, as if dropping a big fat hint. Most people would be crushed by a jail sentence, but not Schrager. He calls it his interlude. It was merely a blip, and a good one, in fact, because it was in prison that he and Rubell had the idea of a boutique-hotel business. 'I'm an entertainer at heart,' he says. 'What I like is creating an atmosphere. For me this is where design and architecture come in.' Even a jail sentence didn't deter new investors. 'We'd had huge success, we were tenacious and we had talent,' he explained. It was a mere five years ago that he assaulted London with St Martins Lane and Sanderson. They were pure theatre. Rooms that changed colour, a foyer like a Dali painting, gnome tables, logs for sofas, restaurants with names such as Spoon+. He put bathrooms inside the rooms, hung paintings on ceilings. People who lived in London checked in just to say they'd been there. Within minutes of opening, Schrager was photographed with Madonna, Kate Moss and Jade Jagger. He was anointed 'golden boy'. 'It hurts to read that you used to be a golden boy,' he says. (I don't see any tears welling up in his eyes, though.) There is virtually no entrepreneur in America who has not failed in some extraordinary fashion. But when I asked him 'At heart I'm an entertainer. I like creating an atmosphere' whether he thought going to jail falls into the category of failure, he disagreed. 'I guess it's proof that the legal system works,' he replied smiling. In hindsight, it had its advantages. 'It takes the downs to appreciate the ups,' he said. What troubles him now is how to tell his daughters about it. 'I went to see a child psychologist because the girls will read about it on the internet. There's no way they won't find out.'

Perhaps he's selling Sanderson and St Martins Lane because he's on to the next thing. Schrager has his sights set on our homes. His latest project is the 181-room Gramercy Park Hotel and residences in downtown New York. The 23 condominiums designed by John Pawson will be on sale in the New Year. 'I'm a minimalist,' says Schrager. 'It's the modern way of living.' What about Philippe Starck? I ask. 'I made him very rich,' he replies drily. Schrager admires the artistic process up to a point. 'I straddle art and commerce,' he says. 'I think a lot of talk in design circles is intellectual gibberish. I am famous for butting in and saying: "What are you talking about?"' There is nothing that Schrager says that isn't clear; you are quickly reminded that he is a lawyer. The 23 apartments with family rooms, luxury kitchens and sumptuous Pawson touches such as 4ft-wide wooden doors, wood-burning fireplaces and expanses of glazing won't be cheap. They will have the concierge services offered by the Gramercy Park Hotel next door which is being designed by the Eighties rock-star artist Julian Schabel and is expected to open in January 2006. 'This hotel is going to have a new look,' he says. 'It's going to be bohemian, undisciplined. It's not proving that easy. Schnabel works in his own way. I can't exactly say to him, "I don't like the colour; paint it over," can I?' Combining a Schnabel hotel with a Pawson apartment block is like dressing a tattooed punk in Hardy Amies. But they say eclecticism is the future.

Schrager is also planning a residential building with 30 apartments in NoHo, New York, designed by Herzog and de Meuron, the architects behind Tate Modern. 'This will be a traditional home done LSD,' he says. In the works is a plan to convert rooms in his hotels into apartments. 'I'm obsessed with how people live,' he says. 'I'd like to bring into people's homes a bit of what we did in nightclubs.' I think he's on to something. The line between homes and hotels grows thinner every day (hotels such as the Pierre and Ritz Carlton contain private apartments). Global nomadism means that people can't be bothered to maintain houses. Apartments within hotels could be the answer.

Journalists may speculate about his financial affairs, but the banks seem happy to finance his projects. There is no doubt that Schrager is the ultimate comeback kid. He got it right twice, why not a third time? 'I'm still hungry,' he said. 'I could have cashed out a long time ago.' He describes himself as 'a despot and a tyrant' but the impression you get is that he is a softie and a loner. 'I'm really very shy,' he told me in the lift as he went up to have his picture taken. So why does he do it, over and over again. The answer according to him: 'My passion is to shake things up... to change things... to violate the status quo... and to have a real impact. Also, I still haven't done my masterpiece.' Until he feels he's achieved that, he'll just keep trying.