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TimesOnline UK | November 11, 2007

Marriott Goes For Boutique Hotels

By John Arlidge

The hotel giant has launched a venture with Ian Schrager, king of the design hotel. John Arlidge reports.

MILLIONAIRES take risks but even the most reckless do their homework before signing billion pound deals. Not Ian Schrager. The ultra-stylish hotelier who created the design hotel has just signed a £2 billion joint venture with the world’s biggest hotel chain, Marriott – even though he has never stayed in one of its hotels. "Marriott is not my cup of tea," he said.

It’s not hard to see why. The lobby of the Marriott Park Lane, where Schrager met Marriott executives last week, is magnolia. The lobbies of Schrager’s hotels are like nightclubs. Every room in the Marriott has a trouser press and a Bible. The cupboards in Schrager’s hotels contain pink champagne and "intimacy kits".

But here, surrounded by chi-no-clad road warriors, supping warm pints on a wet Wednesday, is where Prada-wearing Schrager wants to be. It is, he said, where the future lies. "The time is right to move on to do something that appeals to a much larger audience on a much larger scale."

Schrager is calling time on the design hotel. His intimidatingly hip Royalton, Paramount, Morgans, Hudson, Delano and Mondrian in America and St Martin’s Lane and Sanderson in London revolutionised the urban hotel market and spawned dozens of copies worldwide. But now the design hotel has become a victim of its own success, he said, and customers want something new.

"It’s time to go away from design because it’s over the top now," he said. "Hotels are playing design one-upmanship. It’s too much. People are tired of it and rightly so. The time is right to go in completely the opposite direction: to create the first stylish global lifestyle hotel chain."

Next month Schrager and his new partner, JW "Bill" Marriott Jr, chairman and chief executive of the hotel group, will announce the first 15 sites for their joint venture and reveal its brand name. There will be one in London, Paris, Madrid, Barcelona, Milan, Rome, Naples, Mumbai and Mexico, with the rest spread across leading American cities. Other British hotels will follow in Manchester and Edinburgh. Overall, 100 are planned and, by 2012, there could be as many as 200, with a combined value of £2 billion.

Schrager will design the hotels with leading architects, designers and artists. Private developers will build and own the buildings. Marriott will run everything, except the marketing and restaurants, bars and room service, which Schrager will take care of. Schrager and Marriott will be paid a fee and receive a share of the profits.

Schrager and Marriott are – by any standards – an odd couple. Brooklyn-born Schrager co-founded the most hedonistic nightclub the world has seen – New York’s Studio 54, where the famous rubbed sequins with the infamous. He was imprisoned for tax evasion before moving into high-end, bespoke designer hotels and property, where his success earned him rock-star status. He is often pictured partying alongside the likes of Madonna and Kate Moss.

Marriott is a 76-year-old conservative from Maryland, who has created the biggest, blandest one-size-fits-all hotel chain in the world, described as "the McDonald’s of lodging".

But Schrager insists this is one relationship where opposites attract. "He is not like me and I am not like him. He can’t do what I do and I can’t do what he does. But, together, we can do something extraordinary, especially in service."

By combining Schrager’s aesthetic integrity and cachet with its own mass-market experience and organisational muscle, Marriott hopes to attract a younger, wealthier, more fashionable traveller and gain entry into the fast-est-growing sector of the market.

Over the past three years, bou-tique hotels’ per-room revenue growth in America – the world’s largest market – has averaged 11% a year, one third above the industry norm, according to independent hotel analysts Smith Travel Research. Marriott’s arch-rival Starwood, which runs its successful boutique-inspired W chain in 25 locations from Mexico City to Seoul, is already reaping the rewards. It’s time for Marriott to catch up.

For Schrager – who already has more money than he could spend after selling his hotel group two years ago – the new venture is about catching the curve, proving to himself that, at 61, his trend-spotting instincts are still as sharp as they were when he opened his first hotel a generation ago.

Style and the mass market are no longer a contradiction in terms, he argues. In key sectors, notably fashion and consumer goods, quality and good service are going mainstream. It’s time for the first "mass-but-class" hotel brand.

"Consumers are more and more sophisticated and educated," he said. "They respond to individuality and to originality. The fact that you are doing it on a large scale does not undermine that. Look at Apple. It comes up with products that are appealing to people of all ages and all stratas of wealth. What I am doing for Marriott is not dumbing down. It is just designed for a bigger market."

Schrager also wants to prove wrong the critics who claim that his hotels appeal only to people who live in Soho and wear black all the time. "I’ve been working on a big deal for years. I’ve wanted to do it. It’s the scale itself that is sexy to me. I’ve never done it before. I’ve only ever done one-offs. It’s a new mountain for me to climb."

Each of the new 150 to 250-room hotels will have a different look. "They will be in different buildings, in different cities and will have different designers. It will be a chain but it will not look like one."

However, good service and "a sense of entertainment" will be consistent. Each hotel will, for example, have that Schrager trademark: the "destination" bar and restaurant that lures locals as well as guests. "We’re in an experience economy. People pay a premium for it. We will offer consistency of experience and attitude."

With no sites announced yet, it is still early days and some critics predict the edgy Schrager and the cookie-cutter Marriott will eventually come to blows. Jim Butler, an American hotel analyst, recently asked: "What will Schrager do when Marriott criticises the colour of the silk or some innovative design feature in the bathroom?"

Schrager admits there have been disagreements. "At the start they kept asking me for a list of approved designers, a book of standards, how big the rooms would be. I said No because it all depends on the property and the city."

But he said each problem has been thrashed out – even the thorny issue of lighting. Schrager likes dark hallways to create a bright, dramatic entrance into each room but concedes the corridors at the new hotels will be brighter. "People are looking for division between us. There isn’t any."

Going global is, he acknowledges, the toughest challenge he has faced in a remarkable business career. "This may be the hotel industry but there’s no free lunch," he said.

He has not analysed the market or gone to focus groups – despite Marriott’s requests. As with Studio 54 and his hotels, he is doing what he always does: trusting his gut instinct.

"I don’t trust the intellect. It’s the instinct. I get an impulse for things and I’ve got an impulse for this," he said.